2017 (6) TMI 1048 - HC - Income Tax

Non grant approval u/s. 10(23C)(vi) - Tribunal directing the CIT(E) to grant approval - Held that - Trust has been in existence since long and is engaged exclusively in the activities of education purposes. The Commissioner was not correct in holding that the Trust had not satisfied the condition of section 10(23C)(vi) of the Act. Even if the requirement that Trust must exist solely for educational purpose and not for purposes of profit is to be strictly complied, in the present case, the trust deed provided sufficient safeguard in this regard. Clause (a) of the trust deed envisaged the object of the Trust to spread amongst people of Dharmaj education and to employ suitable means for the spread of intellectual, physical and moral education. Clause (b) pertains to collection of funds, to accept trust funds and to execute them for the accomplishment of the above mentioned aim. Clause (c) merely enable the Trust to manage any public institution of the village. This clause cannot be divorced from the earlier two clauses as to allow a freehand to the Trust to involve itself into management of any public institution irrespective of the fact whether it is engaged in education activity or not?. Tax Appeal is dismissed.

Summary

Issues:
Challenge to the Income Tax Appellate Tribunal's judgment on approval under section 10(23C)(vi) of the Income Tax Act.

Analysis:

1. Issue of Eligibility under Section 10(23C)(vi):
The appeal was filed by the Revenue challenging the judgment of the Income Tax Appellate Tribunal regarding the approval under section 10(23C)(vi) of the Act. The Tribunal allowed the appeal of the assessee Trust, emphasizing that the Trust had been in existence since 1954, running educational institutions, registered under section 12AA, and enjoying exemption under section 80G. The Commissioner's objection was based on the belief that the Trust might have ancillary activities not associated with education, which the Tribunal deemed as a hypothetical observation. The Tribunal, following precedents, directed the prescribed authority to grant approval under section 10(23C)(vi) for the relevant assessment year.

2. Interpretation of Trust Deed and Activities:
The Trust's eligibility under section 10(23C)(vi) was contested based on the Commissioner's view that the Trust did not exist solely for educational purposes. However, the Tribunal found that the Trust's activities were exclusively focused on education, as evidenced by the trust deed's clauses outlining the spread of education, collection and execution of funds for educational aims, and management of public institutions. The Tribunal highlighted that the Trust's engagement in educational activities was genuine and that the Commissioner's doubts lacked specific grounds. By considering the trust deed's provisions and the Trust's historical engagement in education, the Tribunal dismissed the Revenue's challenge and upheld the Trust's eligibility for approval under the relevant section.

3. Reliance on High Court Decisions:
The Tribunal relied on decisions from Allahabad and Karnataka High Courts to support its judgment in favor of the Trust. These decisions emphasized that if the Trust exclusively carried out educational activities without engaging in other profit-seeking ventures, approval under section 10(23C) should not be denied. By aligning with these precedents and considering the Trust's longstanding commitment to education, the Tribunal concluded that the Trust met the necessary criteria for approval under section 10(23C)(vi) of the Income Tax Act.

In conclusion, the Gujarat High Court dismissed the Tax Appeal filed by the Revenue, upholding the Income Tax Appellate Tribunal's decision to grant approval under section 10(23C)(vi) to the Trust for the relevant assessment year. The judgment underscored the Trust's genuine dedication to educational activities, as reflected in its trust deed and operational history, and rejected the Commissioner's objections as unsubstantiated. The decision aligned with established legal principles and precedents from other High Courts, reinforcing the Trust's eligibility for the tax exemption under the specified section.