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Guru Nanak Education Trust Versus Union of India And Others

2015 (9) TMI 232 - UTTARAKHAND HIGH COURT

Application seeking approval under Section 10(23-C)(VI) rejected - Held that:- Prescribed authority has to ascertain whether the educational institution has been applying its profit wholly and exclusively to the objects for which the institution is established. Merely because institution has earned profit would not be deciding factor to conclude that educational institute exists for profit. To decide the entitlement of institution for exemption under Section 10(23-C)(VI) of the Income Tax Act th .....

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of the above, order impugned does not sustain in the eyes of law and is hereby quashed. Consequently, present petition succeeds and is hereby allowed. The Chief Commissioner of Income Tax, Dehradun is directed to decide the application moved by the petitioner afresh in the light of observations made hereinbefore preferably within 90 days from today. - Decided in favour of assessee. - Writ Petition No. 2680 of 2014 (M/S) - Dated:- 19-8-2015 - Alok Singh, J. For the Petitioner : Mr Arvind Vashist .....

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-G of the Income Tax Act. Petitioner has applied on the prescribed form no. 56-D on 30.09.2013 for grant of approval under section 10(23-C)(VI). Application, so moved by the petitioner, was rejected vide order dated 23.09.2014 on the ground that petitioner has other objects apart from imparting education and petitioner has disproportionate fee structure as to maximum fee simply to invest for expansion of the institution which may not fall into the ambit of charitable activity; petitioner has spe .....

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ve carefully perused the record. Judgment of this Court in the case of M/s Queen's Educational Society, relied upon by the Chief Commissioner of Income Tax in the impugned order was subject matter of Civil Appeal No. 5167 of 2008 before the Hon'ble Apex Court and the same was set aside by the Hon'ble Apex Court vide judgment dated 16.03.2015. Hon'ble Apex Court in the case of M/S Queen's Educational Society (Supra) has held as under: We reiterate that the correct tests which .....

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heir income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. Hon'ble Apex Court in the case of CIT v. Surat Art Silk Cloth Manufacturers' Assn. [(1980) 2 SCC 31 , has h .....

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inciples of management. In order to ascertain whether the institute is carried on with the object of making profit or not it is the duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established. Hon'ble Apex Court in the case of Aditanar Educational Institution v. Additional Commissioner of Income Tax, (1997) 224 ITR 310 , has held as under: "The High Court has made an observation that .....

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y carried on by the educational institution, it will not cease to be one existing solely for educational purposes since the object is not one to make profit. The decisive or acid test is whether on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity." The Hon'ble Apex Court in the case of American Hotel & lodgi .....

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n 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 [judgment of this Court in Aditanar Educational Institution v. Asstt. CIT MANU/SC/2122/1997 [1997] 139 CTR (SC) 7: [1997] 224 ITR 310 (SC)] . The tes .....

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authority for which every applicant has to move an application in the standardized form in terms of the first proviso. It is only if the pre-requisite condition of actual existence of the educational institution is fulfilled that the question of compliance of requirements in the provisos would arise. We find merit in the contention advanced on behalf of the appellant that the third proviso contains monitoring conditions/requirements like application, accumulation, deployment of income in specifi .....

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ia. As discussed above, with the insertion of the provisos in section 10(23C)(vi) of the 1961 Act, it is open to the prescribed authority (PA) to stipulate, while granting approval, that the approval is being given subject to utilization/application of certain percentage of income, in the accounting sense, towards impartation of education in India. Such exercise would be based on estimation. There is a difference between 'accounting income' and 'taxable income'. At the stage of s .....

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