TMI Blog2013 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust. The emphasis on part of the CCIT that the purpose of education would not be served if the education is for students who have been illegally admitted and the purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise, appears to be going beyond the requirements of the section. Of course, the requirement of an educational institution to provide admissions strictly in accordance with the prescribed rules, regulations and statute cannot be less emphasized, rather the same need to be adhered to in letter and spirit, but then, the said violation cannot lead to its loosing the character as an entity existing solely for the purpose of education. As decided in Rajan Purohit Vs. Rajasthan University of Health Sciences [2013 (3) TMI 137 - SUPREME COURT] that there was no agreement between the College and the State Government to admit students into its MBBS course on the basis of RPMT 2008 and the finding of the High Court in this regard is erroneous and the High Court could not have directed the College to fill up its seats on the basis of merit of students as determined in RPMT 2008. Hence, the direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income under Section 10(23C)((vi) of the Act. After exchange of several letters between the Trust and the authorities whereby several queries were raised and the same were answered, the application of the Trust was rejected by the order dated 27.1.2010, inter-alia, on the ground that the Trust was not satisfying the essential conditions for exemption under Section 10(23C). It was also pointed out in the writ petition that for the assessment year 2010-11 and onwards, the Trust has been granted approval under Section 10(23C)(vi) of the Act. The order of rejection was challenged on several grounds. Notices of the writ petition were issued and the appellants filed detailed reply to the said writ petition inter-alia justifying the rejection of the application for exemption filed by the Trust. The main reason stressed for rejection was that the medical college run by the Trust was granted permission for the MBBS Medical Course with annual intake of 150 students, starting from the academic year 2008-09. Against the intake of 150 students for MBBS Course, 15% were made available for NRI / management quota, while 85% of the seats were available for open selection. The college admitted 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any other adverse material on record against the assessee, for drawing such adverse inference. Learned Chief Commissioner of Income Tax vide order dated 27/1/2010 has only assigned one single reason as stated above to deny the approval under Section 10(23C) of the Act. The relevant portion of the impugned order dated 27/1/2010 is reproduced hereunder for ready reference: 11. It is also apparent that the Trust is not satisfying essential condition for exemption u/s 10 (23C) (vi) and (via). As per the relevant clause, any income received by any person on behalf of any university or other educational purposes. Moreover, the income earned should be applied wholly and exclusively to the objects for which it is established, i.e. for educational purpose. In the institution's case, the Hon'ble High Court has held that the admissions made for Academic Year 2008-2009 were illegal. The purpose of education would not be served, if the education is for students who have been illegally admitted. The purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise. The spending of funds on education of students who h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption under Section 10(23C) of the Act. Consequently, the writ petition was allowed in the terms as indicated herein-before. Assailing the order so passed by the learned Single Judge, it was contended on behalf of the appellants that the Trust was not satisfying the essential condition for exemption under Section 10(23C)(vi) of the Act because the income received is exempted only if the institution is existing for educational purposes and as the Court has held that the admissions made for the academic year 2008-09 were illegal, CCIT was justified in rejecting the application. It was also submitted that as the issue with regard to violation by the Trust, of the admission process as laid down by the statutory body, has been held against the Trust by the learned Single Judge of this Court and upheld by the Division Bench, the entity which has violated the prescribed procedure of admission cannot qualify as an institution for grant of benefit of exemption. Learned counsel for the respondent-Trust opposed the submissions as made by the learned counsel for the appellant. It was contended that the mere fact that the Courts found some defects in the admission procedure adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny beneficial provision of law for approval / registration / exemption etc., it would necessarily mean an entity which is otherwise free of any defect. An entity which has violated the prescribed procedure of admission would not qualify as an institute referred to in any law granting any benefit to such institute. In my opinion, having violated the system of admission as laid down by the State Govt., Rajasthan University and the Medical Council of India, the Institute does not qualify for any benefit available in section 10(23C). 11. It is also apparent that the Trust is not satisfying essential condition for exemption u/s 10 (23C)(vi) and (via). As per the relevant clause, any income received by any person on behalf of any university or other educational institution is exempt under the section if such institution is existing for educational purposes. Moreover, the income earned should be applied wholly and exclusively to the objects for which it is established, i.e. For educational purpose. In the institution's case, the Hon'ble High Court has held that the admissions made for Academic Year 2008-09 were illegal. The purpose of education would not be served, if the education is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and / or finding of the learned CCIT that on account of the said defect in the admission procedure, the Trust ceased to exist solely for educational purposes and / or it existed for the purposes of profit. Further, it is not the case of the appellants that the students who were admitted were not imparted education in the college in which they were admitted and / or the admissions granted were fake or non-existent or that the income generated by admitting the said students was not used for the purpose of the Trust. The emphasis on part of the learned CCIT that the purpose of education would not be served if the education is for students who have been illegally admitted and the purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise, appears to be going beyond the requirements of the section. Of course, the requirement of an educational institution to provide admissions strictly in accordance with the prescribed rules, regulations and statute cannot be less emphasized, rather the same need to be adhered to in letter and spirit, but then, the said violation cannot lead to its loosing the character as an enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment shall be spent by the State Government for improvement of infrastructure and laboratories of the Government medical college of the State and for no other purpose. 47.4. The College which was responsible for making the admissions in violation of clause (2) of Regulation 5 of the MCI Regulations will surrender 107 (117 - 10) MBBS seats to the State Government phase wise, not more than ten in any academic year beginning from the academic year 2012-2013 and these surrendered seats will be filled up by the students selected in RPMT or any other common entrance test conducted by the State Government of Rajasthan or its agency for admissions to the government colleges and the fees payable by the students admitted to the surrendered seats would be the same as that payable by the students of government colleges. 47.5. The results of the students in the MBBS course held up on account of interim orders passed by the Court may now be published. 48. The impugned judgment of the High Court is modified accordingly and the appeals are allowed to the extent as indicated in this judgment. The pending I.A. Nos. 3 and 4 stand disposed of. From the above, it is clear that the entire con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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