SUNSHINE EDUCATIONAL & DEVELOPMENT SOCIETY,NOIDA vs. ADDL. CIT, EXEMPTION, GHAZIABAD

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘G’ : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER and SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA No.4727/Del./2017 (ASSESSMENT YEAR : 2010-11) Sunshine Educational & Development vs. JCIT, Range 3, Society, Noida. 28/1, Knowledge Park – III, Greater Noida – 201 304. (PAN : AAGTS3431F) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri K.P. Garg, CA REVENUE BY : Shri H.K. Chaudhary, CIT DR Date of Hearing : 16.12.2021 Date of Order : 16.12.2021 O R D E R PER AMIT SHUKLA, JM : Aforesaid appeal has been filed by the assessee against the impugned order dated 30.03.2017, passed by the ld. CIT (Appeals)-I, Noida for the quantum of assessment passed under section 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) for the assessment year 2010-11.

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Rs.15,02,090/-. The enhancement was on account of taxing the entire receipts, that is, fees received of Rs.10,43,86,862/- and on account of donations received of Rs.2,89,86,220/-.

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taken for construction of college building including hostel. Out of this interest, interest of hostel building has been allocated at Rs.95,36,206/-. After calling for the details, he held that the excess expenditure claimed for hostel building of Rs.27,66,890/- is to be disallowed. He further observed lease rent of Rs.3,71,212/- which has been allocated for hostel space out of lease rent of Rs.6,74,931/- claimed by the assessee. Since assessee had not deducted and deposited tax at source in terms of section 194-I, therefore, he held that the same is to be disallowed as per section 40(a)(ia) of the Act. Accordingly, he also disallowed lease rent of Rs.3,71,212/-. Consequently, he computed the income of the hostel activities in the following manner :- “Subject to above remarks the income from hostel activities is calculated as under :- Loss from hostel activities as discussed by the assessee Rs.16,36,008/- Add : Excess interest cost claimed for hostel building as discussed above Rs.27,66,890/- Lease rent disallowed as discussed above Rs. 3,71,212/- Rs.15,02,094/- As calculated u/s 11(4A) Rs.15,02,094/-”

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and not u/ss 11 & 12 and there is no overlapping of the provisions. Thereafter, he has discussed certain judgments of Hon’ble Apex Court which again has no correlation on the facts of the assessee’s case because nor there is any finding that either assessee is not carrying out any educational activities which falls within ambit of definition of charitable activities under section 2(15) or there is any violation of any of the provisions. He also discussed the concept of charity in a philosophical manner without even looking to the fact that carrying out educational activities has been treated as parts of therapeutical activities u/s 2(15) of the Act. He held that entire activities of the assessee cannot be held to be charitable and the expenditure incurred by the assessee is not in the manner laid down under the provisions of the Act. He has even held that entire receipts have to be taxed as income from other sources u/s 56 and still it is not entitle for deduction u/s 57 (3) of the Act. The entire income of the assessee by way of fees and other levies recovered from students and their guardians and also amounts of donations as received by the assessee society has been held the income of the assessee chargeable to tax u/s 56 without any deduction and directed the AO to issue demand notice after enhancing the income at Rs.13,33,73,102/-.

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finally all the receipts and donations are taxable as income from other sources without giving any deduction.

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income has to be computed in terms of sections 11 to 13 till the registration u/s 12A is cancelled. The computation of income u/ss 11 to 13 is fate accompli, except if there is any violation of provisions of sections 11 and 13 or it has been found that assessee was not carrying out the activities as per its objects for which it was granted registration. The ld. CIT (A), as noted above by us has completely gone off tangent and held that since income of the educational institution is to be dealt with in accordance with section 10(23C) \, therefore, the same cannot be exempted in terms of provisions of sections 11 & 12. Nowhere, it has been disputed that receipt of the assessee was not from educational activities. Simply based on this premise that the assessee’s income has to be considered u/s 10(23C), and hence assessee will lose the benefit of sections 11 & 12 cannot be sustained.

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School (supra) wherein the Tribunal has held in detail the issues involved in the entire findings which, for the sake of ready reference, are reproduced as under :-

“ The aforesaid appeal has been filed by the assessee against impugned order dated 30/03/2017 passed by the ld. CIT (Appeals)-I, NOIDA for the quantum of assessment passed u/s.143(3) for the Assessment Year 2011-12. The assessee has raised the following grounds of appeal. 1. The Ld. CIT (Appeal) has erred, in law, in issuing the notice u/s 251(2) of the I.T. Act 1961. 2. The Ld. CIT (Appeal) has erred, in law, in holding that income of educational institutions is to be dealt with for exemption from the incidence of tax u/s 10(23)(C) only and not under the provisions of sections 11 & 12 of the Act. 3. The Ld. CIT(Appeal) has erred, on facts & in law, in holding that income of the appellant society by way of fees & other charges from the students cannot be said to be income from property held under trust and therefore not eligible for exemption u/s 11 of the Act. 4. The Ld. CIT (Appeal) has erred, on facts & in law, in holding that cost of education cannot be recovered by educational institutions from the students by way of fees and therefore cannot be adjusted against the expenditure incurred. 5. The Ld. CIT (Appeal) has erred in holding that donations received by the appellant are not eligible to exemption being in violation of the provisions of section 11(1)(d) in as much as such observations have been made contrary to facts & without application of mind. 6. Without prejudice to above, the Ld. CIT (Appeal) has erred, on facts & in law, in holding that income of the appellant cannot be assessed under the head "Profits & gains from business or profession" even where exemption u/s 10 or 11 is not to be allowed. 7. Without prejudice to above, the Ld. CIT (Appeal) has erred, on facts & in law, in holding that income of the appellant has to be assessed under the residual head "Income from other sources" but the expenditure incurred for running the school cannot be allowed as deduction u/s 57.”

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him, the person claiming exemption must satisfy the condition specified u/s 11(1) to the effect that income, sought to be exempt, must be derived from property held under trust. In other words, income derived by it from an activity of running school cannot be said to be income from property held under trust in as much as such activity does not amount to be a property held under the trust. According to him, balance sheet of the assessee does not disclose any property from which any income is derived. (ii) Since the appellant is not eligible for exemption u/s 11, therefore, the entire receipts by way of fees and other charges from the students would be treated as its income for the reasons that, firstly, since the appellant is not claiming any income u/s 28, therefore, the question of allowing any deduction incurred does not arise; and secondly, once the income is found to be not eligible for exemption u/s 11, the provisions of chapter IV-D would not apply. 4. Thereafter, the ld. CIT (A) discussed in detail the concept and theory of ‘charitable purposes’ as defined in Section 2(15) and conditions laid down in Sections 11 to 13 for granting of benefit. The detailed discussion on provision of law has been discussed from paragraphs 14 to 60 (pages 4 to 18 of the appellate order), which being of pure academic in nature, hence no discussion as such is required to be dealt with. He has also referred to following judgments and propositions laid down by the Hon'ble Apex Court: (i) ACIT vs. Surat Art & Silk Cloth Manufacturers Association, Surat, (1980) AIR 387 SC. (ii) Ms Mohini Jain Vs. State of Karnataka and Others, (1992) AIR 185 SC. (iii) Unnikrishnan J.P. & Ors. etc. vs. State of Andhra Pradesh & Ors. (1993) AIR 2178 SC (iv) TMA Pai Foundation & Ors. vs. State of Karnataka & Ors., (2002) 8 SCC 481 (v) Islamic Academy of Education & Anr. Vs. State of Karnataka & Ors. (2003) 6 SCC 697. (vi) PA Inamdar & Ors. State of Maharashtra & Ors. (2005) AIR 3226 SC.” 5. Ld. CIT (A) also discussed the provisions of Section 10(23C)(iv) & (v) and observed that, once the income of Educational institution are exempted u/s.10(23C), then legislature does not intend to give same benefit in Sections 11 & 12 again. According to him there is no conflict and

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overlapping between the provision contained in Sections 11 to 12 and Section 10(23C). On this ground, he held that assessee is not eligible for exemption u/ss.11 and 12, once the provision of Section 10(23C) (iv) and (v) are applicable. Thereafter referring to various judgments, he held that, since imparting of education is a matter of pure charity, therefore, the educational institutions are not permitted to receive or recover the cost of charity from its beneficiaries by way of charging fees. In other words, according to him, charging of fees would amount to uncharitable activities and in this context he has referred to the aforesaid judgments of Hon'ble Supreme Court. In his exhaustive and elaborate order, he has discussed the entire concept of charity as enshrined in Section 2(15) and procedure laid down in Sections 11 to 13. However, the relevance for such an elaborate discussion does not seem to be appropriate on the facts of the assessee’s case. Interpreting the provision contained in Section 11, Ld. CIT (A) has gone to the extent of holding that the benefit is only available to a ‘Trust’, because the word used in Section 11(1)(a) is that, income should be derived from the property held under the trust wholly for charitable or religious purpose. Assessee being a society and is not a Trust, hence it is not entitled for benefit u/s.11. According to him, since sources of income are students, therefore, students cannot be reckoned as ‘property held under the trust’ and activity of imparting education also cannot be reckoned as property. In his view, self imposed obligation to do charity cannot be held to be property and donation receipt by the assessee cannot be held to be voluntarily. After making such observations he held that;  Firstly, assessee is not entitled for benefit u/ss.11 and 12;  Secondly, its income cannot be taxed as business income, albeit it has to be taxed as “income from other sources” u/s.56(1); and  Lastly, the assessee is not entitled for any deduction against its income under the provision of Section 57 and accordingly the entire receipts of Rs.1,04,85,689/- would be taxed. Thus, the entire receipts stood taxed by the ld. CIT (A). 6. Before us the ld. counsel for the assessee, Mr. K. C. Singhal, after drawing our attention to the various observations of the ld. CIT(A), submitted that mainly three

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reasons have been given by the ld. CIT(A) to tax the entire receipts:- (i) Since the assessee is eligible for exemption under specific provision of Section 10(23C) then it cannot avail exemption under the general provision of Section 11; (ii) Income derived by the assessee from its activity of running school cannot said to be income derived from property held under the Trust; (iii) Charging of fees amounts to under charitable activities because educational institutions are not permitted to extract or recover the cost of charity from its beneficiaries by way of fees. 7. In support of the aforesaid reasoning, Ld. CIT (A) has referred to certain judgments of Hon'ble Supreme Court which according to learned counsel has no applicability at all on the facts of the assessee’s case, albeit in principle they support the case of the assessee. On the first issue he submitted that, now this issue stands directly covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Indian Institute of Engineering Society (2013) 218 Taxman 151 (Alld); and Punjab and Haryana High Court in the case of CIT vs. Mahasabha Gurukul Vidhaypeeth (2010) 326 ITR 26 ( P & H), wherein in both the judgments it has been held that claim u/s.11 cannot be denied merely because the assessee did not avail exemption u/s.10(23C). He further submitted that similar observation has been made by the Hon'ble Supreme Court in the case of CIT vs. Bar Council of Maharashtra, (1981) 130 ITR 28 (SC), wherein the Hon'ble Apex Court held that there are other allied provision like 10(23C) which clearly indicate that Legislature did not intend to Rule out Section 11 when exemption was claimable under specific provision of Section 10. 8. So far as the issue, whether income derived by the assessee from an activity of running school can be treated as income from property held under the trust or not, he submitted that section 2(24) defines the scope of ‘income’ which also refers to voluntary contribution received by the charitable trust or institution and Section 11(1)(d). Section 11(1)(d) refers to voluntary contribution received by the charitable trust which forms part of the corpus which legislature has considered to be capital receipt not chargeable to tax. Section 11 refers to voluntary contribution other than the ones falling u/s. 11(1)(d)

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thereby treating it as property held under the trust. Further, Section 11 envisages that revenue consideration shall be deemed to be income derived from property held under the Trust. Thus, ld. CIT (A) was incorrect in law in holding that contribution received by way of fees from the beneficiaries is not an income from the property held under the trust. He further referred to various judgments wherein it has been held that exemption cannot be disallowed if the source of income held under the trust is under legal obligation and here the assessee was under obligation to apply the income for charitable purposes. The judgment relied upon by him are as under:- CIT-v- Gujarat Maritime Board 295 ITR 561 SC i. All India Spinners Association-v-CIT 12 ITR 482 PC ii. CIT-v-Andhra Chamber of Commerce 55 ITR 722 SC iii. Delhi Stock Exchange Association Ltd-v-CIT 225 ITR iv. 235 SC Institute of Chartered Accountants of India-v-DGIT v. 358 ITR 91 (Del) 8. Mr. Singhal submitted that if the interpretation of ld. CIT(A) is accepted, then no educational institution will ever be able to claim exemption which certainly cannot be the intention of the legislature. He further submitted that, assessee came into existence as society with the sole object of providing education and hence it was under obligation to set up an infrastructure for the same and to carry out such activities. In the Memorandum of Association, there was no clause under which any of the fund of the society could be diverted for a private gain and in fact section 14 of the ‘Registration of Societies Act, 1860’ specifically provides that in case of dissolution, the property of the society shall not be paid or distributed to any member but the same shall be given to some other society. As regards his finding that the entire receipts by way of fees and charging of fees would amount to uncharitable activities. He submitted that, firstly the judgments relied upon by the ld. CIT(A) were mostly on the issue of capitation fees and not the normal fees charged by the school or institution; in fact the Hon'ble Supreme Court have held that charging of fees is essential for carrying out the educational institutional activities. In support, he drew out attention in various paragraphs of the judgment of the Hon'ble Supreme Court which we shall deal in the latter part of our order.

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assessment proceeding was back dated. This allegation of the Assessing Officer has been negated by the ld. CIT(A) who has found that audit report in Form 10B was proper. Thus, the ground and the finding of the Assessing Officer to deny the claim of benefit of section 11 has been overruled by the first appellate authority, which finding has now attained finality as revenue is not in appeal or in cross objection. The Assessing Officer has only taxed the surplus over income and expenditure account, however the ld. CIT(A) has proceeded to tax the entire receipt albeit on different grounds. 12. Now we shall deal in brief the various observations and findings of the ld. CIT(A) by which he has denied exemption/benefit of Section 11 to the assessee. Coming to his first objection that assessee is not entitled for benefit/exemption u/s.11, because there is a separate provision under the Act u/s. 10(23C)(iv), (v) and (vi) where it could have or can claim the exemption and since assessee has not availed the exemption u/s.10(23C), therefore, it is debarred from claiming exemption u/s.11. At the outset, such an observation is against the principle laid down by the Hon'ble Supreme Court in the case of CIT vs. Bar Council of Maharashtra (supra), wherein the their Lordships have observed and held as under:- 6. At the outset it may be stated that we were not inclined to permit counsel for the revenue to urge his first contention as in our view the revenue must be deemed to have given up the same. We may point out that precisely this very contention was raised by the revenue before the Tribunal and was negative by it. The Tribunal on a detailed analysis of the concerned provisions took the view that the two provisions were not mutually exclusive but operated under different circumstances, that section 11 was relatively wider in its scope and ambit, that while section 10(23A) granted absolute exemption in respect of particular types of income, section 11 imposed certain conditions for the exemption but such exemption was available for all sources, and that there was nothing inherently improbable or inconceivable about the two provisions operating simultaneously and as such the claim for exemption under section 11 was available to the assessee-Council provided it satisfied 11 the requirements of that provision. We may point out that there are other allied provisions like for instance clause (23C) in section 10 which clearly indicate that the Legislature did not intend to rule

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out section 11 when exemption was claimable under such specific provisions of section 10. It was after negativing the contention in this manner that the Tribunal went on to consider the claim for exemption made by the assessee-Council under section 11 but on merits found that there was no material or evidence on record to show whether or not the securities were held by the assessee-Council for any of the charitable purposes and, therefore, it remanded the case. The remand order was never challenged by the revenue by seeking a reference on the ground that a remand was unnecessary because section 11 was ruled out by reason of exemption having been obtained by the assessee- Council under section 10(23A) nor was any such contention raised when reference was sought by the assessee- Council nor when the matter was being argued in the High Court. In these circumstances, it is clear to us that the revenue acquiesced in the view taken by the Tribunal that the claim for exemption under section 11 could not be said to be ruled out by reason of the provisions of section 10(23A). We, therefore, proceed to deal with the second contention which was principally argued before us in these appeals. 13. Thus, the aforesaid observation of the Hon'ble Apex Court, makes it very clear that there is no bar or disharmony between Section 10(23C) and Section 11; and exemption of Section 11 cannot be denied even when there is a specific provision of Section 10(23C). This principle has been reiterated by the Hon'ble Jurisdictional High Court in the case of CIT vs. Indian Institute of Engineering Society, reported in 218 Taxman 151 (All), wherein Their Lordships had observed as under:- Shri Awasthi, learned counsel, submitted that 6. as the assessee claimed exemption, being an educational institution as such it was required to obtain exemption from the prescribed authority under Section 10(23C) of the Act, which is mandatory. Since no exemption from the prescribed authority under Section 10(23C) of the Act has been obtained as such the assessee was not entitled to claim benefits under Section 11 of the Act. The submission is wholly misconceived. Admittedly, the assessee is an educational institution and was established for charitable purposes for running educational institutions and imparting education. Section 10 of the Act deals with the income not liable

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to be included in total income of the assessee while Section 11 deals with the income from property held for charitable or religious purposes. Both Section 10(23C) and Section 11 of the Act are independent sections. The assessee was registered under Section 12A of the Act. As such the assessee was rightly granted benefits under Section 11 of the Act.” 14. This judgment of Hon’ble jurisdictional High Court clearly negates the theory of ld. CIT (A). Further Hon'ble Punjab and Haryana High Court in the case of CIT vs. Mahasabha Gurukul Vidhyapeeth (2010) 2 Taxmann.com 283 (P & H) too have upheld the same proposition that once all the requisite conditions for exemption u/s.11 have been met and even if condition u/s. 10(23C) have not been complied with, then there should be no bar to seek exemption u/s.11. In view of the aforesaid binding judicial precedents, we reject the observation and finding of the ld. CIT (A) that assessee cannot claim exemption/benefit of Section 11 or is not entitled for benefit u/s 11 as assessee was eligible for such an exemption u/s. 10(23C). 15. Ld. CIT(A) while denying the exemption of Section 11 to assessee society has held that, since imparting of education is a matter of pure charity, therefore, the educational institution is not permitted to receive or recover the cost of charity from its beneficiary by way of fees, i.e., charging of fees itself would amount uncharitable activity. We are unable to subscribe to this proposition at all, because if fees is not charged from the students then how the activity of imparting education can be carried out. Fees collected from the students itself feeds the charity, unless some other considerations are received for profiteering and personal gains of trustees or members of the society. Strong reliance has been placed by the ld. CIT (A) upon the judgment of Hon'ble Apex Court in the case of ACIT vs. Surat Art Silk Cloth Manufactures Association (supra). In our humble understanding of the said judgment and the principle laid down by the Constitutional Bench of Hon'ble Apex Court, nowhere the Hon'ble Apex court has held that the charging of fees or some profit for carrying out charitable activity would be reckoned as not charitable. The Hon'ble Apex Court held that if primary or dominant purpose of a trust or institution is charitable, then any other object which by itself is not charitable and is mere ancillary to the dominant purpose then also it is held to be valid charity. The primary test which is to be applied is, whether the main or primary object of the trust is charitable or not. It is an undeniable that under the Income

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Tax Act, educational activity has been specifically treated as charitable purpose and if the entire activities of the assessee is purely for carrying out education then the test of dominant and main purpose stands fulfilled as laid down by the Hon'ble Apex court. Hon'ble Apex Court has further held that if any activity for profit is carried out in the course of actual carrying out its purpose, then the activity for profit must be intertwined or wrapped up with or implied in the purpose of the institution or trust, in other words it must be an integral part of such purpose. What is to be looked into whether the activity is propelled by a dominant profit motive and whether the dominant object of the activity is profit making or carrying out a charitable purpose, if it is former then the purpose would not be charitable, but, if it is latter the charitable character of the purpose would not be lost. Thus, in no way the principle laid down by the Hon'ble Apex Court can be interpreted or understood in the manner that if certain receipt or income is generated out of an activity which is charitable and such a receipt or income is wholly applied for carrying out charitable purpose, then it cannot be reckoned for non charitable purpose. Here in this case, the charging of fees is a part of receipt during the course of carrying out educational activity which has been completely applied for that activity alone, therefore such a receipt by way of fees has to be seen as an application of income for charitable purpose. As regards another constitutional bench judgment of Hon'ble Apex Court in the case of TMA Pai Foundation and others (supra), it is seen that the Hon'ble Apex Court in the context of ‘capitation fee’ and profiteering, itself culled out the exception in the following manner:- In such professional unaided institutions, 66. the Management will have the right to select teachers as per the qualifications and eligibility conditions laid down by the State/University subject to adoption of a rational procedure of selection. A rational fee structure should be adopted by the Management, which would not be entitled to charge a capitation fee. Appropriate machinery can be devised by the state or university to ensure that no capitation fee is charged and that there is no profiteering, though a reasonable surplus for the furtherance of education is permissible. Conditions granting recognition or affiliation can broadly cover academic and educational matters including the welfare of students and teachers.” [Emphasis added is ours]

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of the judgments as referred to by the ld. CIT(A) have been analysed in proper prospective rather his interpretation of the principles laid down by the Apex Court are incorrect and out of context. Before us the learned counsel had submitted the total fees charged from various students during the year the details and bifurcation of which is as under:- Class STUD ENTS TRAV ADMISSIO BUS NO. OF ELLIN TUTION REST N MON STUDE (300*1 G BY FEES THS NTS 2) BUS ANNUAL FEES Total 60,000 NUR 500 12 60 3,60,000 1,000 3,600 5 18,000 78,000 LKG 500 12 78 4,68,000 1,000 3,600 7 25,200 70,000 UKG 500 12 70 4,20,000 1,000 3,600 8 28,800 69,000 69 4,96,800 1,000 3,600 43,200 1 600 12 12 83,000 2 600 12 83 5,97,600 1,000 3,600 15 54,000 80,000 3 5,76,000 1,000 3,600 36,000 600 12 80 10 78,000 4 600 12 78 5,61,600 1,000 3,600 17 61,200 70,000 5 600 12 70 5,04,000 1,000 3,600 15 54,000 76,000 6 700 12 76 6,38,400 1,000 3,600 17 61,200 700 77,000 12 77 6,46,800 1,000 3,600 15 54,000 79,000 8 700 12 79 6,63,600 1,000 3,600 19 68,400 60,000 9 900 12 60 6,48,000 1,000 3,600 17 61,200 57,000 10 900 12 57 6,15,600 1,000 3,600 18 64,800 33,000 11 1,100 12 33 4,35,600 1,000 3,600 7 25,200 29,000 12 1,100 12 29 3,82,800 1,000 3,600 5 18,000 TOTAL 80,14,800 9,99,000 6,73,200 LATE FINE 2,65,095 FEES 27,750 30,500 B/S 82,79,895 B/S 7,00,950 10,29,500 4,70,900 1,04,81,245 18. From the above details, it is quite evident that the assessee school has been charging fees only from its students and there is no capitation fee at all. Such fees have been charged from the students for the running of the school and has been applied for its dominant purpose/object of carrying out educational activity. If we apply the principle and ratio laid down by the Hon'ble Apex Court in the aforesaid cases, then the fees charged by the assessee is neither for profiteering nor for carrying any activity beyond its dominant object. Thus, allegation of the ld. CIT (A) on this score also is hereby rejected.

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property. If such a proposition or view of ld. CIT (A) is upheld, then probably no education institution in the country would ever be eligible/entitled for exemption u/s.11 and perhaps will defeat the entire purpose of legislature and the definition of ‘charitable purpose’ of education as defined in Section 2(15). Section 12 of the Act clearly provides that any voluntary contribution received by a trust wholly for charitable or religious purpose, then for the purpose of Section 11 it is deemed to be income derived from the property held under the trust. Such a deeming provision of revenue contribution is held as income derived from the trust which is subject to computation and conditions laid down in Section 11 to 13. If the assessee is carrying out any obligation for educational activity, then it has to be treated as the ‘trust’ under the provision of Section 11; and this proposition has been clearly held by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Maritime Board (Supra), that if the assessee is under legal obligation to apply the income then it is entitled to be registered as charitable trust. In the case before the Hon’ble Supreme Court, the authority Gujarat Maritime Board was carrying out the development of minor port which was in the realm of ‘carrying out objects of general public utility’. The Hon'ble Apex Court held that such an authority is to be reckoned as charitable trust for the purpose of Section 11. In this case one of the main objection raised on behalf of the department was that said Board was not entitled for the benefit of Section 11 as it was not a trust under the ‘Public Trust Act’ and therefore, it was not entitled to claim registration u/s. 12A. Since it was not held under the trust therefore, it is not entitled for exemption u/s. 11(1)(a). The relevant contention of the Revenue as well as the finding of the Hon'ble Apex Court reads as under:- 12. One of the objections raised on behalf of the Department was that Gujarat Maritime Board is not entitled to the benefit of section 11 of the 1961 Act as the said Board was not a trust under Public Trust Act and, therefore, it was not entitled to claim registration under section 12A of the 1961 Act. The Department's case was that the Maritime Board was a statutory authority. It was not a trust. Its business was not held under a trust. Its property was not held under trust. Therefore, the Board was not entitled to be registered as a Charitable Institution. It was the case of the Department that the Board was performing statutory functions. Development of minor ports in the State of Gujarat cannot be termed as the work undertaking for charitable purposes and

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in the circumstances the Commissioner rejected the Board's application under section 12A of the 1961 Act in the light of the above case of the Department, we are required to consider the expression 'any other object of general public utility' in section 2(15) of the 1961 Act. 13. ……....... 14. We have perused number of decisions of this Court which have interpreted the words, in section 2(15), namely, 'any other object of generally public utility'. From the said decisions it emerges that the said expression is of the widest connotation. The word 'general' in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose—CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry—CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity—Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC). The present case in our view is squarely 15. covered by the judgment of this Court in the case of CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax. Applying the ratio of the said judgment in the 16.

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case of Andhra Pradesh State Road Transport Corpn. (supra), we find that, in the present case, Gujarat Maritime Board is established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board is essentially with the State Government and there is no profit motive, as indicated by the provisions of sections 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in India. In the circumstances, in our view the judgment of this Court in Andhra Pradesh State Road Transport Corpn.'s case (supra) squarely applies to the facts of the present case. Before concluding we may mention that under 17. the scheme of section 11(1) of the 1961 Act, the source of income must be held under trust or under other legal obligation. Applying the said test it is clear, that Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for the development of minor port in the State of Gujarat. Therefore, they are entitled to be registered as 'Charitable Trust' under section 12A of the 1961 Act.” 20. This principle has been reiterated by the Hon'ble Delhi High Court in the case of Institute of Chartered Accountants of India-v-DGIT, 358 ITR 91 (Del). Thus, the assessee society which has been registered under ‘Registration of Societies Act, 1860’ with the sole object of providing education and has a legal obligation for applying its income for such charitable purpose, then for the purpose of Section 11 it has to be treated as trust and income derived from carrying out such obligation has to be reckoned as income derived from property under the trust and therefore, on the ground also as raked by the ld. CIT (A), exemption u/s.11 cannot be denied. Accordingly, in view of the finding given above and various legal principle as discussed above, we hold that none of the observations and the finding of the ld. CIT(A) are sustainable and the grounds taken and the reasoning given by him to deny the benefit/exemption u/s.11 to the assessee cannot be upheld either in law or on facts. 21. Accordingly, in view of our finding given above, the entire receipts which has been taxed under the head ‘income from other sources’ is set aside and we direct the

24 ITA No.4727/Del./2017 Assessing Officer to grant exemption u/s.11 as per the income and expenditure account submitted by the assessee. 22 In the result, the appeal of the assessee is allowed.”

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Sd/- Sd/- (N.K. BILLAIAY) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER

26 ITA No.4727/Del./2017

Dated the 16th day of December, 2021 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-1, Noida. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.

Date of Dictation : 16.12.2021 Date on which the typed draft is placed before the Dictating Member: 16.12.2021 Date on which the approved draft come to Sr.PS/PS : 16.12.2021 Date on which fair order sent to Member for signature : 16.12.2021 Date on which the fair order comes back after pronouncement to the Sr.PS/PS : 16.12.2021 Date on which order is uploaded : 16.12.2021 Date on which the file goes to the Bench Clerk : 16.12.2021 Date on which the file goes to the Head Clerk………………………………… The date on which the file goes to the AR for signature on the order………… Date of Despatch of the Order………………………………………………