2009 (8) TMI 83 - HC - Income Tax

Charitable Purpose Exemption u/s 10(23C)(vi) educational activities other activities like undertaking extra mural studies extension programmes and field outreach activities to contribute to the development of society Held that - The petitioner Institute admittedly fulfils the requirement of imparting formal education by a systematic instruction as noted above. If the same university introduces the courses with the objective of greater interface with the society through extra mural extension and field action related programmes these are not the objectives independent of education but are aid to the education - The petitioner Institute fulfils all the requirements of Section 10(23C)(vi) of the Act and is thus entitled for grant of registration and consequently exemption under the aforesaid provision of the Act

Issues Involved:
1. Whether the activities stipulated in the object clause of the petitioner Institute's Memorandum of Association (MOA) qualify as educational activities under Section 10(23C)(vi) of the Income Tax Act, 1961.
2. Whether the petitioner Institute exists solely for educational purposes and not for profit.

Detailed Analysis:

Issue 1: Qualification of Activities as Educational Activities
The core question is whether the activities stipulated in the object clause of the petitioner Institute's MOA qualify as educational activities. The petitioner Institute was registered under the Societies Registration Act, 1860, and is running the Jaypee Institute of Information Technology. It was declared a "Deemed University" by the University Grants Commission (UGC) under Section 3 of the UGC Act, 1956. The Institute's application for registration under Section 10(23C)(vi) of the Income Tax Act was rejected by the respondent on the grounds that the Institute's objectives included "undertaking extra mural studies, extension programmes and field outreach activities to contribute to the development of society," which the respondent argued did not relate to formal education.

The court noted that the UGC guidelines require institutions seeking "Deemed University" status to include objectives such as extra mural studies and field outreach activities. These activities are considered part of the educational objectives by the UGC. The court emphasized that the inclusion of these objectives was imperative for obtaining the "Deemed University" status and that these activities are not independent of education but are aids to it.

Issue 2: Existence Solely for Educational Purposes
The respondent's main contention was that the petitioner Institute had multiple objectives, of which education was only one. The respondent argued that the objectives were independent and not ancillary to education, thus the Institute did not exist solely for educational purposes. The court, however, found this approach narrow and pedantic. It highlighted that the petitioner Institute imparts education in a systematic manner, has been granted "Deemed University" status by the UGC, and is accountable to the UGC for maintaining educational standards.

The court referred to the Supreme Court's interpretation of "education" in Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, which defines education as systematic instruction and training. The court also cited the Gujarat High Court's judgment in Saurashtra Education Foundation v. Commissioner of Income Tax, which clarified that an educational institution under Section 10(22) of the Act must impart formal education in an organized and systematic manner.

The court concluded that the petitioner Institute fulfills the requirements of imparting formal education and that the additional activities stipulated in the MOA, such as extra mural studies and field outreach, are part of the modern concept of education. These activities contribute to the development of students' knowledge, skills, and character, aligning with the broader definition of education.

Conclusion:
The court found that the impugned order passed by the respondent was unsustainable in law. The petitioner Institute meets all the requirements of Section 10(23C)(vi) of the Income Tax Act and is entitled to registration and exemption under this provision. The court quashed the respondent's order dated 26.3.2008 and directed the respondent to grant exemption to the petitioner for the assessment year 2007-08 onwards. The writ petition was allowed, and no costs were awarded.

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