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TMI Blog2012 (8) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ubaneswar Institute of Management and Information Technology and Indian Institute of Science and Information Technology for imparting Higher Education in MBA and MCA courses respectively. The aforesaid two institutions have been established with the sole intention to provide higher education only without having any profit motive. These institutions are running to impart world class environment and training to enable the youth of India belonging to all sections and strata of the society to give a foot hold and place in the international market. Therefore, these institutions come within the scope and ambit of Section 10(23C)(vi) of the Act, 1961. As per the said provision, the petitioner filed an application vide Annexure-2 in Form No.56-D with the Chief Commissioner for grant of exemption under Section 10(23C)(vi) of the Act, 1961 for the financial year 2008-09. While adjudicating the petitioner's claim, the Chief Commissioner directed opposite party No.2-Commisisoner of Income Tax to make an inquiry and submit a report on the actual activity of the petitioner. Accordingly, an inquiry was conducted by opposite party No.2, records were examined and finally being satisfied a report re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee so constituted recommended the fees under different heads which would be charged for the Academic Session 2007-08. Under Clause (1), a ceiling limit was fixed for certain costs which could be levied including placement fee by the institutions. The Legislature of the State of Orissa enacted the Orissa Professional Educational Institutions (Regulation of Admission and Fixation of Fee) Act, 2007 (for short, "Act, 2007") to provide for the regulation of admission and fixation of fee, prohibition of capitation fee, reservation in admission and for other measures to ensure equity and excellence in professional educational institutions and for the matters connected therewith or incidental thereto. 4. Mr. Kar, further argued that in Islamic Academic of Education and others v. State of Karnataka, AIR 2003 SC 3724, it was held that two Committees for monitoring the admission procedure and determining fee structure in professional Educational Institutions are permissible as regulating measures. Thereafter, the Hon'ble Supreme Court in P.A. Inamdar and others v. State of Maharashtra, AIR 2005 SC 3226, held that it is for the Central Government or for the State Governments, in absence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also in similar lines with a ceiling on optional cost to be collected from the students and also provided for collecting "placement and training fee". The Notification vide Annexure-4 also provides that Colleges are not allowed to charge any other optional costs in any other name other than prescribed and if any institution has collected any other fee in any name guise, the same will entail in withdrawal of NOC by the AICTE and levy of penalties as per the Act, 2007. The placement and preplacement training is a part of the curriculum and has been recognized by the AICTE. A perusal of the approval letter of the AICTE and Clause (4) of the General Conditions thereof would go to show that other fees shall be charged as prescribed by the competent authority. The placement fee comes within the category of "other fee" collection of which has the approval of the Fee Structure Committee which is the competent authority. Therefore, placement and training is a mandatory condition for grant of approval and collection of the fee for it is a part of the curriculum and an educational activity of the Institution. 6. Mr. Kar further submitted that the case laws relied upon by the Chief Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery fact of collection of fees under the head other than educational purpose, disentitles the petitioner to avail exemption under Section 10(23C)(vi) of the Act, 1961. 8. On the rival, factual and legal contentions advanced by the parties, the questions which fall for consideration by this Court are as follows: (i) Whether the petitioner Trust is existing solely for educational purpose and not for the purpose of profit so that the income received by it shall not be included in computing its total income for the financial year 2008-09 ? (ii) Whether opposite party No.1-Chief Commissioner is justified in not granting approval under Section 10(23C) (vi) of the Act, 1961 for the financial year 2008-09 ? 9. Since both the aforesaid questions are interlinked, they are dealt with together. 10. To deal with the aforesaid two questions, it is necessary to know what is contemplated in Section 10(23C)(vi) of the I.T. Act. The same is extracted below: "10. Incomes not included in total income In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - ** ** ** (23C) any income rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business. The 12th proviso provides that where the other educational institution does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under Section 12AA or to any fund or trust or institutions or any university or other educational institution or hospital or other medical institutions shall not be treated as application of income to the objects for which such fund or trust or institution or university or other educational institution or hospital or other medical institutions as the case may be is established. 12. The Hon'ble Supreme Court referring to its earlier decision in the case of Surat Art Silk, (1980) 2 SCC 31, considered the provision of Section 10(23C)(vi) in American Hotel & Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC) and made the following observations: "With the insertion of the first proviso, the prescribed authority is required to vet the application. This vetting process is stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein." 13. In the above case the Hon'ble Supreme Court further held that it is only if the prerequisite condition of actual existence of the educational institution is fulfilled, the question of compliance with requirements in the provisos would arise. To make the section with the proviso workable, monitoring conditions in the third proviso like application/utilization of income, pattern of investments to be made, etc., could be stipulated as conditions by the prescribed authority subject to which approval could be granted. While imposing stipulations subject to which approval is granted, the prescribed authority may insist on certain percentage of accounting income to be utilized/applied for imparting education in India. However, the prescribed authority must give an opportunity to the petitioner-institution to comply with the monitoring conditions which are stipulated for the first time as mentioned in the third proviso to Section 10(23C) of the I.T. Act. After grant of approval, if it is brought to the notice of the prescribed authority that conditions on which approval was given have been breached or that circumstances mentioned in the thirteenth proviso exist, then the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, alter and repair houses and other buildings and to build drains and make roads and fences and otherwise to improve and develop and to cultivate or cause to be cultivated all or any of the said lands, hereditaments and premises and to insure houses and buildings against loss or damage by fire and/or other risks or to let, lease, make allowances to any agreements with tenants, agriculturists and generally to deal with the said lands, hereditaments and premises as they may deem fit in their absolute discretion." 18. The Chief Commissioner further held that the petitioner trust is not existing solely for educational purposes. The trust has been created with other aims and objectives which are clearly in the nature of business. However, from the impugned order under Annexure-5, it does not reveal whether the petitioner trust has carried on any activities enumerated against item No.16 at page 13 of the Trust deed. 19. The Chief Commissioner, in paragraph 5 of his order under Annexure-5, has observed that on verification of the audited income and expenditure statements for financial years 2008-09 and 2007-08 it is seen that the assessee was engaged in non-educational activities like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and training fee" came with effect from 2007 vide Annexure-4 and is very much for educational purpose and cannot be held otherwise and in the least can ever be considered as a profit earning by the petitioner's institution. Therefore, the said fee collection is for educational purpose only as envisaged under Section 10(23C)(vi) of the Act, 1961. The institutions are obliged to see the placements of their students as per the AICTE Guidelines and train them accordingly. The fee for the same has been permitted to be collected which is for educational purpose. 22. The Chief Commissioner, therefore, is required to see whether the fees collected under head "placement and training" is in consonance with the Act, 2007, order of the Hon'ble Supreme Court dated 01.06.2007 and subsequent notification vide Annexure-4 as claimed by the petitioner. If the collection is in consonance with the Act, 2007, order of the Hon'ble Supreme Court dated 01.06.2007 and subsequent notification vide Annexure-4, then it cannot be said that the collection is without any authority of law. 23. The next question that arises and needs to be determined is as to whether the collection of money made under the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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