2020 (2) TMI 546 - HC - Income Tax

Exemption/approval u/s 10(23C)(vi) - denial of registration under Section 12AA - whether assessee's stated objects does not aim to have its activities 'solely for education', which is one of the main condition for granting approval u/s 10(23C)(vi)? - ITAT allowed exemption - HELD THAT - From the perusal of the paper book, it is evident that one of the factor considered by the CIT (E) was denial of registration under Section 12AA of the Act. It would be pertinent to note here that while dealing with the issue of Section 12AA of the Act, the Tribunal dealt with the objection with regard to amassing capital fund and fixed assets. It was concluded that corpus created and the land and building was acquired out of donations, for setting up the school. Further, the point of fee receipt was also considered and it was held that the same was spent for running the school. The only issue raised by learned counsel for the Revenue needs to be considered is that the object to work for social, moral, intellectual upliftment of general public especially women brings the object of the assessee out of the phrase solely for educational purpose . The contention raised is not well founded. From the objects quoted above, it is forthcoming that the assessee was promoting quality education in the rural areas and managing the affairs of Sadhu Singh DAV, Rural Public School, Mukandpur. The object for upliftment of general public especially women is only with regard to its sole object of educational purpose only, as the intellectual upliftment of general public especially women can only envisage education and nothing else. In view of the above discussion, no interference is called for in the conclusion arrived at by the Tribunal.-Decided against revenue.

Summary

Issues:
Condonation of delay in filing appeal, interpretation of Section 10(23C)(vi) of the Income Tax Act, 1961, denial of registration under Section 12AA, educational purpose of society's objects, surplus generation, asset creation vs. fund deployment, reliance on previous court decisions, rejection of application under Section 10(23C)(vi).

Condonation of Delay:
An application for condonation of delay of 11 days in filing the appeal was allowed by the court, and the delay was condoned as prayed for.

Interpretation of Section 10(23C)(vi):
The appeal was filed against the ITAT order granting exemption under Section 10(23C)(vi) of the Income Tax Act. Various substantial questions of law were raised, including issues related to the educational purpose of the society's objects, failure to file income tax returns, timing of application for approval, emphasis on asset creation, surplus generation, and compliance with the conditions laid down by the Apex Court.

Denial of Registration under Section 12AA:
The CIT(E) rejected the application under Section 10(23C)(vi) citing denial of registration under Section 12AA. The Tribunal had upheld the registration under Section 12AA, emphasizing that the society's activities were in line with educational purposes, including the acquisition of assets for educational use.

Educational Purpose of Society's Objects:
The Revenue argued that one of the society's objects, focusing on the upliftment of the general public, deviated from the educational purpose required for approval under Section 10(23C)(vi). However, the court determined that the object was aligned with promoting quality education in rural areas and managing educational institutions, thus falling within the scope of educational purposes.

Surplus Generation and Asset Creation:
The Revenue contended that the society's emphasis on asset creation and surplus generation exceeded permissible limits, leading to a deviation from the educational focus. The court found that the society's activities, including asset acquisition and surplus utilization for educational purposes, were in line with the law and did not warrant interference.

Reliance on Previous Court Decisions:
The court rejected the Revenue's argument challenging the reliance on a previous court decision regarding registration under Section 12AA. It upheld the Tribunal's decision, emphasizing that the society's activities were aimed at promoting education and were not contrary to the law.

Rejection of Application under Section 10(23C)(vi):
After analyzing the facts and circumstances of the case, the court concluded that no interference was warranted in the Tribunal's decision to grant exemption under Section 10(23C)(vi). The appeal was dismissed for lack of merit.