TMI Blog2010 (3) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... utes towards instruction of industrial training, workshops, and connected establishments and management and supervision thereof ; (ii) to takeover sick educational establishments and other educational institutions ; (iii) to give priority for the educational needs of all people irrespective of religion, regional and caste considerations and differences ; (iv) to strive for the uplift and betterment of all people especially the Christian minority in respect of education disseminating knowledge towards education, cultural, social service, discipline and moral upliftment including economic and intellectual advancement of the people ; (v) to provide facilities for library, reading rooms to generate interest and to open scope for play and other educational aspects, to distribute free or at subsidised rate books, stationery articles, writing materials, giving assistance for learning apart from arranging to secure financial aid for educational purposes, such as charts, materials pertaining to education and uniform. During hearing, it was found that the trust had filed return of income for the assessment years 2006-07 to 2008-09 claiming exemption under section 10(23C) and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 (provisional accounts) 42,42,000 34,37,840 81 per cent. After elaborating the decisions discussed by the Uttaranchal High Court in the case of CIT v. Queens' Educational Society and St. Pauls Sr. Secondary School [2009] 319 ITR 160 (Uttarkhand), to reach its conclusion that where a body is making systematic profits even though that profit is utilised only for charitable purposes yet it cannot be said it could claim exemption. After concluding that the change in the trust deed being illegal and the trust being run on commercial lines with a view to earn profit, the learned Commissioner of Income-tax has rejected the application of the trust seeking registration under section 12AA of the Act and did not grant registration. The assessee-trust is aggrieved and has raised following grounds of appeal : "1. The order of the Commissioner of Income-tax, Salem dated July 24, 2009 in C. No. 9755(113)/SLM/08-09 in rejecting the application filed for grant of registration under section 12AA of the Act is contrary to law, facts and in the circumstances of the case. 2. The Commissioner of Income-tax erred in rejecting the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate that the decisions cited in this regard had no application to the facts of the case inasmuch as the principles laid down in the hon'ble Supreme Court decisions referred to were understood wrongly and out of context in the process of rejecting the prayer for grant of registration. 11. The Commissioner of Income-tax failed to appreciate that imparting education on the facts of the case, resulting in surplus as pointed out would not lead to the automatic conclusion on the profit motive and the aspect of profit motive in the running of the educational institution ought to have been examined in the assessment proceedings while such examination in the present proceedings would be outside the domain of powers vested in section 12AA of the Act. 12. The Commissioner of Income-tax failed to appreciate that the order under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 13. The Commissioner of Income-tax failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law." The circumspectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ademic, moral and physical education to develop children natural instincts and aptitude and to prepare children for higher education. The assessee-trust also relied on the followings. 1. Section 10(22) and section 10(23C)(iiiad) are similar with the sole exception that the condition of gross receipts finds place in the latter. 2. Circular No. F. No. 194/16-17-IT(AI) in paragraph reads as under : 'The question for consideration whether an educational institution existing solely for educational purpose but which shows some surplus at the end of the year is eligible for this exemption. If the profit of the educational institution can be diverted for personal use of the proprietor thereof, then the income of the educational institution will be subject to tax. However, there may be cases where the provisions of section 11 may be applicable. Where all the objects of the trust are educational, and the surplus, if any, from running the educational institution is used for educational purpose only, it can be held that the institution is existing for educational purpose and not for the purpose of profit. However, if the surplus can be used for non-educational purposes, it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housed or the equipment that is contained in it but something more. It is an institution. . . It is not income from the educational institution that is exempt but any income of the educational institution. If the word had been 'from', the position would have been that the income should have been derived from the actual running of the school itself". 7. The Supreme Court in American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC) observed as under (headnote) : 'Once an applicant-institution came within the phrase "exists solely for educational purposes and not for profit" no other condition like application of income was required to be complied with. The prescribed authority was only required to examine the nature, activities and genuineness of the institution. The mere existence of profit/ surplus did not disqualify the institution. Therefore, when exemption was given to an institution, there was no assessment or demand. Section 10(22) had an automatic effect. Under section 10(22), the test was restricted to the character of the receipt of the income, viz., whether it had the character of an educational institution in India.' 8. The Uttarak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the income of the relevant year. 9. The assessee-trust is running only educational institution and no other activities are carried on by the trust except education to all, there is no business or profit motive by the trust and surplus earned all and again reinvested for educational activities and to provide education to all people irrespective of caste, religion, sex, etc., and relied upon the following decisions and circulars. 10. On the other hand, the principle laid down by the Uttarkhand High Court in the decision reported in CIT v. Jyoti Prabha Society [2009] 310 ITR 162 (Uttarkhand) on August 29, 2008 can be applied with the support and strength of the Board circulars and decisions referred above. Hence the provisions of section 10(23C)(iiiad) is applicable to the assessee-trust based on the above decisions and circulars. Yours faithfully, Salem(Sd.) R. Rathnakumar, 22-6-2009(Authorised Representative)." We have considered the above submissions. In a recent decision of the hon'ble Punjab and Haryana High Court in the case of Pinegrove International Charitable Trust v. UOI [2010] 327 ITR 73 (P H) C. W. P. No. 6031 of 2009 judgment dated January 29, 2010, 1 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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