TMI Blog2018 (4) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... is a definite case for the respondent / writ petitioner that the respondent/ writ petitioner is only running one Institution and there is no other Institution, which is being run by it and, in fact, even it has a case that there is no other activity. As under the Memorandum of objects, there are various objects, other than education. What Section 10(23C)(6) of the Act actually does contemplate is that income received by any person on behalf of the Institution, which is an educational institution and that Institution should exist solely for educational purpose and not for the purpose of profit, other than those mentioned in Clauses (iiiab) (iiiad). It is also to be approved by the Prescribed Authority. Therefore, the requirement of law must be that the educational institution is to exist solely for educational purpose and it should not exist for the purpose of profit. Underlying object appears to be that the words existing solely are to be understood in the context of the words not for the purpose of profit . In the light of this, we would think that the Appeal must be partly allowed and the portion of the judgment directing exemption to be granted must be set aside, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t running any other educational institution or pursuing any other activity except the one mentioned hereinbefore and as such is existing solely for the educational purpose and not for the purpose of profit. The petitioner Society applied for grant of exemption under Section 10(23C) (vi) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the Financial Year 2011-12 by filing Annexure-4 Application. Documents relating to the income / receipts were verified. Inspector of Income Tax submitted his report. According to the petitioner, although the petitioner is covered under Section 10(23C), by the order dated 20.09.2013 (Annexure-1), the appellant rejected the Application for grant of exemption. It is, inter alia, in fact stated that the petitioner obtained a copy of the Certificate of Registration under Section 12AA of the Act (Annexure-5). 6. Pleadings were exchanged. 7. The learned Single Judge reasoned that by the impugned order, the claim for exemption was rejected, inter alia, on the ground that the Society had disproportionate fee structure which was devised to earn maximum money for the purpose of expansion of the institution and the expansion of instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable activity. Next, it is stated that the Society is also not registered under Section 12A of the Income Tax Act. Reference is made to the judgment of this Court in the case of M/s Queen s Educational Society (supra), wherein it was held that the institution with fee structure so designed that it is earning exorbitant surplus year after year cannot be taken as a purely charitable activity. Though, the High Court was, in that case, dealing with exemption under Section 10(23C)(iiiad), the said test will apply for considering approval under Section 10(23C)(vi). Following the judgment of the jurisdictional High Court, the application was rejected. As far as the part relating to the Assessee s fee structure being disproportionate and on that ground following the judgment of the jurisdictional High Court in Queen s Educational Society (supra) is concerned, the matter must necessarily be considered in the light of the judgment of the Hon ble Apex Court arising from the judgment of this Court, which is reported in (2015) 8 SCC 47. It is this judgment, which has also found favour with the learned Single Judge. The learned Single Judge has, after referring to the judgment, straightway af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act. 11. Therefore, the fact that imparting education results in making a profit does not lead to an inference that it becomes an activity for profit. If after meeting expenditure, a surplus arises incidentally from the activities carried out by the educational institution, it does not cease to be one existing solely for educational purposes. The final test would be whether on an overall view of the matter, in the concerned assessment year, the object is to make profit as opposed to educating persons. We are noticing these only to indicate that after the learned Single Judge set aside the order of the Officer, the tests are still remaining to be applied to the facts. It is only after applying the tests laid down by the Hon ble Apex Court that the correct position would emerge as to whether the provisions of Section 10(23C)(vi) of the Act are fulfilled or not. Therefore, the learned Single Judge should not have straightway granted exemption without directing reconsideration of the matter. 12. The learned counsel for the respondent/writ petitioner Mr. Mohit Maulkehi would, no doubt, draw our atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his as a ground for rejection of the Application. In fact, Mr. Mohit Maulkehi, learned counsel for the respondent / writ petitioner, in this regard, would draw our attention to the judgment of this Court passed in Special Appeal No. 340 of 2015 (Chief Commissioner of Income Tax vs. Maharani Luxmi Bai Memorial Educational Society, decided on 29th July, 2015). Therein also, the contention is seen taken by the Revenue that the Institution must itself move the Application. Following is our discussion in regard to the same: 8. The word person is undisputedly defined to include persons like the writ petitioner, which is a registered Society. Therefore, on a conjoint reading of Section 10(23C)(vi) of the Income Tax Act and also the definition of the word person , we would think that there is no merit in the contention of the learned counsel for the appellant. In this context, we also notice that Form 56D, which is the form prescribed under Section 10(23C)(vi), also refers in the first column to the educational institution and, at the second column, to the trust or society. It provides for the signing of the application obviously by the person, who is competent to certify the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. 19. Thereafter, Section 5 defines scope of the total income . It, inter alia, provides that subject to the provisions of the Act, the total income of any previous year of a person who is a resident to include income, which is received or is deemed to be received in India in such year by or on behalf of such person; or accrues or arises or is deemed to accrue or arise to him in India; or accrues or arises to him outside India. Thus, the income tax is levied on the total income of a person and we have already noticed the definition of the word person . The word person is defined to include a juristic person. The writ petitioner is a society, which is registered under the Societies Registration Act, which clothes it with juristic personality and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of imparting education. This is contra-distinguished from an educational institution, which exists for the purpose of making profits. In the light of this, we would think that the Appeal must be partly allowed and the portion of the judgment directing exemption to be granted must be set aside, and instead a direction must be issued to the appellant to re-consider the matter in the light of the judgment of the Hon ble Apex Court in the case of American Hotel Lodging Association Educational Institute v. CBDT reported in (2008) 10 SCC 509 and also the judgment of the Hon ble Apex Court in the case of Queen s Educational Society vs. Commissioner of Income Tax reported in (2015) 8 SCC 47. 21. Accordingly, the Appeal is allowed partly and while we uphold the quashing of the order, we set aside the portion directing exemption to be granted under Section 10(23C)(vi), instead we direct the appellant to consider and take a decision afresh in the light of the observations in this judgment and also the judgment of the Hon ble Apex Court American Hotel Lodging Association Educational Institute v. CBDT reported in (2008) 10 SCC 509, which was followed in the case of Queen s Educational ..... X X X X Extracts X X X X X X X X Extracts X X X X
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