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Income Tax Appellate Tribunal, “J”
Before: HON’BLE SH. SHAMIM YAHYA, AM & HON’BLE SH. SANDEEP GOSAIN, JM
CIT (Exemp.) Shree 6th floor, Piramal RamkrishnaShikshan बनाम/ Chamber, Parel, Mandal, Mumbai-400 012 Kandivali, Mahatma Vs. Gandhi Road, Charkop, Kandivali (west), Mumbai-400 067 स्थायीलेखासं./जीआइआरसं./ PAN No. AAATR0337B (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri SubodhRatnaparkhi, AR प्रत्यथीकीओरसे/Respondentby : ShriBhupendra Kumar Singh, DR सुनवाईकीतारीख/ : 05.06.2018 Date of Hearing घोषणाकीतारीख / : 04.09.2018 Date of Pronouncement आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
1. The present Appeal filed by the assesseeis against the order of Ld. CIT (Exemp), Mumbai dated 24.09.16 on the grounds mentioned herein below:-
1. On facts and in law, the Hon. CIT (Exemptions) erred in holding the appellant notentitled for exemption u/s 10(23C)(vi) & (via) of the Income Tax Act 1961.
2. On facts and in law, the Hon. CIT (Exemptions) erred in not appreciating that theappellant was only running a school providing education to students upto class XIIth and therefore existed solely for educational purposes and denial of exemption sought u/s 10(23C)(vi) & (via) was not justified by law.
3. The appellant craves leave to add, alter, amend or delete any of the above groundof appeal.
The brief facts of the case are thatthe assessee is registered with the office of the Charity Commissioner Mumbai and registration u/s 12A dated 09.07.87 has been issued to the assessee trust. The application of the assessee u/s 10(23C)(vi) & (via) of the I.T. Act has been rejected by Ld. CIT(E) on the ground that the assessee’s institution is not existing ‘solely’ for the purpose of education.
Aggrieved by the order of Ld. CIT(E), the assessee has preferred the present appeal before us by raising the above grounds.
Ground No. 1& 2 3. These grounds raised by the assesseeare inter connected and inter related and relates to challenging the order of Ld. CIT(E)in holding that assessee is not entitled for exemption u/s u/s 10(23C)(vi) & (via) of the I.T. Act, therefore we thought it fit to dispose of the same by this common order.
We have heard counsels for both the parties at length and we have also perused the material placed on record, judgment cited by both the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(E). The Ld. CIT(E) has dealt with the above grounds raised
by the revenue in para no. 1 to 6ofitsorder. The operative portion of the order of Ld. CIT(E) is 4. Shree RamkrishnaShikshan Mandal, contained in para no. 6(6.1 to 6.7) of its order and the same is reproduced below:-
I have perused the reply of the assessee in detail. However, the contentions of the applicant trust are not acceptable as the same does not fall within the purview of sec tO(23C)(vi) which reads as under; "vi. any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub- clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority or" - 6.1 Accordingly, three conditions have to be fulfilled for claiming exemption u/s. 10(23C)(vi) of the I.T. Act. These are :-
(i) There has to be an educational institution; (ii) It should exist solely for the educational purposes and; (iii) It should not be for the purpose of profit.
6.2 The above conditions are cumulative and if even one of the conditions are not fulfilled, the trust shall not be entitled for registration u/s. 10(23C)(vi) of the 5 Shree RamkrishnaShikshan Mandal, Act. As discussed above, the object clause of the trust shows that it is not existing solely for the purpose of education. It is clear from the above objects that the trust is authorized to do activity other than education, the objection regarding intensive development (intellectual, physical and moral) of the younger generation in the country authorizes the trustees to do any kind of activity which may be other than education also. Similarly, providing scholarships for higher studies abroad is also not an act of direct educational activity, as required u/s. 10(23C). Also the clause regarding help to. institutions working in similar activity is also general in nature. Therefore, it is clear from the above mentioned facts that the trust is not existing solely for the purpose of education.
6.3 The submission of the applicant trust is of no help as the object clause and other clauses of the trust deed show that it is not existing solely for the purpose of education and it can spend the funds on other, objects also. Grant of registration u/ s. 10(23C)(vi) is to be governed by the object clause and not by the actual activities carried out by the trust. Reliance is also placed on the judgement of the Hon'ble Andhra Pradesh High Court in the case of New Noble Education Society vs. CCIT 12, [Taxmann.com 267 (2011)], wherein it has been held by the Hon'ble .High Court that; "Even if the applicant had not applied its income to achieve those non-educational objects, they would still be disentitled to the benefit of being - exempted under section 1 O(23C)(vi), as the exemption there under is available only to the educational institutions whose existence is solely for the purpose of education."
6.4 The applicant trust has also placed reliance on the judgement of the Hon'ble Supreme Court in the case of American Hotel and Lodging Association Educational Institute vs. CBDT (301 ITR 86)(2008). I have carefully perused the judgement of the Hon'ble Supreme Court. However, it is noted that the issue involved before the Hon'ble Supreme Court was whether the institute was existing for the purpose of education or for the purpose of profit and in that there were other objects in the trust deed that the institute is existing for any other purpose other than education. The Supreme Court in that case has held that it is not necessary that the institute should exist for profit. If it is existing for education, the registration may be allowed. The fact in the present case are different as the institute is not existing solely for the purpose of education and it is 7 Shree RamkrishnaShikshan Mandal, existing for some other objects as mentioned in the trust deed as discussed in the preceding paras. Accordingly, the judgement of the Hon'ble Supreme Court is respectfully distinguishable.
6.5 Reliance has also been placed on the judgement in the case of Queens Educational Society-vs-CIT, 371 ITR 699 (SC) (2015) and Simpkins School - vs-Director General of Income Tax (Investigation) & Others, 367 ITR 335 (All) (2014) and other judgements which have 6.6 Accordingly in view of the above mentioned facts and circumstances, I am of the considered opinion that the applicant trust is not existing solely for the purpose of education and is therefore not entitled for exemption u/s. 10(23C)(vi). The application for approval u/s. 10(23C)(vi) is therefore rejected.
6.7 Accordingly in view of the above mentioned facts and circumstances, I am of the considered opinion that the applicant trust is not existing solely for the purpose of education and is therefore not entitled for exemption u/s. 10(23C)(vi). The. application for approval u/s. 10(23C)(vi) is therefore rejected.
After having gone through the facts of the present case, we find that Ld. CIT(E) has rejected the application for approval u/s 10(23C)(vi) of the I.T. Act on the ground that assessee is not existing ‘solely’ for the purpose of education. Whereas Ld. AR appearing on behalf of the assessee drawn our attention to the written submission filed by the assessee before Ld. CIT(E) which is contained in para no. 5 of its order and the same is reproduced below:-
5. In response to the letter, Shri M. T. Phadnis, C.A. and authorized representative of the applicant trust attended on 07.09.20 16 and filed letter dated 07.09.2016 and made the following submissions, the relevant portion of which is reproduced hereunder :-
"In response to your above referred letter, we humbly submit as under:
Copy of Registration Certificate u/s 12A of the Income Tax Act, 1961 and Copy of latest certificate u/s 80G are enclosed for your records. Copy of last scrutiny
order u/s 143(3) of the Income Tax Act, 1961 for A. Y. 2013-2014 is also enclosed.
As had been stated in the earlier correspondence on the issue, we are a educational institutional engaged solely in providing education to school students upto class X11t11 Standard in the school run and managed by our institution at NaravaneVidyalaya, M. G. Road, Kandivali (W), Mumbai 67 also run schools dumb, deaf and. blind.
We have alongwith our application placed on record our trust deed. The main objects our trust as per clause no. a, b, c. of the trust deed are as under:-
(a) To work for the intensive development (intellectual, physical and moral) of the younger generation in the country.
(b) For this to open and conduct study centres and ashrams where individual care shall be taken of each student.
(c) To open and conduct research laboratories and workshops where students can carry on their higher studies of scientific and technical nature and perfect their theoretical knowledge by work and practical experience.
As can be seen from the activity carried out by our trust as well as the objects enumerated in the trust deed, our trust exists solely for educational purposes and not for the purposes of profit.
4. Your honour has vide the above mentioned letter requested us to explain as to why our application for registration u/s 10(23C) (vi) & (via) of the I. T. Act 1961 should not be rejected on the ground that the sole object of the trust is not education.
We once again categorically state that we are solely engaged in providing education to school students by running the school at M. G. Road, Kandivali (W), Mumbai and in no other activity. This fact can be identified from our earlier submissions and the financial statements for all the earlier asst. years placed on record.
6. With regards to the issue raised by your honour, we humbly draw your honours kind attention to certain judicial pronouncements.
6.1 The Hon. Supreme Court in the case of American Hotel & Lodging Associations) Educational Institute - vs - CBDT., 301 ITR 86 analysed the provisions of 11 Shree RamkrishnaShikshan Mandal, section 10(23C) and clarified that if the petitioner fulfilled the threshold conditions of actual existence of an educational institution u/s 10(23C) (vi) of the I.T. Act 1961, the authority could not reject the application.
The Hon. Supreme Court in the recent decision in the case of Queens Educational Society-vs-CIT, 371 ITR 699 (SC) (2015) has said that for examining as to whether the institution qualifies for registration u/s 10(23C) the predominant object test must be applied. The purposes of education must not be submerged by a profit making motive.
Applying the ratio laid down by the above decision, we submit that in the case of our institution not only predominant but sole objective of our institution is to provide education to school students only.
The Hon. Allahabad High Court in the case of Simpkins School - vs-Director General of Income Tax (Investigation) & Others, 367 ITR 335 (All) (2014) held that where the petitioner society was running an educational institution and merely because were are other objects of the society would not mean that the educational institution did not exist solely for 12 Shree RamkrishnaShikshan Mandal, educational purposes. The Hon. Court explained that the word "solely" was in relation to the educational Similar view has been taken in the case of Allahabad Young Mens Chris Association-vs-Chief Commissioner of Income Tax & Others, 371 ITR 23 (All) (2015).
Similar view has also been taken in a recent decision in the case OfManas Sew Samiti&Ors. - vs - Chief Commissioner of Income Tax & another, 282 CTR 302 (AU) (2016) where out of several objects of a society, one the object was to establish educational institution.
6.2 We once again submit that we are in educational institution running a school solely providing education to students up to class Xth at our school premises at M.G. Road, Kandivali (W), Mumbai. We do not carry on any other activity and therefore exist solely for the educational purposes only. In view of the facts of our matter, the provisions of law and the decisions in support. of our submission cited above, we humbly request that the registration u/s 10(23.C) (vi) of the I. T. Act 1961 may kindly be granted to us."
From the record and after hearing the parties at length, we find that assessee is an educational institution engaged in providing education to school students upto class XIIth Standard in the school run and managed by appellant institution at NaravaneVidyalaya, M. G. Road, Kandivali (west), Mumbai and also run schools dumb, deaf and blind.
We have also gone through the documents placed on record in the shape of registration certificate under Bombay Public Trust, certificate of Registration u/s 12(a) of the I.T Act, certificate issued u/s 80G of the I.T. Act, Memorandum of Association dated 15th Aug 1946 and audited financial statements.
The Hon. Supreme Court in the case of American Hotel & Lodging Associations Educational Institute - vs – CBDT reported in 301 ITR 86 has categorically held that after analyzing thethe provisions of section 10(23C), it is clarified that if the petitioner fulfilled the threshold conditions of actual existence of an educational institution u/s 10(23C) (vi) of the I.T. Act 1961, the authority could not reject the application.
The Hon. Supreme Court also in the case of Queens Educational Society-vs-CIT, 371 ITR 699 (SC) (2015) has categorically held that for examining as to whether the institution qualifies for registration u/s 10(23C) the predominant object test must be applied. The purposes of education must not be submerged by a profit making motive. As per the petitioner, the sole objective of their institution is to provide education to school students only.
We also find that Ld. CIT(E) while rejecting the application had held that the object clause of the petitioner trust shows, it is not existing solely for the purpose of education but rather dividends other than the education. Whereas on the contrary, from the objects of the petitioner, it is clearly reflecting that the predominant and the sole objective of the institution is to 15 Shree RamkrishnaShikshan Mandal, provide education to the school students only. Merely because, the petitioner is authorized to do activities for intensive development (intellectual, physical and moral) of the younger generation in the country, would not mean that the educational institution did not exist solely for educational purposes. The intensive development in respect of intellectual, physical and moral of younger generation are part and parcel of the broad meaning of the word ‘Education’. Providing scholarships for higher studies is also an act of educational activities and is thus covered under the ambit of provisions of requirement as laid down u/s 10(23C)(vi) of the I.T. Act.
The judgments referred by Ld. CIT(E) in order to reject the permission u/s 10(23C) are not applicable to the facts of the present case. Whereas on the contrary, the judgments of Hon’ble Supreme Court in the case of American Hotel and Lodging Association Educational Institute Vrs. CBDT (301 ITR 86) (2008) and Queens Educational Society vrs. CIT 371 ITR 699 (SC) (2015) are applicable to the facts of the present case. Thus in our considered view, the Ld. CIT(E) has wrongly rejected the 16 Shree RamkrishnaShikshan Mandal, approval of exemption sought by petitioner u/s 10(23C)(vi) & (via) of the Income Tax Act 1961 and the order of Ld. CIT(E) is unsustainable in law. Resultantly, this ground raised by the assessee stands allowed.
Ground No. 3 5. This ground raised by the assessee is general in nature, thus requires no specific adjudication.