2019 (5) TMI 1857 - AT - Income Tax

Grant of exemption / approval u/s 10(23C)(vi) - category of assessee to which it falls - as per assessee society is existing solely for educational purpose and not for purpose of the profit - HELD THAT - The Income Tax Act envisages exemption u/s 10(23C)(vi) to Universities or Educational Institution only but not to Trusts. We find different sub sections / clauses are meant for different category of assessee's and clause (vi) do not provide for any exemption to Trusts. Hence, the assessee has not crossed the first level of eligibility or the primary filter to be eligible for deduction under section 10(23C)(vi). - Decided against assessee.

Summary

Issues:
- Interpretation of provisions of Section 10(23C)(vi) of the Income-tax Act, 1961
- Eligibility of a society for exemption under Section 10(23C)(vi)
- Compliance with conditions for exemption under Section 10(23C)(vi)
- Utilization of income for educational purposes
- Purchase of transport vehicles and cars by the society
- Salary structure of the society
- Fee structure of the society
- Application of the term "person" in Section 10(23C)(vi)

Interpretation of provisions of Section 10(23C)(vi) of the Income-tax Act, 1961:
The appeal addressed the interpretation of Section 10(23C)(vi) regarding the eligibility for exemption. The Appellant argued that the conditions under this section were fulfilled by the society and exemption should have been granted. However, the Respondent contended that this section applies only to universities or educational institutions, not to societies. The judges analyzed the provisions and concluded that the exemption is specifically for universities or educational institutions, excluding trusts or societies.

Eligibility of a society for exemption under Section 10(23C)(vi):
The case involved the eligibility of a society for exemption under Section 10(23C)(vi). The society applied for approval under this section but was denied by the Ld. CIT(E) based on various grounds, including the addition of transport vehicles not aligned with educational objectives, purchase of cars, salary structure discrepancies, and high student fees. The Appellant argued that the society existed solely for educational purposes and should be eligible for registration under Section 10(23C)(vi). However, the judges ruled that the exemption under this section is not extended to trusts, emphasizing the legislative intent to benefit universities or educational institutions only.

Compliance with conditions for exemption under Section 10(23C)(vi):
The judgment also discussed the compliance of the society with the conditions for exemption under Section 10(23C)(vi). The Ld. CIT(E) denied approval citing various reasons such as the purchase of transport vehicles, salary discrepancies, and high fees. The Appellant argued that the society's activities were solely for educational purposes. However, the judges found that the society did not meet the eligibility criteria for exemption under this section, leading to the dismissal of the appeal.

Utilization of income for educational purposes:
The issue of income utilization for educational purposes was raised during the hearing. The Appellant argued that the society's income was solely used for educational activities, including transportation for students. However, the Ld. CIT(E) raised concerns about the society's expenditure on vehicles and salary structures. The judges examined the income utilization and concluded that the society did not qualify for exemption under Section 10(23C)(vi) due to its nature as a society, not an educational institution.

Purchase of transport vehicles and cars by the society:
The judgment highlighted the purchase of transport vehicles and cars by the society as a factor in denying exemption under Section 10(23C)(vi). The Ld. CIT(E) raised objections to the society's acquisition of vehicles, indicating a deviation from educational objectives. The Appellant defended the purchases, stating they were solely for educational purposes. However, the judges emphasized that the society's actions did not align with the criteria for exemption under the relevant section.

Salary structure of the society:
The discrepancy in the society's salary structure was a point of contention in the judgment. The Ld. CIT(E) noted inconsistencies with CBSE guidelines, while the Appellant argued that the salaries were in line with prevailing market rates. The judges considered this aspect but ultimately concluded that the society's eligibility for exemption under Section 10(23C)(vi) was not established, leading to the dismissal of the appeal.

Fee structure of the society:
The judgment addressed the issue of the society's fee structure, with the Ld. CIT(E) deeming it exorbitant. The Appellant provided a breakdown of fees, emphasizing the educational focus of the society. However, the judges found that the society's fee structure, along with other factors, did not meet the requirements for exemption under Section 10(23C)(vi), resulting in the dismissal of the appeal.

Application of the term "person" in Section 10(23C)(vi):
The application of the term "person" in Section 10(23C)(vi) was discussed during the proceedings. The Ld. CIT(DR) argued that the section specifically applies to universities or educational institutions, not trusts or societies. The judges examined the legislative intent behind the provision and clarified that the exemption under this section is intended for educational institutions, excluding trusts. This interpretation led to the confirmation of the Ld. CIT(E)'s order and the dismissal of the appeal.