Ewing Christian College Society vs Chief Commissioner of Income Tax

By means of the present writ petition filed under Article 226 of the Constitution of India, the petitioner seeks a writ, order or direction in the nature certiorari quashing the order dated October 25, 2007, passed by the Chief Commissioner of Income Tax, Allahabad, filed as annexure 6 to the writ petition, and other consequential reliefs.

Briefly stated the facts giving rise to the present writ petition are as follows:

According to the petitioner, Ewing Christian College Society was constituted some times in the year 1902 and runs educational institutions in the State of Uttar Pradesh. One of the institutions, namely, Ewing Christian College, Allahabad, has been identified by the University Grant Commission as a college with potential and excellence. It is a constituent college of the University of Allahabad and has been granted status of an autonomous college. u/s 10(23C)(vi) of the Income Tax Act (hereinafter referred to as "the Act"), all educational institutions existing solely for educational purposes and not for purpose of profit are exempt from Income Tax. The requirement is that the institution has to make an application before the Chief Commissioner of Income Tax for grant of a certificate of registration. The petitioner has applied in the prescribed proforma on October 26, 2006, giving the details. However, the application has been rejected by the Chief Commissioner of Income Tax, vide order dated October 25, 2007, on the ground that the purpose for which the society has been established are religious in nature and consequently the society cannot be said to exist solely for the purpose of education.

Counter and rejoinder affidavits have been exchanged between the parties. With the consent of the learned Counsel appearing for the respective parties, this writ petition is being heard and decided finally at the admission stage itself in accordance with the Rules of the court.

We have heard Sri Ravi Kant, learned senior advocate assisted by Sri R.S. Agarwal, learned Counsel for the petitioner and Sri R.K. Upadhyaya, learned standing counsel appearing for the respondent.

Learned Counsel for the petitioner submitted that from a perusal of the impugned order dated October 25, 2007, passed by the Chief Commissioner of Income Tax, Allahabad, filed as annexure 6 to the writ petition, it would be clear that the Chief Commissioner of Income Tax has misdirected himself while rejecting the application which is based on wholly irrelevant material and consideration. According to him, under Clause (vi) of Sub-section (23C) of Section 10 of the Act, the only requirement for granting registration certificate is that the institution is existing solely for educational purpose and not for the purpose of profit. The Chief Commissioner of Income Tax has not adverted himself to this important aspect of the matter and instead has gone into the object of the society which provided also for serving the church and the nation. In support of his submission he has relied upon a decision of the apex court in the case of American Hotel and Lodging Association Educational Institute Vs. Central Board of Direct Taxes and Others,

Sri R.K. Upadhyaya, learned standing counsel, on the other hand, submitted that as the object of the society, which had applied for registration, is religious in nature, the Chief Commissioner of Income Tax was perfectly justified in rejecting the application. According to him, the institution does not exist solely for educational purpose as other objects are also there.

Having given our thoughtful consideration to the various pleas raised by the learned Counsel for the parties, we find that it is not in dispute that the petitioner-society runs various educational institutions in the State of Uttar Pradesh and u/s 10(23C)(vi) of the Act all educational institutions which exist solely for educational purposes and are not for the purpose of profit are exempt from taxes. The moot question in the present writ petition is to see as to whether the requirement of Clause (vi) of Sub-section (23C) of Section 10 of the Act has been fulfilled or not. It is not disputed that the petitioner-society runs educational institutions and it is not for the purpose of making profit. Merely because the object of the society is also to serve the church and the nation would not mean that the educational institution is not existing solely for educational purpose. Our view stands fortified by the decision of the apex court in American Hotel and Lodging Association Educational Institute Vs. Central Board of Direct Taxes and Others, in which the apex court has held as follows (page 107):

Having analysed the provisos to Section 10(23C)(vi) one finds that there is a difference between stipulation of conditions and compliance therewith. The threshold conditions are actual existence of an educational institution and approval of the prescribed 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 with the 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 specified assets whose compliance depends on events that have not taken place on the date of the application for initial approval.

That being the position, we are of the considered opinion that the impugned order dated October 25, 2007, passed by the Chief Commissioner of Income Tax, Allahabad, filed as annexure 6 to the writ petition, cannot be sustained and is hereby set aside. The Chief Commissioner of Income Tax is directed to pass a fresh order in the light of the observations made above within a month from the date a certified copy of this order is filed before the said authority.

The writ petition succeeds and is allowed. However, the parties shall bear their own costs.