2016 (3) TMI 1310 - HC - Income Tax

Grant of exemption in terms of Sec.10(23C)(vi) denied - Held that - As per Section 2(15) of the Act Charitable purpose means charitable purpose includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wild life) and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility . Clause-4 of the objectives shall not come within the meaning of charitable purpose as defined under Section 2(15) of the Act. Therefore, the finding of the respondent that the 4th objective cannot be considered as being related to promotion of education as contained in Section 10(23C)(vi) of the Act is just and proper. Development of Society as narrated in the said objective and hence, for the assessment year 2014-15, the petitioner had multiple objectives and therefore, did not exist solely for educational purpose. As already stated, the amendment made in the Memorandum and Articles of Association can only be prospective and in that case, it shall apply only for the assessment year 2015-16 and cannot be considered for the assessment year 2014-15. Considering all these aspects, the respondent had rightly rejected the Form-56 D filed by the petitioner finding that the assessee does not qualify under Section 10(23C)(vi) of the Act for the assessment year 2014-15. Since the facts and circumstances of the case relied upon by the learned counsel for the petitioner differs, the same is not applicable to the present case. Writ petition dismmissed.

Summary

Issues:
1. Eligibility for exemption under Sec. 10(23C)(vi) of the Income Tax Act based on the objectives of the Institute.
2. Impact of the deletion of certain objectives from the Memorandum and Articles of Association on the exemption claim.
3. Prospective vs. retrospective application of the deletion of objectives in relation to tax exemption eligibility.

Analysis:

Issue 1:
The petitioner, a Society established under the Indian Societies Act, sought exemption under Sec. 10(23C)(vi) of the Income Tax Act for educational purposes. The petitioner contended that its objectives solely focused on education, research, and dissemination of knowledge, making it eligible for the exemption. The petitioner had also obtained Registration under Sections 12AA and 80G of the Income Tax Act to support its claim for exemption under Section 11 of the Act.

Issue 2:
The respondent rejected the petitioner's application for exemption, citing the existence of a 4th objective in the original memorandum that was later deleted by the petitioner. The respondent argued that the deletion of objectives was made prospectively from 02.06.2014 and could not be considered for the assessment year 2014-15. The respondent relied on the presence of the 4th objective to deny the exemption claim, emphasizing that the petitioner had multiple objectives and did not exist solely for educational purposes.

Issue 3:
The Court considered the impact of the deletion of objectives on the petitioner's eligibility for tax exemption. It noted that the deletion of Clause-4 from the Memorandum and Articles of Association was prospective and could not be retrospective. The Court analyzed the provisions of Sec. 10(23C)(vi) of the Income Tax Act, emphasizing that the petitioner's objectives should align with educational purposes to qualify for exemption. As the petitioner had multiple objectives for the assessment year 2014-15, the Court upheld the respondent's decision to reject the exemption claim.

In conclusion, the Court dismissed the Writ Petition, stating that the petitioner did not qualify for exemption under Sec. 10(23C)(vi) of the Income Tax Act for the assessment year 2014-15 due to the presence of multiple objectives and the prospective nature of the deletion of certain objectives. The judgment highlighted the importance of aligning organizational objectives with the criteria for tax exemption under the relevant provisions of the Act.