G.H.R. EDUCATION FOUNDATION,NAGPUR vs. CIT EXEMPTION, PUNE

Facts in Brief:– The assessee was incorporated on 18/02/2024 under section 8 of the Companies Act with the main object "To convert existing Society "G.H.R. Education Foundation" having registration no.MAH/830/04 dated 21/12/2004 (PAN: AAATG7303E) as going concern under Section 366 to 374 of Part-1, Chapter-XXI of the Companies Act, 2013 r/w with the Companies [Authorised to be Register] Rules, 2014 as amended from time to time, on its incorporation under the Companies Act, 2013 to "G.H.R. Education Foundation", a Section 8 Company, limited by guarantee and not having share capital under the Companies Act, 2013. The predecessor society was an approved educational institution under section 10(23C(vi) of the Act having registration under section 80G of the Act. Details of previous approval under section 10(23C)(vi) of the Act are as under:–

Sr. Particulars Section Approval No. Approval Date no. PN/DGIT(Inv.)/GH Prior to REF 1. 10(23C)(vi) 28/04/2009 01/04/2021 Soc/10(23C)/2009– 10/28/04/2009 2. After 01/04/2021 10(23C)(vi) AATG7303EC20214 28/05/2021

The assessee runs following Schools and Colleges:–

3 G.H.R. Educational Foundation & 615/Nag./2024

Year of Sr. Granted or Particulars Location Establish– no. Non–Granted ment G.H. Raisoni Institute of Engineering 1. Jalgaon 2007 Non Granted &Business Management 2. SadabaiRaisoniWomens College Nagpur 2004 Non Granted 3. G.H. Raisoni Junior College Jalgaon 2015 Non Granted 4. G.H. Raisoni Public School Jalgaon 2022 Non Granted

Since the status of assessee changed from society to Section 8 Company, it had filed an application in Form no.56D, on 11/04/2008, seeking grant of fresh approval under section 10(23C)(vi) of the Income tax Act, 1961 (“the Act”).

4. Before the learned CIT(E), the assessee furnished various details and documents in support of its claim. However, the learned CIT(E) considering the same, rejected the application of the assessee by following certain judicial pronouncements and held that the assessee is not found eligible for approval under section 10(23C)(vi) of the Act by observing as under:–

“3. The information / details were called for under the provisions of sub-clause (a) of clause (ii) of second proviso to section 10(23C) of the Income Tax Act, 1961. These are the basic details required to ascertain the validity of the application and the overall nature of the activities of the assessee and are directly relevant to the present proceedings. The assessee was requested to submit its compliance by 17/05/2024. The assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration / approval shall also be liable to be cancelled. The assessee was also given an opportunity of being heard vide the said notice. The notice was duly served on the assessee through e-portal and email. However, the assessee did not respond to the said notice. Hence, another notice was issued on 30/07/2024 as under METAX DEPAR "(1) Copy of MOU/ Agreement entered into between GHR Edu Foundation (Co) and GHR Edu Foundation Society (Trust), copies of resolution and minutes of proceedings of the trust and the company regarding transfer and taking over of activities has not been furnished. (ii) Year-wise details of donations with full name, address, PAN of donors, date and mode of donation, amount, receipt no. issued. has not been furnished. (iii) Present application has been filed u/s 10(23C) (iv) (B) for grant of registration u/s 10(23C) (vi) of the Act. Provisions of said section applies to an institution existing solely

4 G.H.R. Educational Foundation & 615/Nag./2024 for educational purposes. However, as noticed from the MOA of the institution, the objects provide for many activities other than education, for e.g. running rehabilitation centre, clinics etc. as well. Therefore, the assessee is not eligible for registration under said section." 3.1 The assessee was requested to submit the compliance by 06/08/2024. The notice was duly served on the assessee through e-portal and e-mail. In compliance to the notice, the assessee submitted its reply on 05/08/2024 wherein the assessee contended that G.H.R. Education Foundation is incorporated on 18.02.2024 under section 8 of the Companies Act with the main object "To convert existing society "G.H.R. Education Foundation" having registration no MAH/830/04 dated 21.12.2004 (PAN AAATG7303E) as going concern under Section 366 to 374 of Part-1-Chapter XXI of the companies Act 2013 read with the Companies [Authorised to be Register] Rules, 2014 as amended from time to time, on its incorporation under the Companies Act, 2013 to "G.H.R Education Foundation" A Section 8 Company, limited by guarantee and not having share capital under the Companies Act, 2013" as going concern under section 366 to 374 of Part-1- Chapter XXI of the Companies Act, 2013 read with the companies [Authorized to be Register] Rules, 2014 as amended from time to time, on its incorporation under the Companies Act, 2013 to "G. H. R. Education Foundation". The assessee also stated that former trust ie. G. H. R. Educations Foundation Society Nagpur (AAATG7303E) was approved educational institution u/s 10(23C)(vi) of the I. T Act and it was also having registration u/s 80G of the IT Act. In respect of the objects e.g. running rehabilitation centre, clinics etc. as pointed out in the above show cause, the assessee submitted that the rehabilitation centre is in the context with students who leave education midway and need counselling for re-starting their education. The assessee further stated that 'clinic' has been used in the context with Medical Education wherein there is requirement of Medical College along with Hospitals, medical centres, clinic, etc. As such the assessee asserted that it has sole objects of imparting education only. The submission of the assessee has been carefully perused, however, the same is not acceptable for following reasons.

4. On verification of the details/documents submitted by the assessee as well as available on the Income Tax Data base, it is learned that the assessee which was earlier registered as a trust/Society with name andtitle 'GHR Educations Foundation Society Nagpur having PAN AAATG7303E. The objects of the trust were as under: 1) To spread good education among the masses of Rural and Urban area. 2) To start institutions and organization like Pre-Primaries, Primaries, Secondary Schools, College, Hostels, Guidance Centers, Physical Training insinuations, Teachers Training organization, Rehabilitation centers, Libraries, Institutions of Social Science, Engineering Colleges, Medical Colleges, Hospitals Ayurvedic College, Homeopathic College, Dental College, Nursing College, Law College, Institution of Management etc. 3) To create self-discipline value of manual labour, feeling of equality and morality amongst the students. 4) In general to provides an ideal education without any religion bias with the principles of equality, Liberty, Justice and respect for all.

5 G.H.R. Educational Foundation & 615/Nag./2024 5) To undertake and facilitate research in all branches of knowledge and establish institutions of this purpose. 6) To work for promotion and over all educational development of Hindi Speaking community according to Government Strategy 7) To promote education among economically backward classes and providing free medical services and providing free services to poor people.

8) To aid, help and donate to a registered Public trust having exclusive objects of promoting and advancement of secular education, Medical education and research thereon. 9) To do all such necessary things which are incidental or conducive to the attainment of the aforesaid objects. 10) To grant stipends scholarship, studentship and other allowances, concessions and gratuities to deserving scholars, students and other candidates. 11) To collect, raise and receive subscriptions, decagons and gifts in cash or in kind. 12) To organize, hold and arrange cultural functions, recitations, debates, symposiums and other cultural and literary programs, and citations for the benefit of the public and to invite scholars, technicians, poets, artists and other learned persons to participate therein and to organize and hold classes and conduct examinations and award diplomas, certificates or other distinctions or titles. 13) To borrow, raise money or moneys on such terms as may be thought fit by the Governing Body for attainment of objects of society. 14) To invest the money of the society in such manner as the Governing Body may think fit and proper and also as may be permissible under the law. 15) To enter into any arrangement or contract with any Government, authority or person whomsoever and to obtain from any Government authority or person such rights, concessions and privileges as the society may think desirable and to carry out, exercise and comply with any such arrangement, contract, privilege, right or concessions. 16) To hire and employ, professors, teachers, instructors, doctors legal advisors, clerks, servants, workmen and others and to pay them salaries, fees, wages, gratuities, honorarium as may be necessary. 17) For realization of the above objectives, the Society will interalia work towards renewing of school/ college acquaintances, along with their wives and cultivate feelings of brotherhood, sprit of self help and corporate spirit among the Alumni members' and keep the Alumni in touch with their Alma Mater. 18) To do and cause to be done all such legal transactions as are in accord with the spirit and principles of the objects of the Society or which are conductive to the attainment and pursuit of the aims and objects of the Society. 19) To work in collaboration with other institutions, organization, societies, trusts or companies to impart promote and improve the standard and education in the institutions established by the present- society."

6 G.H.R. Educational Foundation & 615/Nag./2024 4.1 Further, the trust got itself converted into a section 8 company under the name and title of 'GHR Education Foundation' having PAN AALCG0443P on 18.02.2024 with following objects: "2. To spread good education among the masses of Rural and Urban area.

3. To establish, promote, run, consent and accreditation of Schools, Colleges, Institutions and Universities for imparting higher education in all disciples of education in India including collaborations with foreign universities where considered necessary.

5. To create self-discipline value of manual labour, feeling of equality and morality amongst the students. In general to provides an ideal education without any religion bias with the principles of equality Fraternity, Liberty, Justice and respect for all.

6. To undertake and facilities research in all branches of knowledge and establish institutions of this purpose and to organize institutions of social and educational nature to advance the cause of national development.

7. To work in collaboration with other institutions, organizations, societies, trusts or companies to impart, promote and improve the standard of education in the institutions established by the company.

8. To work for promotion and over all educational development of minority and Hindi speaking community according to government strategy.

9. To promote education among economically backward classes and providing free medical services to poor people.

11. To promote and disseminate knowledge, create awareness and provide a common forum of interaction amongst academicians, professionals and government agencies, establish effective co-ordination, to organise training courses and special programmes to impart training, education in all disciplines like academic, cultural, musical, artistic, literacy, crafts, Scientific, engineering and technical, medicinal, vocational, management and commercial subjects or which may be conducive to knowledge of or skill in any profession, trade or otherwise, to undertake, promote, do and conduct research in various areas of education, study global developments and evaluate new instruments or services and disseminate their applications in India, to participate in training programmes abroad and evaluate their practices for betterment of education in India, to provide, offer fellowship, scholarships, prizes, certificates,diplomas, awards or honour otherwise on completion of the training programmes or 7 G.H.R. Educational Foundation & 615/Nag./2024 specific courses, passing examinations or for contributions in various areas of education."

8 G.H.R. Educational Foundation & 615/Nag./2024 Solely, Cambridge Dictionary (4th Edn.) (2013). the 'predominant object' test was applied unquestioningly in cases relating to charitable institutions claiming to impart education. The obvious error in the opinion of this court which led the previous decisions in American Hotel (supra) and in Queens Education Society (supra) was that Surat Art (supra) was decided in the context of a society that did not claim to impart education. It claimed charitable status as aninstitution set up to advance objects of general public utility. The Surat Art (supra) decision picked the first among the several objects (some of them being clearly trading or commercial objects) as the 'predominant' object which had to be considered while judging the association's claim for exemption. The approach and reasoning applicable to charitable organizations set up for advancement of objects of general public utility are entirely different from charities set up or established for the object of imparting education. In the case of the latter, the basis of exemption is Section 10(23C) (iiiab), (iiiad) and (vi). In all these provisions, the positive condition 'solely for educational purposes and the negative injunction 'and not for purposes of profit loom large as compulsive mandates, necessary for exemption. The expression 'solely is therefore important. Thus, in the opinion of this court, a trust, university or other institution imparting education, as the case may be, should necessarily have all its objects aimed at imparting or facilitating education. Having regard to the plain and unambiguous terms of the statute and the substantive provisions which deal with exemption, there cannot be any other interpretation.

9 G.H.R. Educational Foundation & 615/Nag./2024

10 G.H.R. Educational Foundation & 615/Nag./2024 57. The scope of a proviso was dealt with in great detail in S. Sundaram Pillai v. V.R. Pattabiraman.27 This court observed that normally a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. A proviso cannot be tom apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment. After quoting previous decisions and authoritative texts, this court summarized the correct legal position, as follows: "43. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment: (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable: (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself: and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision."

11 G.H.R. Educational Foundation & 615/Nag./2024 60. In the light of the above discussion, this court is of the opinion that the interpretation adopted by the judgments in American Hotel (supra) as well as Queens Education Society (supra) as to the meaning of the expression 'solely' are erroneous. The trust or educational institution, which seeks approval or exemption, should solely be concerned with education, or education related activities. If, incidentally, while carrying on those objectives, the trust earns profits, it has to maintain separate books of account. It is only in those circumstances that 'business' income can be permitted-provided, as stated earlier, that the activity is education, or relating to education. The judgment in American Hotel (supra) as well as Queens Education Society (supra) do not state the correct law, and are accordingly overruled. ……..”

7. In view of the above, it is found that objects of 'GHR Educations Foundation' incorporated as section 8 Company on 18.02.2024 are not solely educational and/or incidental to educational activities and therefore, following the above decision of the Hon'ble Supreme Court, the assessee is not found eligible for approval u/s 10(23C)(vi) of the Act. The application filed by the assessee is hereby rejected.”

The assessee being aggrieved by the impugned order so passed by the learned CIT(E) is in further appeal before the Tribunal.

5. The learned Counsel for the assessee argued that the assessee is carrying on activity of providing education since 2009 and it is an approved educational institution under section 10(23C)(vi) of the Act since then. The educational activities were carried on under the status of Societywhich has been converted into Section 8 Company, not for the purpose of profit, on 12 G.H.R. Educational Foundation & 615/Nag./2024 18/02/2024. Because of change in status of the assessee, it has applied for fresh approval u/s 10(23C)(vi) but there is no change in nature of activity of providing education which were earlier carried on by the society since the year 2009. The learned Counsel for the assessee submitted that the learned CIT(E) has rejected assessee’s application for approval u/s 10(23C)(vi) for the reason that the objects clause of the section 8 company contains few words like “Rehabilitation Centre, medical centre, medical institutions, Clinics, providing free medical services to poor people” which were not there in the object clause of the predecessor society and these objects are medical activitieswhich does not fall under section 10(23C)(vi) of the Act. The learned Counsel for the assessee argued that these objects are related to providing of medical education where medical centre and clinics are pre-requisites of medical education hence the learned CIT(E) is not correct in holding that the objects are not solely for educational purpose. The learned Counsel for the assessee argued that these activities are akin to running medical colleges as there cannot be a medical college run without there being clinics wherein the patients are treated. He emphasised the fact that every medical college also has a hospital attached to it which is a prerequisite for running an effective medical education institution. The learned Counsel for the assessee further argued that these words must be read in conjunction with previous words of the main object clause. They cannot be read in isolation. The specific words in the main object are to start institutions like pre-primary, Primaries, Secondary Schools, Colleges, Universities etc which are followed by the general words like rehabilitation centre, clinics, etc. The specific words are solely related to education and as such the general words would take colour

13 G.H.R. Educational Foundation & 615/Nag./2024 from the specific words which are related to education only. He further argued that all the objects of the assessee exists solely for the purpose of imparting education and none of the objects can be read in a manner so as to infer that the said object firstly is an independent object and that secondly it is not in any way connected with the main object of imparting education. The learned Counsel for the assessee further submitted that the assessee is presently engaged only in providing education related to the field of engineering apart from also running certain junior colleges and the Assessee does not at present run operate any medical colleges. The learned Counsel for the assessee further submitted that the objects with respect to running of medical colleges were included at the time of incorporation to enable the assessee to seek approval to run medical colleges in future. It was further the submission of the learned Counsel for the assessee that merely being permitted to do certain acts does not ipso facto be a ground for rejection of the approval sought more particularly when the said activities have never been undertaken by the assessee. The learned Counsel for the assessee submitted that after passing of rejection order by learned CIT(E), the assessee has modified its object clause and removed all the words like “Rehabilitation Centre, medical centre, medical institutions, Clinics, providing free medical services to poor people” which were objected by the learned CIT(E) and as such even if it is held that the said objects cannot be treated to be in the nature of education then the ground of rejection by the learned CIT(E) having already been addressed by the Assessee by suitably modifying the object clause, there at present exist no disability even considering the order of the learned CIT(E) and accordingly prayed that the registration as claimed under section 10(23C)

14 G.H.R. Educational Foundation & 615/Nag./2024 be allowed to the assessee. The learned Counsel for the assessee placed before us the copy of the revised objects clearly highlighting that the words which were objected to by the learned CIT(E) have been suitably deleted by the assessee.

6. The learned Departmental Representative strongly supported the order of CIT(E) and argued that the assessee is not eligible for approval under section 10(23C)(vi) as it is not existing solely for the purpose of education.

15 G.H.R. Educational Foundation & 615/Nag./2024 Company there is no change in activities of the assessee. There is no finding in the impugned order passed by learned CIT(E) that the assessee is carrying on any activity other than education and more importantly the conversion has been made on the basis of going concern implying that the entire activities of the erstwhile society has been taken over by the assessee company and the assessee company is carrying on exactly the same operations as were being performed by the erstwhile society. The main objection of the learned CIT(E) that the words used “Rehabilitation Centre, Medical Centre, Medical Institutions, Clinics, providing free medical services to poor people” and nowhere has the learned CIT(E) either brought on record as to whether these activities are actually being performed by the Assessee or that the Assessee is undertaking any activity other than imparting of education. The learned CIT(E), in our opinion, has lost sight of the fact that the Assessee is solely engaged in the activity of providing education and is running educational institutes as mentioned hereinabove which is in the field of Engineering apart from also running certain Junior Colleges. The learned CIT(E) has further misinterpreted the said activities mentioned in the object clause as not being related to imparting education losing sight of the fact that in case of imparting medical education it is imperative that the institute also operates medical centres apart from running medical colleges wherein the students undergoing medical education get practical exposure which is essential in providing quality medical education. We find those in the argument of the Ld. Counsel that all medical institutions imparting education also parallelly operate a medical college wherein patients are treated and the medical students are given practical training in the field of education and as such running such 16 G.H.R. Educational Foundation & 615/Nag./2024 medical centres are part and parcel of imparting medical education and as such cannot be read in isolation as has wrongly been interpreted by the learned CIT(E). We further find force in the argument of the learned Counsel for the assessee that mere mention of the fact that certain activities are authorised to be undertaken by the Assessee does not in any manner can prove to be a hindrance without the said activities having actually been undertaken by the assessee. The assessee cannot be punished or faulted for any activity which has not yet been undertaken solely on the ground that he might, on some future uncertain date, undertake those activities which in the opinion of the learned CIT(E) might not be held to be wholly attributable to the purpose of imparting education. Even for the sake of argument if it is held that such activities would not amount to the purpose of imparting education, then it would be open for the Department in future upon the assessee undertaking the said activities to re-evaluate the registration is granted and take suitable action including cancellation of registration if they so deem fit. However, rejecting the application for registration, for the acts which have not yet been undertaken by the assessee would amount to and be equivalent to punishing someone for a crime which he is not yet committed and which in the opinion of the officer in charge he might commit in future. Such presupposition while evaluating application for registration under section 10(23C), in our opinion, is not proper and cannot be sustained. Under any case, the assessee has already modified its objects by removing the “objectionable” objects referred to and relied upon by the learned CIT(E) and as such there remains no cause for rejection of the registration applied for by the assessee under section 10(23)(vi) as apart from the inclusion of certain

17 G.H.R. Educational Foundation & 615/Nag./2024 objects in the object of the assessee, which as per the submission of the learned Counsel for the assessee as well as on perusal of the revised object clause submitted before us, there is no other ground raised by the learned CIT(E) for rejection of the application for grant of approval under section 10(23)(vi). On a conspectus of the above facts, firstly wherein the assessee has not undertaken any of the objects which formed the basis for rejection of the approval under section 10(23C), coupled with the fact that the said objects are akin to imparting medical education and further the objects of the Assessee having been suitably modified by removing the words which were held to be objectionable by the learned CIT(E), in our opinion, there remains no reason for the approval under section 10(23)(vi) to be withheld and consequently, relying on the findings given hereinabove, we remit the matter back to the file of learned CIT(E) solely for the reason to verify the revised objects of the Assessee to ensure that the words earlier held objectionable by the learned CIT(E) have been deleted and after taking the revised objects on record grant the approval under section 10(23C)(vi) as claimed by the assessee.

ITA no.615//Nag./2024

“1. On the facts and circumstances of the case and in law, the learned CIT Exemption, Pune has grossly erred in rejecting assessee's application for 18 G.H.R. Educational Foundation & 615/Nag./2024 approval u/s 80G of IT Act. The order passed by CIT Appeals is illegal, invalid and against the principles of natural justice.

2. On the facts and circumstances of the case and in law, the learned CIT Exemption, Pune ought to have granted approval under section 80G of IT Act to the Appellant as the Appellant has duly complied with all the conditions as prescribed under law for grant of approval under section 80G of the Act.

3. The Appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of Appeal.”

10. In this case, the registration under section 80G is the core issue. In view of our findings stated supra vide Para–16, the impugned order passed by the learned CIT(E) is also set aside and the learned CIT(E) is directed to adjudicate the issue in accordance with law after considering the facts of the case of the assessee for approval under section 10(23C)(vi)of the Act. Thus, all the grounds raised in this appeal are allowed for statistical purposes.