AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 855
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....rah, gives an important interpretation about learning, "He gives knowledge and wisdom to whomever He wills and to whomsoever knowledge is given, much good has been given." In Avinash Mehrotra v Union of India (2009) 6 SCC 398, this court underlined the object and value of education in the following words: "29. Education today remains liberation - a tool for the betterment of our civil institutions, the protection of our civil liberties, and the path to an informed and questioning citizenry. Then as now, we recognize education's "transcendental importance" in the lives of individuals and in the very survival of our Constitution and Republic." 2. The subject matter of these appeals M/s St. Augustine Educational Society v The Chief Commissioner of Income Tax, C.A. No.3793/2014; M/s St. Patrick Educational Society v The Chief Commissioner of Income Tax, C.A. No. 3794/2014; M/s New Noble Educational Society v The Chief Commissioner of Income Tax, C.A. No. 3795/ 2014; M/s R.R.M Educational Society Hyderabad v The Chief Commissioner of Income Tax, C.A. No. 6418/2012 and M/s Sri Koundinya Educational Society v The Chief Commissioner of Income Tax, C.A. No. 9108/2012 is the ....
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....3C)(vi) of the Act. (Pine-grove International Charitable Trust v. Union of India, [2010] 327 ITR 73 (P&H)). The distinction sought to be made between the society, and the educational institution run by it, does not, therefore, merit acceptance. 8. In order to be eligible for exemption, under section 10(23C)(vi) of the Act, it is necessary that there must exist an educational institution. Secondly, such institution must exist solely for educational purposes and, thirdly, the institution should not exist for the purpose of profit. (CIT v. Sorabji Nusserwanji Parekh, [1993] 201 ITR 939 (Guj)). In deciding the character of the recipient of the income, it is necessary to consider the nature of the activities undertaken. If the activity has no co-relation to education, exemption has to be denied. The recipient of the income must have the character of an educational institution to be ascertained from its objects. (Aditanar Educational Institution, [1997] 224 ITR 310 (SC)). The emphasis in section 10(23C)(vi) is on the word "solely". "Solely" means exclusively and not primarily. (CIT v. Gurukul Ghatkeswar Trust, (2011) 332 ITR 611 (AP); CIT v. Maharaja Sawai Mansinghji Museum Trus....
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....Institutions and Endowments maintained by the Assistant Commissioner. One copy thereof is required to be furnished to the Deputy Commissioner, and another to the Commissioner. Under section 43(11) where any trustee or other person fails to apply for registration of a charitable institution, within the time specified, he shall be punishable with fine which may extend to one thousand rupees. Section 44 relates to the power of the Commissioner to have the institution registered and, thereunder, where any trustee or other person in charge of the management of a charitable institution fails to apply for registration of the institution, the Commissioner shall give notice to the trustee, or the other person, to make an application in that regard within a specified period and, if he fails to make such an application within the period specified, the Commissioner is empowered to have the charitable institution registered after following the prescribed procedure. 22. On a conjoint reading of the Explanation to section 1(3)(a), section 2(4) and 2(5) of A.P. Act 30 of 1987 it is evident that a society running an educational institution in the State of Andhra Pradesh is a public charita....
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....le Trustee, Loka Shikshana Trust v. CIT, [1975] 101 ITR 234 (SC)). This definition of "education" is wide enough to cover the case of an "educational institution" as, under section 10(23C)(vi), the "educational institution" must exist "solely" for educational purposes. (Maharaja Sawai Mansinghji Museum Trust, [1988] 169 ITR 379 (Raj)). The element of imparting education to students or the element of normal schooling where there are teachers and taught must be present so as to fall within the sweep of section 10(23C)(vi) of the Act. Such an institution may, incidentally, take up other activities for the benefit of students or in furtherance of their education. It may invest its funds or it may provide scholarships or other financial assistance which may be helpful to the students in pursuing their studies. Such incidental activities alone, in the absence of the actual activity of imparting education by normal schooling or normal conduct of classes, would not suffice for the purpose of qualifying the institution for the benefit of section 10(23C)(vi). (Sorabji Nusserwanji Parekh, [1993] 201 ITR 939 (Guj)). Section 2(15) is wider in terms than section 10(23C)(vi) of the Act. If the as....
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....activity has no correlation with education, exemption has to be denied (see judgment of this Court in Oxford University Press [(2001) 3 SCC 359 : (2001) 247 ITR 658] ). Therefore, the character of the recipient of income must have character of educational institution in India to be ascertained from the nature of the activities. If after meeting expenditure, surplus remains incidentally from the activity carried on by the educational institution, it will not cease to be one existing solely for educational purposes. In other words, existence of surplus from the activity will not mean absence of educational purpose (see judgment of this Court in Aditanar Educational Institution v. CIT [(1997) 3 SCC 346 : (1997) 224 ITR 310] ). The test is-the nature of activity. If the activity like running a printing press takes place it is not educational. But whether the income/profit has been applied for non-educational purpose has to be decided only at the end of the financial year." 8. It was further held that the third proviso was in effect operative after the registration or approval of the trust at the stage of assessment to determine the actual application of income of any given trust. Th....
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....given under which the PA is empowered to withdraw the approval earlier granted. Under that proviso, if the PA is satisfied that the trust, fund, university or other educational institution, etc. has not applied its income in accordance with the third proviso or if it finds that such institution, trust or fund, etc. has not invested/deposited its funds in accordance with the third proviso or that the activities of such fund or institution or trust, etc. are not genuine or that its activities are not being carried out in accordance with the conditions subject to which approval is granted then the PA is empowered to withdraw the approval earlier granted after complying with the procedure mentioned therein. 44. Having analysed the provisos to Section 10(23-C)(vi) one finds that there is a difference between stipulation of conditions and compliance therewith. The threshold conditions are actual existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application in the standardised form in terms of the first proviso. It is only if the prerequisite condition of actual existence of the educational institution is ful....
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....the first proviso. The condition of obtaining approval from the PA was inserted because Section 10(22) was misused. The proviso was inserted along with other provisos because there was no monitoring mechanism to check abuse of exemption provision. The process of examination of the application was stipulated by the second proviso, which stated that the PA could call for such documents including annual accounts or information from the applicant to check its genuineness. Under the third proviso, the PA had the power to judge the genuineness of the activities of the applicant and consider if it applied its income wholly and exclusively to the objects for which it was constituted/established. Under the twelfth proviso, the PA had to examine cases where an applicant did not apply its income during the year of receipt and accumulated it but made payment therefrom to any trust or institution registered under Section 12AA or to any trust and to that extent the proviso stated that such payment shall not be treated as application of income to the objects for which such trust was established. This was to guide the PA to determine the meaning of the words "application of income to the objects f....
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....ue, and if that was solely and exclusively for the purpose of education, the statutory condition was satisfied. 14. Learned counsel lastly urged that the appellants had established and were managing educational institutions which did not make profit. It was submitted that the IT Act did not stipulate registration under the A.P. Charities Act, or any other state law as a condition precedent for grant of approval. As long as the trust was registered under some law (such as the Andhra Pradesh Societies Registration Act, 2001) or even a not-for-profit was duly incorporated, no other requirement under provisos to Section 10(23C)(vi) of the IT Act compelled further registration or approval under any state law. It was reiterated that the IT Act was a complete code in itself, and other acts, including the A.P. Charities Act, could not be the basis for denying institutions the benefit of approval. It was submitted that the provisions of the IT Act ought not be linked to, or taken together with, provisions of other enactments. The objects and reasons and the various provisions of the A.P. Charities Act regulated and protected the property of charitable institutions. The activities of the ....
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....of the revenue. He pointed out that from the inception of the IT Act, till 31 March 2009, the definition of charitable purposes under Section 2(15) included only four activities. By the amendment of 2009 - and later in 2015 - other objects, such as preservation of watersheds, forests and wildlife, monuments and places or objects of artistic or historic interest, and yoga were included as activities deemed charitable in nature. The result was that once an activity was identified as charity, the income of that unit or entity was excluded from the ambit of taxation by virtue of Section 10. Likewise, deduction for income from property held for charitable purposes was provided under Section 11. 19. It was alleged that since the inception of the IT Act in 1961 till 31 March 1975, income from education was excluded as a head under Section 10. By Section 10 (22), income of university or other educational institutions existing 'solely' for educational purposes, and not for the purpose of profit, was excluded from tax liability. An identical provision was enacted by Section 10 (22A) for hospitals. It was pointed out that there were two key elements to the definition of what could be exclu....
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....r throughout any state, were classified under one category. Fourthly, institutions solely for educational purposes and not for the purpose of making a profit, were classified under one category (i.e., Section 10 (23C) (vi) and (via)). It was submitted that of the several provisos added, the most important of them having a bearing on the subject matter of these appeals were the first, second, third, seventh, thirteenth, fourteenth, fifteenth and sixteenth provisos. 22. The ASG urged that the expression 'education' found place in several provisions of the Constitution. As to what was the precise scope of the expression was examined by this court on several occasions. The ASG relied on the decision of the eleven-judge bench in T.M.A Pai Foundation v State of Karnataka 2002 (8) SCC 481 where it was held that 'education' under the Constitution meant and included education at all levels, from primary school up to postgraduation, and also included professional education. The expression 'educational institution' meant institutions which imparted education as understood in the formal sense of schooling. It was further elaborated that having regard to the demographics and the geographical....
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.... the rights conferred under Articles 29 and 30 were to be regarded as guarantees to ensure equality to minority communities either based on religion or language. 24. It was submitted that given this enunciation of the principle that education was an occupation and was per se, charitable, it was antithetical to commerce or business. In other words, education could not, either under the Constitution or under the IT Act, be regarded as a business activity. Thus, any commercialisation of education would result in loss of the benefit of tax exemption which an institution would otherwise be entitled to claim legitimately as a charitable trust. The ASG also relied upon the subsequent seven-judge decision in PA Inamdar v State of Maharashtra (2005) 6 SCC 537 which had followed the reasoning in T.M.A Pai Foundation (supra). 25. It was submitted next, that this court held in Aditanar (supra) - in the context of Section 10 (22) of the IT Act - that the language of the provision was plain and that every year the tax authorities had to discern whether the institution existed solely for educational purposes and not for the purpose of profit after meeting the expenditure, and that if any su....
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....ct was used in Additional Commissioner of Income Tax v Surat Art Silk Cloth Manufacturers' Association (1980) 2 SCC 31 which was not a case dealing with educational institutions, but rather with charities that were engaged in advancing objects of general public utility. It was held that to "ascertain whether the institute is carried on with the object of making profit or not it is the duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established". American Hotel relying on Surat Art, para 37 28. The revenue also urged that the decision in American Hotel (supra) was wrong in holding that the stipulations in monitoring conditions set out in various provisos to Section 10 (23C) were different from compliance with those conditions, and that compliance or non-compliance was to be considered only at the assessment stage. 29. It was submitted that the decision in Queen's Education Society (supra), too could not be sustained, as it relied on the 'predominant object' test enunciated and applied in Oxford University and American Hotel (supra). Learned ASG submitted that the court's....
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....pital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year; or (iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed or (iv) any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or (v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable pu....
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....lly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and] [(b) does not invest or deposit its funds, other than- (i) any assets held by the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution] where such assets form part of the corpus of the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution] as on the 1st day of June, 1973; [(ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998;] (ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, ....
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....or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer". Proviso 14: "Provided also that in case the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in the first proviso makes an application on or after the 1st day of June, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be 1[made on or before the 30th day of September of the relevant assessment year] from which the exemption is sought....
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....onstitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge....All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of section 2. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by formal schooling." Thus, education i.e., imparting formal scholastic learning, is what the IT Act provides for under the head of "charitable" purposes, under Section 2 (15). 34. The issues which require resolution in these cases are firstly, the correct meaning of the term 'solely' in Section 10 (23C) (vi) which exempts income of "university or other educational institution existing solely for educational purposes and not for purposes of profit". Secondly, the proper manner in considering any gains, surpluses or profits, when such receipts accrue to an educational institution, i.e., their treatment for the....
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....bly in Indian Chamber of Commerce v Commissioner of Income Tax (1976) 1 SCC 324 followed in principle, the ratio in Loka Shikshana Trust (supra) and held that profit-making cannot be an object at all in the case of trusts set up with the object of advancing general public utility. Matters came to a head when this court had occasion to review the previous law in Surat Art (supra). The assessee in Surat Art (supra) was a trade promotion association set up to advance the interests of silk weavers and promote exports. Some of its objects included permitting the association to obtain export licenses and export cloth manufactured by members, "To buy and sell and deal in all kinds of cloth and other goods and fabrics belonging to and on behalf of the Members." This court was of the opinion that the principal object, or in the exact words of the decision, 'the predominant' object or purpose of the assessee was to advance the interests of silk manufacturers. The other objects were only incidental. It was in that context that the court held that profit-making in the course of carrying on the predominant objective of a trust or other institution is not per se prohibited. Notably it was held t....
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....r the first time in Surat Art (supra). Noticeably, however, Surat Art (supra) was rendered in the context of a body claiming to be a charity, as it had advancement of general public utility for its objects. It was not rendered in the context of an educational institution, which at that stage was covered by Section 10 (22) Section 10 (22) exempted "any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit". In that sense, the court had no occasion to deal with the term 'educational institution, existing solely for educational purposes and not for purposes of profit'. Therefore, the application of the 'predominant object' test was clearly inapt in the context of charities set up for advancing education. It is important to highlight this aspect at this stage itself, because the enunciation of 'predominant object' test in Surat Art (supra) crept into the interpretation of 'existing solely for educational purposes', which occurred then in Section 10 (22) and now in Section 10 (23C). 40. The issue in Aditanar (supra) was whether the assessee society, whose objects were education, could be denied exemption, on t....
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....he phrase "existing solely for educational purposes and not for the purposes of profit" in clause (22) qualifies only the words "other educational institution" and not the words "a university". But this strict interpretation is of no great account for the purposes of this case, and the expression may be read to qualify both "a university" and "other educational institution". For the purposes of obtaining the exemption under clause (22) the university must be "existing solely for educational purposes and not for purposes of profit". What this means is that the sole purpose of a university must be to impart education and not at all to make profit. The word "existing" in the context means "being". It has no locational sense. The clause does not say "existing in India" and the words "in India" cannot be read into it. The clause does not require that the university must impart education in India before it can qualify for exemption thereunder. The High Court was in error in interpreting the clause differently." 42. D. P. Mohapatra, J. expressed a different view, in which he was joined by Y.K. Sabharwal, J.: "32. I am of the view that the expression 'existing solely for th....
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....of persons. . . .' The words used in the similar setting in clause (22A) are 'existing solely for philanthropic purposes and not for purposes of profit'. There is no reason to restrict the application of these words only to 'other institution' and not to 'a hospital' by holding that these words do not qualify the words 'a hospital'. 42. The requirement of existing university solely for educational purposes and not for purposes of profit will also be applicable to the universities and to this extent I am in respectful agreement with the reasoning of brother Mohapatra. For the present purposes, however, as already said, I will assume that sole purpose of University of Oxford is educational and not profit. ************* ************** A university or other educational institution which exists solely for educational purposes and not for purposes of profit though not established in India but having some educational activity in this country alone would be entitled to claim exemption. Such a university or educational institution having educational activity in India but being established or constituted in some other country wou....
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....ponsible inter alia, for providing a full and complete curriculum recognized throughout the world for all hospitality educational programmes in India, making available text books, course materials and software programmes utilized in the appellant's 'Hospitality Management Diploma', offering a comprehensive certification and registration programme for the Indians desirous of availing an education in the hospitality field in India. The appellant received tax exemption under Section 10(22) up to the year ending 31 March 1998. The branch office accounts showed surplus, which was repatriated outside India. Its claim for approval under Section 10 (23C) after the repeal of Section 10 (22) was rejected as the authority held that the assessee had not applied its income for the purpose of education in India. 44. This court held that: "27. Actual existence of the educational institution was the pre-condition of the application for initial approval under section 10(22). On grant of approval, under section 10(22), sections 11 and 13 did not apply. Therefore, earlier prior to 1-4-1999 when exemption was given to the appellant, there was no assessment nor demand section 10(22) had....
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.... 30. In deciding the character of the recipient, it is not necessary to look at the profits of each year, but to consider the nature of the activities undertaken in India. If the Indian activity has no co-relation to education, exemption has to be denied, (see judgment of this Court in Oxford University Press case (supra). Therefore, the character of the recipient of income must have character of educational institution in India to be ascertained from the nature of the activities, if after meeting expenditure, surplus remains incidentally from the activity carried on by the educational institution, it will not cease to be one existing solely for educational purposes. In other words, existence of surplus from the activity will not mean absence of educational purpose (see judgment of this Court in Aditanar Educational Institution v. Addl. CIT 1997 (224) ITR 310 . The test is the nature of activity. If the activity like running a printing press takes place it is not educational. But whether the income/profit has been applied for non-educational purpose has to be decided only at the end of the financial year". *********** *********** "32. We shall now consider the eff....
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....income to the objects for which such trust or fund or educational institution is established. The idea underlying the twelfth proviso is to provide guidance to the prescribed authority as to the meaning of the words 'application of income to the objects for which, the institution is established'. Therefore, the twelfth proviso is the matter of detail. The most relevant proviso for deciding this appeal is the thirteenth proviso. Under that proviso, the circumstances are given under which the prescribed authority is empowered to withdraw the approval earlier granted. Under that proviso, if the prescribed authority is satisfied that the trust, fund, university or other educational institution etc. has not applied its income in accordance with the third proviso or if it finds that such institution, trust or fund etc. has not invested/deposited its funds in accordance with the third proviso or that the activities of such fund or institution or trust etc., are not genuine or that its activities are not being carried out in accordance with the conditions subject to which approval is granted then the prescribed authority is empowered to withdraw the approval earlier granted after c....
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....reement entered into with Institutions of the Government of India. Similarly, the prescribed authority may grant approvals on such terms and conditions as it deems fit in case where the Institute applies for initial approval for the first time. The prescribed authority must give an opportunity to the applicant-institute to comply with the monitoring conditions which have been stipulated for the first time by the third proviso. Therefore, cases where earlier the applicant has obtained exemption(s), as in this case, need not be re-opened on the ground that the third proviso has not been complied with. However, after grant of approval, if it is brought to the notice of the prescribed authority that conditions on which approval was given are breached or that circumstances mentioned in the thirteenth proviso exists then the prescribed authority can withdraw the approval earlier given by following the procedure mentioned in that proviso. The view we have taken, namely, that the prescribed authority can stipulate conditions subject to which approval may be granted finds support from sub-clause (ii)(B) in the thirteenth proviso." 45. The next judgement is that of Queen's Education S....
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....ly for several years indicated that the trust was essentially engaging itself in profitable activity under the garb of imparting education. The High Court had held that the generation of profits could not be the only reason to deny exemption, and what was relevant was the 'predominant' or main object of the society, which in that case was to impart education. The High Court also held that after granting approval, if the PA notices that the conditions in which approval had been granted were violated under the circumstances detailed in the thirteenth proviso (as it existed then), approval could be withdrawn after following the procedure prescribed. 47. This court in Queens Educational Society (supra) approved the judgement of the Punjab and Haryana High Court in Pinegrove International (supra). By the same judgement, it also approved other judgements of High Courts which had followed Pinegrove and disagreed with the Uttarakhand High Court's judgement. 48. From the above discussion, it is evident that this court has spelt out the following to be considered by the revenue, when trusts or societies apply for registration or approval on the ground that they are engaged in or involv....
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....e attainment of its objectives and separate books of account are maintained by it in respect of such business". 50. The basic provision granting exemption, thus enjoins that the institution should exist 'solely for educational purposes and not for purposes of profit'. This requirement is categorical. While construing this essential requirement, the proviso, which carves out the exception, so to say, to a limited extent, cannot be looked into. The expression 'solely' has been interpreted, as noticed previously, by other judgments as the 'dominant / predominant /primary/ main' object. The plain and grammatical meaning of the term 'sole' or 'solely' however, is 'only' or 'exclusively'. P. Ramanath Aiyar's Advanced Law Lexicon P. RAMANATHA AIYAR, ADVANCED LAW LEXICON, (6th Edn.), Pg. 5249-5250 (2019) explains the term as, "'Solely' means exclusively and not primarily". The Cambridge Dictionary defines 'solely' to be, "Only and not involving anyone or anything else". Solely, Cambridge Dictionary (4th Edn.) (2013) The synonyms for 'solely' are "alone, independently, single-handed, single-handedly, singly, unaided, unassisted" and its antonyms are "inclusively, collectively, cooperativ....
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....he well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the legislature". The Court, while noting the nuances between 'strict' and 'literal' interpretation, held as follows: "29. ...We may reiterate at the cost of repetition that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely, contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; ther....
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....considered the function and effect of a proviso: "8. The proper function of a proviso is to except or qualify something enacted in the substantive clause, which but for the proviso would be within that clause. It may ordinarily be presumed in construing a proviso that it was intended that the enacting part of the section would have included the subject-matter of the proviso." 56. In Indore Development Authority v. Manoharlal (2020) 8 SCC 129 it was held that: "192. A proviso has to be construed as a part of the clause to which it is appended. A proviso is added to a principal provision to which it is attached. It does not enlarge the enactment. In case the provision is repugnant to the enacting part, the proviso cannot prevail. Though in absolute terms of a later Act. Its placement has been considered, and purpose has been considered in the following decisions. It was observed in State of Rajasthan v. Leela Jain [State of Rajasthan v. Leela Jain, (1965) 1 SCR 276 : AIR 1965 SC 1296] : (AIR p. 1300, para 14) "14. ... So far as a general principle of construction of a proviso is concerned, it has been broadly stated that the function of a proviso is to l....
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....ation). 59. In this court's judgment in Delhi Cloth & General Mills Co. Ltd. v Workmen & Ors. 1967 (1) SCR 882 the question involved was the jurisdiction of an industrial tribunal. Under the Industrial Disputes Act, 1947, as to whether it can decide disputes referred to it, and matters incidental thereto, this court explained the meaning of 'incidental' in the following manner: "21. [T]he word 'incidental' means according to Webster's New World Dictionary: "happening or likely to happen as a result of or in connection with something more important; being an incident; casual; hence, secondary or minor, but usually associated:" "Something incidental to a dispute" must therefore mean something happening as a result of or; in connection with the dispute or associated with the dispute. The dispute is the fundamental thing while something incidental thereto is an adjunct to it. Something incidental, therefore, cannot cut at the root of the main thing to which it is an adjunct." The above decision has been followed in other cases. 'Incidental' therefore, means, in the context of the present case, something connected with the activity of educati....
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....ith the effect of the provisos to Section 10(23C). While doing so, the court made certain remarks with respect to the effect of these provisos characterizing a few of them as those dealing with the stage of considering applications for approval or registration and other as those dealing with application of income or receipts of the trust. In respect of the latter, this court was of the opinion that the question of application of income or profits could arise only at the stage of assessment. The court was also of the opinion that the audited books of accounts would be of little or no relevance at the stage of registration or approval. 63. Having regard to the plain terms of the second proviso to Section 10(23C), which refers to the procedure for approval of applications including those made by trusts and institutions imparting education, one can discern no such restrictions. From the pointed reference to 'audited annual accounts' as one of the heads of information which can be legitimately called or requisitioned for consideration at the stage of approval of an application, the inference is clear: the Commissioner or the concerned authority's hands are not tied in any manner what....
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....nt, undertaking, organisation or association formed for a charitable purpose and includes a specific endowment and dharmadayam; (5) 'charitable purpose' includes- (a) relief of poverty or distress; (b) education; (c) medical relief; (d) advancement of any other object of utility or welfare to the general public or a section thereof not being an object of an exclusively religious nature." 65. Clearly, charitable objects - defined by the A.P. Charities Act, are pari materia with the IT Act. Thus, establishments or associations or organizations (widely phrased terms) formed for 'charitable purpose' fall within the meaning of charitable institutions. These include societies and trusts, set up for educational purposes. 66. By Section 43(1), every charitable institution, existing as on the date of commencement of the A.P. Charities Act was obliged to apply for registration. 'New trusts or institutions are obliged, within ninety days of their formation, to apply for registration' through persons in charge - the Registrar, by Section 43(2) to Section 43 (4) is obliged to inquire into the material provided with the application, and ....
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....ivities of charitable institutions in the state. Sections 72-74 deal with surplus funds and their treatment; Sections 75-77 deal with properties of trusts and charitable institutions and restrictions on transfers. These and other provisions enable the State, which is concerned in the proper administration of such organizations, to ensure that they are managed efficiently without misfeasance. They also contain provisions to protect the interests of trusts, especially funds and properties. 70. In view of the above discussion, it is held that charitable institutions and societies, which may be regulated by other state laws, have to comply with them- just as in the case of laws regulating education (at all levels). Compliance with or registration under those laws, are also a relevant consideration which can legitimately weigh with the Commissioner or other concerned authority, while deciding applications for approval under Section 10 (23C). 71. This reasoning equally applies especially in Section 11(4A) which speaks of profits incidental which specifies that exemption in relation to income or trust of an institution which are profits or means of business cannot be exempted 'unles....
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....was not merely imparting education but also was running hostels. It is clarified that providing hostel facilities to pupils would be an activity incidental to imparting education. It is unclear from the record whether R.R.M Educational Society was providing hostel facility only to its students or to others as well. If the institution provided hostel and allied facilities (such as catering etc.) only to its students, that activity would clearly be 'incidental' to the objective of imparting education. 75. The last ground urged was with respect to the refusal by the Commissioner to register certain institutions who had amended their objectives. This court is of the opinion that the impugned judgment cannot be faulted with in rejecting the challenge by the appellant societies and trusts, because the requirement of trust or societies applying for registration or approval under the provisos to Section 10(23)(C) spell out a specific time (before 30 September). As the High Court has observed, there is no provision to extend such a deadline. In the circumstances for the concerned year, the reasoning of the High Court in refusing to interfere with the concerned authorities decisions to ap....
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....ofesses. The observations made in American Hotel (supra) suggest that the Commissioner could not call for the records and that the examination of such accounts would be at the stage of assessment. Whilst that reasoning undoubtedly applies to newly set up charities, trusts etc. the proviso under Section 10(23C) is not confined to newly set up trusts - it also applies to existing ones. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. g. It is held that wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under Section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the trust, society etc. This reasoning is reinforced by the recent insertion of another proviso of Section 10(23C) with effect from 01.04.2021. 77. In a knowledge based, information driven society, true wealth is education - and access to it. Every social order accommodates, and even cherishe....