TMI Blog2010 (11) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2009-10 on the ground that their objects were non educational, cannot be faulted. Even if the petitioner's contention that registration under A. P. Act 30 of 1987 is not a condition precedent, in view of the judgment of this court in New Noble Educational Society v. Chief CIT [2010 (11) TMI 761 - Andhra Pradesh High Court] & is to be accepted, since the object of "eradicating unemployment" can neither be said to be integrally connected with or as being ancillary to, the object of providing education, the order of the first respondent in rejecting the petitioner's application for exemption under section 10(23C)(vi) for the assessment year 2009-10 cannot be faulted. Against assessee. - - - - - Dated:- 23-11-2010 - RAO V. V. S. RAMESH RANGANATHAN, JJ. 23-11-2010 JUDGMENT Ramesh Ranganathan J.- 1. The relief sought for in this writ petition is to declare the proceedings of the first respondent-Chief Commissioner of Income-tax dated May 26, 2010, as illegal and arbitrary. A consequential direction is sought to the first respondent to grant approval to the petitioner under section 10(23C)(vi) of the Income-tax Act, 1961 (hereinafter called "the Act"). 2. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of their objects were non-educational in nature ; inclusion of such objects indicated that the society did not exist solely for the purpose of education ; and, as they were not registered under section 43 of the A. P. Charitable and Hindu Religious Institutions and Endowments Act, 1987 (A. P. Act 30 of 1987), their application was liable to be rejected. The petitioner was asked to furnish details of the corpus fund deposit of Rs.35 lakhs appearing in the balance-sheet on March 31, 2008. They were directed to appear before the first respondent for hearing on May 14, 2010. The petitioner submitted their reply to the show-cause notice on May 17, 2010. However, their application was rejected by the first respondent by proceedings dated May 26, 2010, on the ground that, in so far as the assessment year 2008-09 was concerned, the application filed by them on May 27, 2009, was beyond time ; and, in so far as the assessment year 2009-10 was concerned, some of their objects were non-educational, and they were not registered under A. P. Act 30 of 1987. It is this order of the first respondent dated May 26, 2010, which is under challenge in this writ petition. 5. The order of the first r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of September of the relevant assessment year and, as such, the application ought to have been filed on or before September 30, 2008. Before the amendment, the fourteenth proviso required the application to be made in the financial year immediately preceding the assessment year, in which case the application for the assessment year 2008-09 ought to have been made on or before March 31, 2008. 8. No power is vested with the Chief Commissioner of Income-tax to entertain an application, filed under section 10(23C)(vi), beyond the statutory period by condoning the delay in presenting the application. In this context, it is relevant to reproduce the Notes on Clauses to the Finance Bill, 2006, which reads thus ([2006] 281 ITR (St) 131, 191) : "Providing a time-limit for application for grant of exemption or continuance of exemption for certain charitable and religions trusts and institutions and certain educational and medical institutions. Under the existing provisions contained in sub-clauses (iv), (v), (vi) and (via) of clause (23C) of section 10, there is no time-limit for any university or other educational institution or any hospital or other institutions, or any fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to be ascertained from its objects (Aditanar Educational Institution v. Addl. CIT [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) (judgment of APHC DB in R. C. No. 35 of 1996 dated October 8, 2010) ; CIT v. Maharaja Sawai Mansinghji Museum Trust [1988] 169 ITR 379 (Raj)). In using the expression, "solely", the Legislature has made it clear that it intends to exempt the income of the institutions established solely for educational purposes and not for commercial activities (Oxford University Press v. CIT [2001] 247 ITR 658 (SC)). This requirement would militate against an institution pursuing objects other than education (Vanita Vishram Trust v. Chief CIT [2010] 327 ITR 121 (Bom)). Even if one of the objects enables the institution to undertake commercial activities, it would not be entitled for approval under section 10(23C)(vi) of the Act (American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC)). It is only if the objects reveal that the very being of the assessee-society, as an educational institution, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mary or dominant purpose would not disentitle the institution from the benefit. The test which has, therefore, to be applied is whether the object, which is said to be non-educational, is the main or primary object of the institution or it is ancillary or incidental to the dominant or primary object which is "educational" (Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)). The test is the genuineness of the purpose tested by the obligation created to spend the money exclusively on "education". If that obligation is there, the income becomes entitled to exemption (Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC)). 15. Under the third proviso to section 10(23C)(vi), the prescribed authority has to ascertain, while examining the genuineness of the activities of the institution, whether the applicant applies its income wholly and exclusively to the objects for which it is established. The applicant has not only to impart, but must also apply its income exclusively for the purposes of education (American Hotel [2008] 301 ITR 86 (SC)). The words "not for the purposes of profit" accompanying the words "existing solely for educational p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal 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 be sufficient 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 assessee's case does not fall within section 2(15), it is difficult to put it in section 10(23C)(vi) of the Act (Maharaja Sawai Mansinghji Museum Trust [1988] 169 ITR 379 (Raj)). 18. While the petitioner would contend that the objects were amended on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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