DIVYA JYOTI SHIKSHA SAMITI,SAGAR vs. COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL

Per Bench This is an appeal by the assessee agitating the non-approval order of the Commissioner of Income Tax (Exemption), Bhopal (‘CIT(E)’) dated 28-02-2019 passed under section 80(G)(5)(vi) of the Income Tax Act, 1961 (the ‘Act’). 2.1 The facts of the case in brief are that the appellant is a Society registered under the M.P. Societies Registration Adhiniyam and is running educational institutions, being Schools & Colleges. It, vide its’ applied to the CIT(E) on 25/08/2018 for granting approval under section 80G(5)(vi) of the Income Tax Act, 1961 (‘the Act’). The CIT(E) vide order dated 28-02-2019 rejected the said application.

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ITA No. 15/JAB/2019 Divya Jyoti Shiksha Samiti v. CIT (Exemptions) 2.2 The principal ground cited by the ld. CIT(E) for the said rejection is that the society is generating huge surpluses out of the fee charged to the students from year to year, toward which he refers to the assesseee’s declared results, as under: F.Y. Total Receipts Surplus % Surplus % Capital Expendi- (Rs.) -ture (Rs.) 2015-16 27405959 8495885 31% 2255216 2016-17 31314100 12462618 40% 36988377 2017-18 32046528 12455926 39% 14993730 Though registered as a charitable institution u/s. 12AA of the Act (on 23/8/2006), it charges high fee for providing educational service, and making huge profits. No relief was being given by it to the students inasmuch as it did not produce any details or evidence of providing relief or concession to its’ students. 2.3 The ld. CIT(E) further noticed that the applicant had incurred huge capital expenditure on addition to the school building as well as expansion of its activities. The same was again only for the purpose of generating more profit, not charity. The motive of the applicant is to expand educational institutions on commercial lines, which could not be regarded as a charitable purpose. 2.4 The ld. CIT(E) further observed that there are substantial discrepancies in the amount stated to have been applied for charitable purpose and the amount of accumulation, i.e., as per the computation of total income and the Audit report (in Form 10B) respectively, the details of which are as under: (Amount in Rs.) F.Y. 2015-16 Audit Report Computation of Total Income Amount Applied 21155310 25198210 Amount of accumulation 4110893 2207749

F.Y. 2016-17 Audit Report Computation of Total Income Amount applied 22549859 26616985 Amount accumulated 4697115 4697110

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ITA No. 15/JAB/2019 Divya Jyoti Shiksha Samiti v. CIT (Exemptions) F.Y. 2017-18 Audit Report Computation of Total Income Amount applied 34584327 32046523 Amount accumulated 4807978 0

2.5 The ld. CIT(E) accordingly denied approval u/s. 80G(5)(vi) to the society, leading to the instant appeal. 3. Like contentions were raised by either side before us, with the assessee relying on the following case law: 1. Order by Hon’ble Jabalpur Bench dated 07-09-2020 in the case of Mannulal Jagannath Das Trust Hospital v. CIT (Exemption) 2. Addl. CIT v. Surat Art Silk Cloth Manufactures Association [1979] 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC) 3. CIT v. Rajmala Educational Society (2012) 65 DTR (P&H) 307 4. Judgment in the case of Pradeep Education Society v. CIT (Exemption) ITAT Delhi 5. Judgment in the case of Artemis Education & Research Foundation v. Commissioner of Income Tax (Exemptions) 6. Commissioner of Income Tax v. Maharaja Sawai Man Singh by Hon’ble Supreme Court The ld. CIT-DR, would, in reply, rely on the following case law: 1. Rajah Sir Annamalai Chettiar Foundation v. Director of Income Tax (Exemptions) of ITAT, Madras 2. Aswini Sahakari Rugnalaya & Research Centre [2021] 130 taxman.com 366 (SC) 3. Visvesvaray Technological University [2016] 68 taxman.com 287 (SC) 4. [2016] 73 taxman.com 286 (SC). 4. We have heard the parties, and perused the material on record. 4.1 The only reason for denial of approval u/s. 80G(5)(vi) in the instant case is the earning of ‘huge’ profits, i.e., in excess of what may be deemed appropriate or 3 | P a g e

ITA No. 15/JAB/2019 Divya Jyoti Shiksha Samiti v. CIT (Exemptions) reasonable by the competent authority. The assessee-society is registered as a charitable institution u/s. 12AA of the Act. Its’ object clauses (copy on record), which include that toward education, which it is presently solely undertaking and is per se charitable u/s. 2(15), i.e., independent and irrespective of the extent of profit that may arise in the course of carrying out the said charitable purpose. True, capital expenditure would only result in expansion of its’ activities and, consequently, further profit, but the said activities, being in the realm of education are, as aforesaid, charitable under the Act. We have, toward this, also gone through the rules and regulations of the assessee-society, including that per the latest amendment therein, i.e., on 28/12/2020 (PB-1, pgs. 1-7), to find that there is no embargo in its’ charter on the earning of profits. None such is also observed either u/s. 80G(5) or the relevant rule, being r. 11AA. The same therefore does not serve as a valid ground for denial of approval.

4.2 We have also perused each of the decisions cited by the Revenue, to find them as inapplicable. The same are, firstly, in respect of an Approval u/s. 10(23C)(vi), which provision clearly stipulates the condition of the educational institution as existing solely for the educational purpose and not for the purpose of profit, so that in the facts of a given case, it could be contended that the pre- dominant purpose for the existence of the said institution is the earning of profit. The other decisions are qua the residual clause of s. 2(15), i.e., ‘advancement of any object of general public utility’, to which commercial considerations apply, in contradistinction to the other charitable purposes, including ‘education’. 4.3 As regards the ‘objection’ with reference to the ‘discrepancies’ in the assessee’s accounts in view of the ‘differences’ observed between the amount applied and amount accumulated as per the statement of computation of income (forming part of the return of income) and the audit report (in Form 10B), the same, to our mind, is a matter that may have a bearing on the quantum of exemption u/s. 11 of the Act and, thus, falls in the domain of the AO in the 4 | P a g e

ITA No. 15/JAB/2019 Divya Jyoti Shiksha Samiti v. CIT (Exemptions) assessment proceedings. There is nothing on record to show that the assessee has been denied exemption u/s. 11 for that or any other reason 4.4 Finally, while the ld. CIT(E) does state, at para 7 of his order, that he is taking steps to cancel the assessee’s registration u/s. 12AA, Shri Jain, the ld. counsel for the assessee, would, on asking, confirm the Bench during hearing to the assessee having not received any notice for cancellation of the said registration. In any case of the matter, where so, approval u/s. 80G(5)(vi) would stand to be withdrawn in consequence (s.293C). The said statement by the ld. CIT(E), not acted upon, is thus, to no consequence. 5. In view of the foregoing, we see no reason for denial of approval to the assessee-society u/s. 80G(5)(vi). We, accordingly, setting aside the impugned order, direct for grant of approval u/s. 80G(5)(vi) from the date as applicable under law.

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur. 5 | P a g e