2016 (3) TMI 760 - HC - Income Tax

Eligibility of exemption u/s Sec.10(23C)(vi) - Held that - It is not in dispute that Clause-4 of the Memorandum and Articles of Association was deleted on 02.06.2014 and the effect of deletion of the said Clause will come into force only prospectively and it cannot be retrospective. 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. It relates to 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. - Decided against assessee

Summary

Issues:
1. Eligibility for exemption under Section 10(23C)(vi) of the Income Tax Act based on the objectives of the petitioner Society.
2. Impact of the deletion of Clause-4 from the Memorandum and Articles of Association on the petitioner's claim for exemption.
3. Prospective versus retrospective application of the deletion of Clause-4 and its effect on the assessment year 2014-15.

Analysis:

Issue 1:
The petitioner, a Society established for educational and charitable purposes, sought exemption under Section 10(23C)(vi) of the Income Tax Act. The petitioner claimed to engage solely in educational activities, as per its objectives, and had obtained Registration under Sections 12AA and 80G of the Act. However, the application for exemption was rejected by the respondent, citing the existence of multiple objectives in the original memorandum. The respondent concluded that the petitioner did not qualify under Section 10(23C)(vi) due to the presence of the 4th objective, which was later deleted by the petitioner.

Issue 2:
The deletion of Clause-4 from the Memorandum and Articles of Association was a crucial point of contention. The petitioner argued that the deletion was clarificatory and related back to the inception of the Society. However, the respondent maintained that the deletion, made on 02.06.2014, could only be prospective and applicable for the assessment year 2015-16. The respondent relied on the specific Clause mentioned in the original documents and contended that the petitioner's claim for exemption could not be considered based on retrospective changes.

Issue 3:
The retrospective versus prospective application of the deletion of Clause-4 was pivotal in determining the petitioner's eligibility for exemption under Section 10(23C)(vi) for the assessment year 2014-15. The Court upheld the respondent's decision, emphasizing that the petitioner, with multiple objectives in the relevant assessment year, did not exist solely for educational purposes. The Court highlighted the importance of adherence to the statutory provisions and the documentary evidence available before the respondent in evaluating the petitioner's claim for exemption.

In conclusion, the Court dismissed the Writ Petition, affirming the respondent's decision to reject the petitioner's application for exemption under Section 10(23C)(vi) for the assessment year 2014-15. The judgment underscored the significance of the original objectives of the petitioner Society and the prospective nature of amendments in determining eligibility for tax exemptions under the Income Tax Act.