2020 (8) TMI 132 - HC - Income Tax

Exemption u/s 10 (23C) (vi) - grant of approval for exemption in respect of income of its School - allegation that expenditure in question was not incurred solely for educational purposes - HELD THAT - Admittedly, the Objects of the Trust included such Medical facilities, Charitable activities, Child Welfare etc., in its Trust Deed. The amendment with effect from 29.7.2015 was only to further emphasize and to bring the case within the four corners of Section 10(23C)(vi) of the Act in its strict sense. Burden lies upon the Revenue to bring on record the evidence to rebut the claim of the Appellant Trust and to establish that the activities carried out and the expenditure incurred by the Assessee Trust could not be related to the educational activities of the Appellant Trust by any stretch of imagination. No such exercise of either bringing the evidence on record or controverting or rebutting the evidence produced by the Assessee before the Chief Commissioner appears to have been undertaken by the learned Chief Commissioner. A mere reference to the expenditure incurred and the Head of expenditure in question while rejecting the Application under Section 10(23C)(vi) of the Act is not enough to reject the Application under the provisions of the Act. The very purpose of educational activities and charitable activities for which the said provision intends to extend the benefit of exemption and for educational activities in particular, Section 10(23C)(vi) of the Act, is likely to be defeated if such pedantic and narrow approach on the part of the revenue Authorities is allowed. We are not inclined to uphold the order passed by the Tribunal which upholds the order dated 10.8.2015 passed by the learned Chief Commissioner. Instead of answering the questions at our own end at this stage, we are inclined to remand the case back to the learned Chief Commissioner of Income Tax, Trichy.

Summary

Issues:
1. Denial of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 to an educational trust.
2. Interpretation of the objects of the trust deed and expenditure incurred by the trust.
3. Burden of proof on the Revenue to establish that the trust's activities are not solely for educational purposes.
4. Remand of the case to the Chief Commissioner for fresh orders.

Analysis:
1. The High Court considered an appeal by an educational trust, aggrieved by the denial of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961. The trust's appeal was against the order of the Chief Commissioner of Income Tax, which was upheld by the Tribunal. The trust's activities were found to extend beyond education, leading to the denial of exemption.

2. The Tribunal and Chief Commissioner based their decisions on the trust deed's object clauses and the expenditure incurred by the trust. The trust's activities included awareness programs, medical camps, and charitable endeavors, indicating a broader scope beyond education. The trust amended its deed to emphasize its educational focus, but the Chief Commissioner found the amendment post-relevant assessment year.

3. The burden of proof was on the Revenue to demonstrate that the trust's activities were not solely for educational purposes. The High Court noted that the Chief Commissioner failed to provide evidence to refute the trust's claims regarding the nature of its expenditures and activities. The Court emphasized the need for detailed reasoning and evidence to support the denial of exemption.

4. Consequently, the High Court remanded the case back to the Chief Commissioner for fresh orders. The Court stressed the importance of a thorough review of the trust's activities, proper consideration of evidence, and detailed reasoning in the decision-making process. The parties were directed to appear before the Chief Commissioner for further proceedings within a specified timeline.

This comprehensive analysis highlights the key legal aspects and reasoning behind the High Court's judgment in the case involving the denial of exemption to an educational trust under the Income Tax Act.