TMI Blog2011 (3) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Gangele, Brij Kishore Dube, JJ. ORDER S.K. Gangele, J 1. The petitioners have filed this petition against the order Annexure-P/1, dated 18-2-2008, by which the application of the petitioners filed under section 10(23C)(vi) of the Income-tax Act, 1961 has been rejected. 2. The petitioner-society is a society registered with the Registrar of Firms and Societies under the M.P. Society Registration Act, 1973. It has been running a school named as Little Angles High School at Gudi Guda Ka Naka, Gwalior. As per the society, its sole activity is running a school named as Little Angels High School. The school has been providing education to the children upto 12th standard. The education institutions were granted exemption under section 10(22) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act of 1961'). On 1-4-1999, section 10(22) of the Act of 1961 was omitted and it was replaced by section 10(23C) which contains exemption provisions for educational institutions were not required to file return of the income upto the assessment year 2002-2003. With effect from 1-4-2003, it was made mandatory to file return for educational institutions where aggregate an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on behalf of the petitioners has contended that the impugned order passed by the authority is against the law and against the provisions of section 23(c) of the Act of 1961. It has further been submitted that the objects mentioned in the memorandum of association of the society are correlated with the education and the petitioner-society exists solely for the purpose of education. It has not entered into any business in the relevant period, neither it diversified its fund for any other purposes. Learned counsel further contended that the application of the petitioner -society has been rejected at threshold without considering the activities of the society. Learned counsel further submitted that for the previous year specially 2003-2004 to 2005-2006, the application of the petitioner-society was accepted and the petitioner was granted exemption, however, for the accounting period i.e. 1-4-2006 to 31-3-2007 on the same basis, the application has been rejected, which is against the principle of inconsistency. In support of her contentions, learned Senior Counsel relied on the following judgments:- (i) [1999] 7 SCC 120 (Dr. Preeti Shrivastava v. State of M.P.); (ii) [2008] 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e received by any person on behalf of " (i)-(v)** ** ** (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iii-ab) or sub-clause (iii-ad) and which may be approved by the prescribed authority; or" 8. The aforesaid provision has been interpreted by the Hon'ble Supreme Court in the case of American Hotel and Lodging Association Educational Institute v. Central Board of Direct Taxes [2008] 10 SCC 509, has held as under:- "34. At the outset, we need to examine the scope of section 10(22), which is the predecessor of section 10(23C)(vi), without the provisos. 35. Actual existence of the educational institution was the pre-condition of the application for initial approval under section 10(22). On grant of approval under section 10(22), sections 11 and 13 did not apply. Therefore, earlier prior to 1-4-1999 when exemption was given to the appellant, there was no assessment nor demand. Section 10(22) had an automatic effect. Once an applicant institution came within the phrase "exists solely for educational purposes and not for profit" no other conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no correlation with education, exemption has to be denied (see judgment of this Court in Oxford University Press). Therefore, the character of the recipient of income must have character of educational institution in India to be ascertained from the nature of the activities. If after meeting expenditure, surplus remains incidentally from the activity carried on by the educational institution, it will not cease to be one existing solely for educational purposes. In other words, existence of surplus from the activity will not mean absence of educational purpose (see judgment of this Court in Aditanar Educational Institution v. CIT). The test is " the nature of activity. If the activity like running a printing press takes place it is not educational. But whether the income/profit has been applied for non-educational purpose has to be decided only at the end of the financial year. 39. In Oxford University Press this Court found that the applicant was a branch of Oxford Press which was part of Oxford University but its activity in India was restricted to publishing books, journals, periodicals, etc. The Tribunal held that because Oxford Press is part of the university its income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that power was not there with the PA. Under the third proviso, the PA has to ascertain while judging the genuineness of the activities of the applicant institution as to whether the applicant applies its income wholly and exclusively to the objects for which it is constituted/established. 42. Under the twelfth proviso, the PA is required to examine cases where an applicant does not apply its income during the year of receipt and accumulates it but makes payment therefrom to any trust or institution registered under section 12AA or to any fund or trust or institution or university or other educational institution and to that extent the proviso states that such payment shall not be treated as application of income to the objects for which such trust of fund or educational institution is established. The idea underlying the twelfth proviso is to provide guidance to the PA as to the meaning of the words "application of income to the objects for which the institution is established". Therefore, the twelfth proviso is the matter of detail. 9. The Hon'ble Supreme Court further in the case of Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax, Mysore, [1975] 101 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gwalior for the intellectual development of the children; (b) to conduct the classes and activities for all the levels of study and education in Gwalior; (c) To manage/maintain a library, reading room, and conduct classes of stitching, embroidery, weaving, centre for adult education and education in the filed of entertainment arts etc. (d) To make necessary arrangements for the over all development and growth of children when required." 11. The authority in its impugned order has held that the clauses (c) and (d) of the objects of the institution are non-educational in nature and the society can apply its income to any of the objects mentioned in the memorandum in its discretion, hence, the society is not existing solely for education purpose. Clause (c) of the objects is to manage and maintain a library, reading room and conduct classes of stitching, embroidery, weaving and schooling, adult education and education in the field of entertainment arts. The petitioner-society has filed the instructions issued by the Board of Secondary Education in regard to practical examinations for home science and in the aforesaid instructions, stitching, embroidery, weaving subject ..... X X X X Extracts X X X X X X X X Extracts X X X X
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