2009 (2) TMI 376 - HC - Income Tax

Exemption- There was a piece of land belonging to the petitioner-school-asses see at village Dhorka which was sold to a private builder on the plea that it would be hit by industrial zone. However, the builder has built flats on that area. Held that- for the grant of exemption/approval under section 10(23C)(vi) of the Income Tax Act, 1961, the basic requirement of sub-clause (vi) of clause (23C) of section 10 is that the educational institution seeking exemption should be existing solely for the purpose of education and not for the purpose of profit. Here the emphasis is laid on the word solely . On the facts it could not be said that the petitioner society and the educational institution run by it were existing solely for the purpose of education and not for the purpose of profit. Thus the application of the petitioner is liable to be rejected.

Summary

Issues:
- Petition against denial of exemption under section 10(23C) (vi) and (via) of the Income-tax Act, 1961.
- Consideration of facts leading to the denial of exemption.
- Interpretation of the requirement of existing solely for the purpose of education for exemption under section 10(23C)(vi).
- Legal validity of the Chief Commissioner's order.

Analysis:
The petition was filed challenging the order of the Chief Commissioner of Income-tax, Panchkula, which refused to grant exemption under section 10(23C) (vi) and (via) of the Income-tax Act, 1961 for the assessment years 2008-09 to 2010-11. The Commissioner, based on the views of the Assessing Officer and Additional Commissioner, declined the exemption citing various reasons. One key factor was the sale of land by the petitioner-school to a builder who constructed flats instead of an educational institute as claimed. The petitioner's purchase of farmhouses without permission for an educational institute on the property was also highlighted. The Chief Commissioner found the petitioner's explanations unsatisfactory, especially regarding their intent to use the purchased land for educational activities. The judgment emphasized the requirement that educational institutions seeking exemption must exist solely for educational purposes and not for profit, as per section 10(23C)(vi). Citing a Supreme Court judgment, the Chief Commissioner concluded that the petitioner did not meet this criterion, leading to the rejection of the exemption application.

The court, after hearing the arguments, found no grounds to admit the petition. It held that the Chief Commissioner's order was legally sound and in compliance with the law. Consequently, the writ petition was dismissed. The judgment reaffirmed the importance of meeting the statutory requirements for exemption under section 10(23C)(vi) and upheld the decision based on the facts and legal principles presented in the case.