2023 (8) TMI 32 - AT - Income Tax

Exemption u/s. 10(23C)(vi) - denial of exemption as assessee not carrying out the activities solely for the purpose of education - HELD THAT - Education connotes the process of training and developing the knowledge etc. of students by normal schooling. The assessee Trust though submitted clarification regarding its medical object but conveniently remained silent on its object of scholarship. The assessee Trust also remain silent regarding its other non-educational objects such to organize Family Planning Centers undertake activities for upbringing and training for self-reliance to orphan and deserted women and children etc. Thus it clearly proves that the assessee is not existing solely for the purpose of education . The assessee trust has not submitted documentary evidence which could establish its contention that such scholarships are in fact been used by those students for the purpose of education. Thus the contention of the assessee that the activities of the Trust are only for education is also not correct. The Hon. Supreme Court in the case of Dharamposhanam 1978 (7) TMI 2 - SUPREME COURT has held that whether a Trust is for charitable purpose or not is to be determined by reference to all the objects for which the trust has been brought into existence and for considering the claim of exemption the activities under the provisions of its memorandum of association are relevant and not the activity actually conducted by the assessee. Assessee Trust having multiple objects cannot be said to be existing solely for the purpose of education . It is open to the trust to pursue all or any of the objects of the trust under the garb of education. Therefore in our considered view the condition of section 10(23C)(vi) i.e the applicant existing solely for educational purposes is not fulfilled in the present case. The case laws relied by the assessee are all from Lower Forums and clearly distinguishable however we hereby dealt with the judgments of the Hon ble Apex Court only to arrive our conclusion. Thus we have no hesitation in confirming the denial of exemption u/s. 10(23C)(vi) of the Act to the assessee. Decided against assessee.

Summary

Issues Involved:

1. Rejection of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961.
2. Interpretation of "solely for educational purposes" and profit motive.
3. Multiple objects of the Trust and their impact on exemption eligibility.

Summary of Judgment:

1. Rejection of exemption under Section 10(23C)(vi):

The appeal was filed by the Assessee Trust against the order dated 08-03-2019, which rejected the claim of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961. The Trust, running various educational institutions, argued that its primary purpose was educational, with ancillary medical and social objects supporting the main educational goals.

2. Interpretation of "solely for educational purposes" and profit motive:

The Commissioner of Income Tax (Exemptions) [CIT(E)] found that the Trust had multiple objects beyond education, which did not satisfy the conditions of Section 10(23C)(vi). It was noted that the Trust earned substantial profits from its educational activities, indicating a profit motive, which contravenes the requirement that the institution should not run for profit. The CIT(E) emphasized that "solely" means exclusively for educational purposes and not primarily.

3. Multiple objects of the Trust and their impact on exemption eligibility:

The CIT(E) observed that the Trust's objects included medical treatment, public health activities, and social services, which are not solely educational. The Trust's argument that these activities were ancillary to education was not accepted. The CIT(E) referred to various Supreme Court judgments, including the case of Sole Trustee, Loka Shikshana Trust, which defined "education" as systematic instruction and schooling, not encompassing broader social activities.

The Trust's failure to provide documentary evidence to support its claim that scholarships were used solely for educational purposes further weakened its case. The CIT(E) concluded that the Trust did not exist solely for educational purposes, as required under Section 10(23C)(vi).

Appeal Dismissed:

The Tribunal, considering the facts and legal precedents, upheld the CIT(E)'s decision. It cited the Supreme Court's judgment in the case of New Noble Educational Society, which clarified that institutions seeking exemption must solely engage in educational activities without unrelated objects. The Tribunal found that the Trust's multiple objects and profit motive disqualified it from exemption under Section 10(23C)(vi). The appeal was dismissed, confirming the denial of exemption.