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Judgment
The petitioner is a society registered under the Societies Registration Act, 1860 vide Registration No. 545 of 199091, dt. 3rd Sept., 1990. It is running a co-educational degree college in the name and style of Ch. Natthu Singh Yadav Mahavidyalaya Dihuli Barnahal, Karhal, Mainpuri. It is stated that the college is located in a backward area and is imparting education to boys and girls by charging a very nominal fees. Fee is being charged to meet out the running cost and surplus is being used for developing necessary infrastructure to promote education. It has further been claimed that the institution is providing fee concession to poor, handicapped and disabled students while no fee is being charged from SC and ST students. The petitioner society is registered with the IT Department having PAN AABTN2289D. It made an application in prescribed form for approval under s. 10(23C)(vi) of the IT Act for asst. yr. 2009-10 onwards. The said application has been rejected by impugned order dt. 31st Aug., 2010 passed by the Chief CIT, Ghaziabad on following grounds:
(A) The approval under s. 10(23C)(vi) of the Act is available only to an educational institution existing solely for the educational purposes while the memorandum of the society stipulates other objects as well.
(B) The application for exemption of the income tax should have been filed by the educational institution while the application in the instant case has been made by the society.
(C) The aims and objects of the society provides for free education but the income and expenditure account filed along with the application shows that the institution has been charging fees and which is against the objects of the society.
Challenging the said order, petitioner has come up in writ petition before this Court.
We have heard Sri Ashish Bansal, advocate for the petitioner and Sri Shambhu Chopra, learned counsel appearing for the Department.
Learned counsel for the petitioner submitted that for obtaining approval from the prescribed authority under cl. (vi) of s. 10(23C) it is not necessary that the application should have been filed by the educational institution itself. Such an application has to be filed by ''person'' as defined under s. 2(31) of the Act which, according to him in the instant case is the society. Elaborating his argument he further submitted that the ''person'' contemplated by s. 2(31) of the Act may be having income from various sources but under s. 10, such of its income which falls under any of the clauses stipulated thereunder is exempt and not income from other sources. Thus, it is not necessary that the ''person'' which in the instant case is the society, should be having income only from one or other source stipulated under various clauses of s. 10 and from no other source.
He further submitted that r. 2CA of the IT Rules, 1962 which provides for application for approval being made in Form 56D by educational institution is procedural one and cannot restrict or whittle down the scope and ambit of the statutory provision, i.e., s. 10 which is applicable to a ''person'' as defined under s. 2(31) of the Act. Alternatively, he submits that it has been the specific case of petitioner society that it is engaged only in running the education institutions and is not perusing any other object mentioned in its original bye-laws. In support of his contentions, he placed strong reliance on the judgment of this Court dt. 16th Oct., 2012 passed in Writ Petri. No. 1185 of 2011, C.P. Vidya Niketan Inter College Shikshan Society Vs. Union of India and Others, . He has also placed reliance on the judgment of the apex Court in Aditanar Educational Institution Vs. Additional Commissioner of Income Tax, , Pinegrove International Charitable Trust Vs. Union of India (UOI) and Others, , Digember Jain Society for Child Welfare Vs. Director General of Income Tax (Exemptions), and American Hotel and Lodging Association Educational Institute Vs. Central Board of Direct Taxes and Others, .
On the other hand, Sri Shambhu Chopra, counsel for the Department contended that the application filed by the petitioner society was rightly rejected as not maintainable and since the society has not been formed with the sole object of imparting education, but its memorandum of association reflects that it has other aims and objects as well and, therefore, it has rightly been denied approval under s. 10(23C)(vi).
The first and foremost question which is required to be considered is whether the application for approval under s. 10(23C)(vi) at the instance of the petitioner society was maintainable or not and if the view taken by the prescribed authority that such application should have been filed by the educational institution itself, is legally sustainable. Before insertion of s. 10(23C)(vi), such cases were covered by s. 10(22) which was to the following effect:
10(22) any income of an university or other educational institution, existing solely for educational purposes and not for purposes of profit.
The aforesaid provision was amended by Finance (No. 2) Act, 1998, w.e.f. 1st April, 1999 and in its place s. 10(23C)(vi) has been inserted which is as follows:
10(23C)(vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-cl. (iiiab) or sub-cl. (iiiad) and which may be approved by the prescribed authority; or....
In the case of American Hotel & Lodging Association Educational Institute vs. CBDT & Ors. (supra). Supreme Court considered the effect of insertion of s. 10(23C)(vi) of the IT Act, 1961 and held that the amended provisions are analogous to s. 10(22). Punjab & Haryana High Court had the occasion to consider the effect of s. 10(23C)(vi) in its judgment in Pinegrove International Charitable Trust vs. Union of India & Ors. (supra), while replying to a specific question whether a society registered under the Societies Registration Act, 1860 is eligible to apply for exemption under s. 10(23C)(vi) of the Act. The question was answered in favour of the society by holding that the application for approval under s. 10(23C)(vi) is maintainable at the instance of a society. While taking the aforesaid view, reliance was placed on the judgment of the apex Court in the case of Aditanar Educational Institution (supra). Relevant para whereof is reproduced below:
Counsel for the Revenue mainly stressed the plea that the exemption under s. 10(22) of the Act would apply only to educational institutions as such. According to him, in this case, the assessee might be financing for running an educational institution, but it is not itself an educational institution. As noted earlier, the Tribunal held that the assessee was an institution existing for educational purposes and not for the purposes of earning any profit and the assessee itself could be termed as an ''educational institution'' coming within s. 10(22) of the Act. The High Court has concurred with this view. The High Court has further held that the medium through which the assessee could effectuate its objects is the college and by employing this medium, the assessee imparts education and it cannot be stated that the assessee is only a financing body and does not, on facts, come within the scope of ''other educational institution'' occurring in s. 10(22) of the Act. Reliance was placed on the decision of the Allahabad High Court in Katra Education Society Vs. Income Tax Officer, "A" Ward, , to hold that an educational society could be regarded as an educational institution if the society was running an educational institution. We are of the view that an educational society or a trust or other similar body running an educational institution solely for educational purposes and not for the purpose of profit could be regarded as ''other educational institution" coming within s. 10(22) of the Act. [See Commissioner of Income Tax Vs. Doon Foundation, and Agarwal Shiksha Samiti Trust Vs. Commissioner of Income Tax, ]. It will be rather unreal and hypertechnical to hold that the assessee-society is only a financing body and will not come within the scope of ''other educational institution'' as specified in s. 10(22) of the Act.
Similar view has been taken by Delhi High Court in its judgment in Digember Jain Society for Child Welfare vs. Director General of IT (Exemptions) (supra) wherein it was observed as under:
The Supreme Court in Aditanar Educational Institution Vs. Additional Commissioner of Income Tax, , has held that a society or a trust or other similar body running educational institutions solely for educational purposes and having the overall object of not to make any profit can be regarded as ''other educational institution'' even if some surplus arises from its activities.
When we apply the principles laid down by the apex Court in the aforesaid judgments, it becomes clear that the petitioner-society has mainly been formed within the objective of carrying out educational activity. There is no purpose of profit. As of today, its only activity is education, namely, running of various schools and no other activity.
In view of the authoritative pronouncement of law by the apex Court and various High Courts, we have no hesitation in holding that the application filed by the petitioner society cannot be rejected on the ground that it is not at the instance of "educational institution" as referred to under s. 10(23C)(vi) of the Act and r. 2CA of the IT Rules, 1962.
The next question which now arises for consideration is whether an application can be rejected on the ground that the memorandum of association of the society provides for various other objects apart from educational activities. In this regard, the argument of learned counsel for the petitioner is that even though under the unamended bye-laws of the society, various other aims and objects were mentioned but according to application for approval and the material on record, the society is only carrying on educational activities. In this regard, specific assertion has been made in para 2 of the application for approval. In para 7 of the application, there is a specific assertion that the only source of income of the society is the nominal fees being charged from students and it has no other source of income. Learned counsel for the petitioner has placed strong reliance on the judgment of this Court in the case of C.P. Vidya Niketan Inter College Shikshan Society (supra). We find that there the petitioner was a society which had made an application for approval under s. 10(23C)(vi) and its application for approval was rejected on the ground that benefit of s. 10(23C)(vi) is available only to an educational institution existing solely for the purpose of imparting education, while the application has been made by a society having many activities that appear to be other than educational such as to make appropriate efforts for upliftment of public in social and cultural field etc. Therein, this Court had held that even though the aims and objects of the society may contain several objects but if it has been proved by material on record that the society is not perusing any other activity apart from education then in such case, the society will qualify for grant of approval under s. 10(23C)(vi) of the Act. It was observed as under:
In the facts and circumstances, we are of the opinion that as of now the petitioner society running educational institution by the name of C.P. Vidya Niketan Inter College at Kaimganj, District Farrukhabad imparts education to students from Class VI to XII, in the absence of any allegation or material, the object clause providing for other charitable activities, would not disentitle the society from approval under s. 10(23C)(vi) of exemption. The proviso added to s. 10(23C)(vi), specially provisos 2, 3, 12 and 13, give sufficient powers to check the abuse of the exemption. The mere possibility, therefore, that the society may in future pursue activities, which are not charitable, or closely connected with education for making profit, would not constitute the grounds to reject the approval under s. 10(23C)(vi).
Perusal of the impugned order shows that the pleading in this regard has not been taken into consideration. Further, in the impugned orders, although, there is a finding that the society is having many objects other than educational, but there is no application of mind to the assertion made by the society that it is only pursuing the educational activity and no other. In view of the Division Bench decision of this Court in case of C.P. Vidya Niketan Inter College Shikshan Society (supra), in case, the society is pursuing only educational objects and no other activity then the application by such a society for grant of approval under s. 10(23C)(vi) cannot be rejected on the ground that its aims and objects contain several other objects apart from educational and application by such a society is perfectly maintainable.
Sri Shambhu Chopra, appearing for the Department could not point out any distinguishing feature but rather accepted that the judgment of the Division Bench in C.P. Vidya Niketan Inter College Shikshan Society (supra) will have full application to the facts of the instant case.
Respectively following such judgment, the impugned order dt. 31st Aug., 2010 passed by the Chief CIT, Ghaziabad is quashed. The matter is remitted back to the prescribed authority for a fresh decision in accordance with the observations made above. It is desirable that the said decision may be taken by the prescribed authority within three months from the date of production of a certified copy of this order before it.
Since the matter is being remitted to the prescribed authority and, therefore, this Court is not going into the other questions which may also be pressed and decided by the concerned authority afresh strictly in accordance with law. Subject to the above, the writ petition is allowed. No orders as to costs.