TaxTMI 
TaxTMI 
2026 (8) TMI 1418
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....jasthan Public Trust Act, 1959; that educational infrastructure had been constructed out of the funds of the assessee on land belonging to its trustees, which according to the Ld. CIT(E) resulted in diversion of funds and benefit to the trustees; and that the assessee was generating substantial surplus from its educational activities which, in his opinion, indicated existence of a profit motive. 3. Against the said order, the assessee preferred an appeal before the Tribunal in ITA No. 282/Jodh/2024. The Tribunal, vide order dated 17.12.2024, restored the matter to the file of the Ld. CIT(E) for fresh adjudication in accordance with law after affording adequate opportunity of hearing to the assessee. While restoring the matter, the Tribunal also took note of the subsequent development that the assessee had obtained registration from the Office of the Assistant Commissioner, Devsthan Vibhag, Jodhpur, with effect from 29.05.2024. Pursuant to the directions of the Tribunal, the Ld. CIT(E) issued notice dated 13.03.2026 and the assessee furnished a detailed reply dated 17.03.2026 along with the relevant documents and explanations. However, vide the impugned order dated 18.03.2026, th....
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....carefully considered the material placed on record. At the outset, the objection relating to non-registration under the Rajasthan Public Trust Act/Devsthan framework does not survive any further. The assessee has obtained registration from the Office of the Assistant Commissioner, Devsthan Vibhag, Jodhpur, with effect from 29.05.2024. Indeed, this subsequent development had specifically been noticed by the Tribunal while restoring the matter in the first round. Therefore, whatever may have been the factual position when the original order dated 31.03.2024 was passed, the position had materially changed when the Ld. CIT(E) reconsidered the matter pursuant to the order of the Tribunal. Once registration had been granted by the competent authority, the earlier objection founded upon its absence could not continue to operate against the assessee. 7. This position also assumes significance in the light of the judgment of the Hon'ble Supreme Court in New Noble Educational Society v. Chief Commissioner of Income Tax [2022] 448 ITR 594 (SC). The Hon'ble Supreme Court has, inter alia, held that wherever registration of a trust, society or charitable institution is obligatory under the ap....
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....xamination, the Assessing Officer categorically recorded that "the trust is approved u/s 10(23C)(vi) of the Act" and thereafter accepted the returned income. We are conscious that acceptance of the assessee's position in an earlier assessment year cannot, by itself, confer a perpetual entitlement to approval or preclude examination by the prescribed authority. Nevertheless, it remains a relevant contemporaneous circumstance that the assessee's educational activities and financial affairs had undergone scrutiny by the Department and its position under section 10(23C)(vi) was accepted. In the absence of any demonstrated material change in the objects or actual activities of the assessee, or any fresh material establishing diversion or private benefit, this earlier scrutiny acceptance lends corroborative support to the assessee's case. 10. This brings us to the principal objection of the Ld. CIT(E), namely generation of substantial surplus. The figures referred to in the material before us indicate surplus before depreciation of 22.87%, 20.41%, 27.02% and 28.84% for Financial Years 2020-21, 2021-22, 2022-23 and 2023-24 respectively, whereas the corresponding surplus after depreciat....
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....Supreme Court in New Noble Educational Society (supra) has also clarified that, while considering an application for approval under section 10(23C), the prescribed authority is not confined merely to examining the objects contained in the governing instrument. It is entitled to call for audited accounts and other relevant documents and to examine the genuineness of the institution and the manner of its functioning, including the pattern of its income and expenditure. Thus, there is no infirmity in examining the assessee's accounts or the surplus generated by it. However, such examination has to ultimately answer the statutory question whether the institution genuinely exists solely for education or whether its educational activities are being carried on with a profitoriented objective. The accounts are the means of enquiry; the mere existence of surplus cannot become its predetermined conclusion. 14. Tested on the aforesaid parameters, the material before us does not establish any profit-oriented objective on the part of the assessee. There is no finding that the assessee has carried on any activity unrelated to education. There is no material showing distribution of the surplus....
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....ned with effect from 29.05.2024; the infrastructure created from the assessee's funds is being used for educational activities; no actual diversion of funds or personal benefit to the trustees has been established; no non-educational commercial activity has been identified; the surplus has arisen from educational activities and has been retained and utilised for educational infrastructure and facilities; and, furthermore, in the scrutiny assessment for Assessment Year 2017-18, the Assessing Officer, after examination of the assessee's details and documents, had specifically recorded its approval under section 10(23C)(vi) and accepted its returned income. 18. Thus, there is a fundamental distinction between an institution which generates surplus while pursuing education and an institution which pursues education for generating profit. The former is not interdicted by section 10(23C)(vi); it is the latter which falls outside its ambit. On the facts and material placed before us, the assessee falls in the former category. The quantum of surplus cannot substitute for proof of a profit-oriented purpose, just as ownership of the underlying land by the trustees cannot substitute for pr....