TMI Blog2012 (8) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the receipt in its income and expenditure account. Amount of Rs.15,000/- received has been utilized in the educational activities of the institutions and for infrastructural development. Therefore, it cannot be treated that the profit was earned for non-educational activities - in favour of assessee. Excess collection of fees for placement and training - Held that:- The Chief Commissioner has relied on the Government of India resolution providing for fee structure, 1997 and the Government of Orissa Industries Department Resolution dated 17.09.1998 to come to a conclusion that the fees collected towards "placement and training" is in excess of what was prescribed by the said resolutions which is no more holds the field in view of the Act, 2007 and the order of the Hon'ble Supreme Court P. A. Inamdar and others Versus State of Maharashtra and others [2005 (8) TMI 614 - SUPREME COURT ] constituted the policy planning body and so also the "Fee Structure Committee" and directed that other provisions of the Act shall continue to be in force and subsequent notification vide Annexure-4 issued by the Industries Department. That on the issue of deciding whether an institution is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 regarding the two institutions of the petitioner was submitted. After receipt of the report from opposite party No.2, the Chief Commissioner issued notice to the petitioner for hearing and during the course of hearing the petitioner produced various documents as directed by opposite party No.1. Those documents are; ( a ) The manner of receipt of fees and heads of receipt from the students and the Books of Accounts, ( b ) Copies of the Notification of the Government of Orissa, Industry Department prescribing fees to be charged under different heads, ( c ) Copy of the audit report showing details of receipt and expenditure made for educational activities, and ( d ) Letter of Approval granted by the AICTE. Before the Commissioner, the petitioner has also explained the details of activities which are in consonance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 central legislation, to come out with detailed thought out legislation on the subject. Thus, the State of Orissa has enacted the Act, 2007 in line with the observations of the Hon'ble Supreme Court in the cases referred to supra. The Act, 2007 was challenged before this Court in W.P.(C) No.3689 of 2007 and this Court by judgment dated 18.05.2007 declared it unconstitutional. The said judgment of this Court dated 18.05.2007 was challenged by the State before the Hon'ble Supreme Court in S.L.P.(Civil) No.10318 of 2007 and by order dated 01.06.2007, the Hon'ble Supreme Court constituted the policy planning body and so also the "Fee Structure Committee" and directed that other provisions of the Act shall continue to be in force. In the aforesaid background the notifications of the Government of Orissa Industries Department vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 Commissioner have been misinterpreted by him. He has held that a legally prescribed mandatory educational activity is not to be prescribed by relying on the resolutions which no more hold the field. Therefore, the case needs reconsideration by the said authority in the interest of justice. The observation of the Chief Commissioner is that the petitioner is engaged in non-educational activity like horticulture and generating income from the same is a misunderstanding of facts. There were standing Coconut and mango trees in the land acquired by the petitioner for establishment of the Educational Institutions. In order to maintain a salubrious and green environment the trees were not cut down but maintained. The petitioner has reflected the receipt in its income and expenditure Account and the amount of Rs.15,000/-received has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal 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 received by any person on behalf of - ** ** ** ( 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 (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority". ** ** ** (Underlined for emphasis) A plain reading of Section 10(23C)(vi) of the I.T. Act makes it amply clear that in order to be eligible for exemption under Section 10(23C)(vi) of the I.T. Act, the following conditions are to be satisfied: ( i ) there must be an educational institution, ( ii ) such university or other educational institution must exist solely for educational purposes, ( iii ) it should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 stipulated by the second proviso. It is important to note that the second proviso also indicates the powers and duties of the prescribed authority. While considering the approval application in the second proviso, the prescribed authority is empowered, before giving approval, to call for such documents including annual accounts or information from the applicant to check the genuineness of the activities of the applicant-institution. Earlier that power was not there with the prescribed authority. Under the third proviso, the prescribed authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. 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 prescribed authority can withdraw the approval earlier given by following the procedure mentioned in that proviso. The Hon'ble Supreme Court further held that on the issue of deciding whether an institution is existing for profit or not, the mere excess of income over expenditure cannot be decisive. An institution cannot be considered to be existing for profit, if some surplus is generated over expenditure. According to the Hon'ble Supreme Court, it is not possible to carry on educational activity in such a way that the expenditure exactly balances the income and there is no resultant profit. 14. The Hon'ble Supreme Court in the case of Oxford University Press v. CIT, [2001] 247 ITR 658 (SC), has held that non pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early 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 horticulture and generating income from the same. But the said order is totally silent as to what is the nature and magnitude of horticultural activities carried on by the assessee and what is its annual income and how it is utilized by the assessee. With regard to horticultural income, the contention of the assessee is that there were standing coconut and mango trees in the land acquired by the petitioner for establishment of the educational institution. In order to maintain a salubrious and green environment the trees were not cut down but maintained. The petitioner has reflected the receipt in its income and expenditure account. Amount of Rs.15,000/- received has been utilized in the educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 head "placement and training" is for educational purposes. It is to be further examined by the Chief Commissioner that how the income earned under head "placement and training" is utilized, i.e., whether for educational purpose or non-educational purpose. Recording of findings on the above issues by the Chief Commissioner is very much necessary to decide as to whether the petitioner is entitled to the grant of exemption in terms of Section 10(23C)(vi) of the Act, 1961. 24. In view of the above, the order of the Chief Commissioner under Annexure-5 is set aside and the matter is remitted back to the said authority to re-examine the case of the petitioner in the light of the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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