TMI Blog2013 (10) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... profit. According to this provision, if any educational institution is running on commercial basis then income of such educational institution cannot be exempted from taxation. However, such institution can claim exemption u/ss. 11 and 12 as element of profit is not excluded by the Legislature - 75% of the income is to be applied for charitable purposes itself shows that element of profit is not excluded from the definition of charitable purpose for the purpose of sections 11 and 12. Because some profit has been earned by an educational institution registration u/s. 12AA cannot be denied so long as provisions of sections 11, 12 and 12AA are complied with. Whether on the facts and in law, the registration u/s. 12AA of the Act can be refused to the assessee – Held that:- When societies/trusts are created with the sole object to advance the cause of education but if such objects coupled with the motive to earn profits, then such institution will not be entitled to exemption under section 10(22), since in such cases cannot be said to exist solely for the purpose of education. Therefore, registration under section 12A/12AA would not be relevant by itself for claiming exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y noticed in such statement. Further, in the Receipts Payments Account for the year ended 31-3-2012 furnished during the proceedings, the fee collections are shown at Rs. 84,91,788.. However, the fee structure statement for the financial year 2011-12, showing strength of students for each course i.e., B.Com (Reg), B.Com (Comp) and B.Sc., during the three years (i.e., First Year, Second Year and Third Year) and the respective fee amount, the total fees are shown at Rs. 1,05,10,500/-. Thus, the actual fee collection as per the statement is more than .the amount as shown from the said source in the Receipts Payments Account furnished for the said year. Under these circumstances, the financial statements of the above society for different accounting years are thus not reliable. 4. Further, from the Income Expenditure Account of the above society for the year ended 31-3-2011, it is seen that a sum of Rs. 4,99,549/- has been debited towards Loss on Chit. From such claim, it appears that the above society was also indulging in business activity, utilizing the funds of the society, and under that circumstance, it cannot be allowed registration u/s. 12AA of the Act. 5. Further, du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not fully correct. As seen from the Income Expenditure Account for the year ended on 31-3-2009, the excess of income over expenditure is shown at Rs. 27,67,655. Thus, during that year, the society has got surplus i.e., earned profit of Rs. 27,67,655/- from the collections made from students during that year. Similarly, the above society had earned profit of Rs. 7,68,612 and Rs. 3,33,393 during the accounting year ended on 31-3-2010 and 31-3-2011 respectively. In fact, such profit for the accounting year ended on 31-3-2011 after excluding Chit Loss claimed at Rs. 4,99,549/- would be more. From such statements furnished, thus, it shows that the above society was continuously earning profit from such fee collections made from students. Under these circumstances, it cannot be accepted that various fees collected by the above society, over and above the amount prescribed by the university authorities, was for meeting the expenditure of the society. Hence, it is not eligible for registration u/s. 12AA of the Act. 7. The learned AR submitted that the assessee is an educational institution. Its objects are fully charitable and registration u/s. 12AA of the Act is to be granted. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:] [Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty-five lakh rupees] or less in the previous year;]" 11. So, the object of the education has been declared as of charitable purpose by the Legislature. It was held by the Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association (121 ITR 1) as under: "It is now well settled as a result of the decision of this Court in Dharmadeepti v. CIT 1978 CTR (SC) 120 : (1978) 114 ITR 454 (SC), that the words 'not involving the carrying on of any activity for profit' qualify or govern only the last head of charitable purpose and not the earlier three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of registration u/s. 12AA of the Act. 14. Under both the categories mentioned above, the societies/trusts are created with the sole object to advance the cause of education but if such objects coupled with the motive to earn profits, then such institution will not be entitled to exemption under section 10(22), since in such cases cannot be said to exist solely for the purpose of education. Therefore, registration under section 12A/12AA would not be relevant by itself for claiming exemption under section 10(22) though the same would be relevant for claiming exemption under sections 11 and 12. Therefore, where education is imparted by an institution with the purpose of profit i.e., by running the schools/colleges purely on commercial basis, the assessee would not be entitled to exemption under section 10(22) but such case may be considered for exemption under section 11 if the conditions imposed by the Legislature are satisfied since the profit element has been omitted from the definition of the words 'charitable purpose' with effect from 1-4-1984. 15. Even the private institutions should charge reasonable fees not involving the element of profit. Therefore, in order to dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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