TMI Blog2019 (11) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... determination by the Ld. CIT(E) with regard to the claim of the appellant society u/s 10(23C)(vi) of the Act for the F.Y. 2013-14 to 2015-16. Applicant society has over the years, shifted to acquiring of buses and as evident from the financial statements of the record that the assessee has earned income of ₹ 30,43,010/- in the form of transportation fee during the financial year 2015-16 and the expenses under the head transportation charges was ₹ 16,00,236/- only i.e. almost 50% of the fees charged exemplifies the profit motive - In view of the law laid down by the Hon ble Apex Court in Queen s Educational Society vs. CIT [ 2015 (3) TMI 619 - SUPREME COURT] CIT(E) has to determine the quantum of the surplus amount and its utilization and is also at liberty to put any condition in accordance with law for utilization of the surplus amount and/or fixing the charges of buses/transportation on charitable basis. On the aforesaid analyzations and reasons, it would be proper to set aside the order passed by the Ld. CIT(E) and to remand the case to the file of the Ld. CIT(E) for decision afresh while taking into consideration the observation made above by us and law lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from National and International level Associations and to use for the purposes for which they were received. The application of the Appellant Society was taken into consideration by the Ld. CIT(E) while issuing show cause letter dated 17.01.2017 by fixing the date on 25.01.2017 and the appellant was asked to provide certain documents/clarifications as mentioned in para No.5 of the order, which were replied/clarified by the appellant on 22.03.2017. While perusing the reply of the appellant, it was revealed by the Ld. CIT(E) that the appellant is running a school in the name style of Sri Nangali Academic Public School and had been claiming exemptions u/s 10(23C)(iiiad) of the I.T. Act till Financial Year 2013-14 and thereafter claimed exemption u/s 10(23C)(vi) of the Act for the F.Ys.2013-14 to 2015-16 without having any approval by the prescribed authority. The appellant has also claimed that it wants to commence other charitable activities like free education to poor students in future so it wants to be registered u/s 12AA of the I.T. Act. It was further revealed by the Ld. CIT(E) that the appellant society is also having franchise agreement with M/s. S.K. Ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,30,000/- to M/s S.K. Education . The Ld. CIT(A) finally observed that the applicant has taken a franchise of limited company and it is a well established principle that taking franchise of a corporate company is not exempted as the charitable activity as per provisions of Sec.2(15) of I.T. Act. The franchise agreement between the applicant and the said company is in the nature of business and not of the charity. Further the applicant society claimed to be running only one educational institute under the name style of Sh. Nangali Academics Public School but when the same was questioned in one of the specific query, it transpired that it has also taken a franchise for a play school. The applicant society claimed to run only one school is found to be false. Ultimately the Ld. CIT(E) rejected the application filed by the applicant society on the aforesaid reasons . 3. Being aggrieved, the applicant preferred the instant appeal and in support of its case submitted various documents including an application for registration u/s 12AA of the Act, Copy of certificate of registration of the appellant society dated 14/10/2009 issued by Additional Registrar of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee for using the name of Delhi Public School by the satellite schools in and outside India and no separate books of accounts were mentioned by the appellant for the business activity as required u/s 11(4A) of the Act. The Hon ble Delhi High Court has held that this is prima facie not correct, because the appellant has maintained accounts audited in detail for F.Ys 2000- 2001, 2003-04, 2004-05 2005-06. The Hon ble High Court further held in para 29 of the said judgment. 29. Furthermore, the memorandum of association of DPS Society, as well as the joint venture agreements entered into by DPS Society with the satellite schools validate the motive of an educational purpose that the Assessee aims through its business activities and substantiate its contentions is that regard. On review of the assessee s audited accounts, it can be observed that the surpluses accrued by DPS Society are being fed back into the maintenance and management of the DPS Schools themselves. This, reaffirms the Assessee s argument that the usage of the gains arising out of its agreements are incidental to its educational purpose outlined by its objective of the Assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for rejection is that the emphasis of the applicant society has over the years, shifted to acquiring of buses and as evident from the financial statements of the record that the assessee has earned income of ₹ 30,43,010/- in the form of transportation fee during the financial year 2015-16 and the expenses under the head transportation charges was ₹ 16,00,236/- only i.e. almost 50% of the fees charged exemplifies the profit motive. The Hon ble Apex Court in the case of Queen's Educational Society vs. CIT [2015] 55 taxmann. Com.255 (SC) has held that when surplus is ploughed back for educational purpose, the educational institutions exist solely for educational purposes and not for purposes of profit. The Apex Court further approved accumulation to the tune of 15% of its total income pertaining to the relevant assessment year as per Sec.11(1)(a) of the Act and laid down the following principles. 11. Thus, the law common to Section 10(23C) (iiiad) and (vi) may be summed up as follows: (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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