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2012 (6) TMI 602 - ITAT CHENNAIExemption u/s 11 - denial on ground of entity being not an educational institution - assessee, running a Distance Education Programme for Annamalai University, on Hotel Management and Catering Technology resulting in grant of Diploma and graduation, based on a Memorandum of Understanding (MOU) entered with Annamalai University - Revenue contended assessee to be only technical collaborator for the Distance Education Courses and not doing any charitable activity - alleged contravention of section 11(5) and 13(1) - Held that:- On perusal of Memorandum of Understanding entered by the assessee with Annamalai University and objects of the Trust it is clear that ex-facie the objects are nothing but educational and assessee was imparting a type of oral education and students studying in assessee's institution were being awarded formal Diploma/degree. There is no case for the Revenue that Annamalai University was existing for any commercial purposes. In our opinion, if Annamalai University was an educational institution, then assessee, which was conducting classes for the said University under its authority, was also an educational institution. Whether the substantial surplus generated by the assessee for the relevant previous year would make it a commercial entity - Held that:- Merely because the education activity had resulted in a surplus, would not be a ground to hold that assessee was not carrying on charitable activity. There is no case for the Revenue that surplus generated by the assessee on account of its activities were divided among the trustees or taken by the trustees but, for certain violation allegedly falling under Section 13(1)(c). Therefore, assessee could not have been denied the eligible exemption u/s 11 and 12 for a reason that it was not doing charitable activity as defined u/s 2(15). Violation u/s 13(1)(c) - sum of ₹ 30 lakhs withdrawn from the assessee-Trust and held by one of the trustees for two days - Held that:- It will not be reasonable to take a view that any benefit could have been derived by trustee in such a short period of two days. No violation could be established. Further, A.O. is directed to verify the explanations given by the assessee insofar as alleged violation u/s 13(1)(c) was concerned. If these are explained satisfactorily, assessee shall be given exemption claimed u/s 11 and 12 - Decided in favor of assessee for statistical purposes.
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