2013 (7) TMI 456 - HC - Income Tax

Exemption u/s 10(23C)(iv) - Assessee society running co-education degree college - CIT rejected claiming that society has not been formed with the sole object of imparting education, but its memorandum of association reflects that it has other aims and objects as well - Held that - society or a trust or other similar body running educational institutions solely for educational purposes and having the overall object of not to make any profit can be regarded as other educational institution even if some surplus arises from its activities - Following decision of Aditanar Educational Institution v. Additional CIT 1997 (2) TMI 3 - SUPREME Court - Decided in favour of Assessee. whether an application can be rejected on the ground that the memorandum of association of the society provides for various other objects apart from educational activities - Held that - petitioner was a society which had made an application for approval u/s.10(23C)(vi) and its application for approval was rejected on the ground that benefit of section 10(23C)(vi) is available only to an educational institution existing solely for the purpose of imparting education, while the application has been made by a society having many activities that appear to be other than educational such as to make appropriate efforts for upliftment of public in social and cultural field etc. Therein, this court had held that even though the aims and objects of the society may contain several objects but if it has been proved by material on record that the society is not perusing any other activity apart from eduction then in such case, the society will qualify for grant of approval u/s. 10(23C)(vi) - Following decision of C.P. Vidya Niketan Inter College Shikshan Society vs. Union of India and others 2013 (7) TMI 367 - ALLAHABAD HIGH COURT - Decided in favour of Assessee.

Summary

Issues:
1. Maintainability of the application for approval under section 10(23C)(vi) of the Income Tax Act.
2. Rejection of the application based on the society's memorandum of association containing various other objects.

Issue 1: Maintainability of the application for approval under section 10(23C)(vi) of the Income Tax Act:
The petitioner, a society running an educational institution, applied for approval under section 10(23C)(vi) of the Income Tax Act. The application was rejected by the Chief Commissioner Income Tax on the grounds that the approval is available only to educational institutions existing solely for educational purposes, the application should have been filed by the educational institution itself, and the institution was charging fees contrary to its objects. The petitioner challenged this decision in a writ petition before the High Court.

The petitioner argued that the application could be filed by the society as a 'person' under the Act, and the society's income, even if from various sources, could be exempt under section 10. They relied on previous judgments to support their case. The department contended that the application was rightly rejected as the society had other aims and objects besides education. The High Court analyzed the relevant provisions and previous judgments to determine the maintainability of the application.

Issue 2: Rejection of the application based on the society's memorandum of association containing various other objects:
The High Court considered whether an application could be rejected solely based on the society's memorandum of association containing various objects apart from educational activities. The petitioner argued that despite other objects in the bye-laws, the society was only engaged in educational activities, as stated in the application. They relied on a previous judgment to support their contention. The High Court found that the impugned order did not consider the assertion that the society was solely pursuing educational activities. The court referred to a previous Division Bench decision to conclude that if a society is pursuing only educational objects and no other activity, the application for approval under section 10(23C)(vi) cannot be rejected based on other objects in the memorandum of association.

In light of the above analysis, the High Court quashed the impugned order and remitted the matter back to the Prescribed Authority for a fresh decision. The court directed the authority to consider the observations made and make a decision within three months. The court refrained from delving into other issues, leaving them to be decided by the authority in accordance with the law.

In conclusion, the writ petition was allowed, and no costs were awarded in the matter.