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2014 (10) TMI 399 - HC - Income TaxRejection of grant of certificate for registration u/s 10(23C)(vi) Educational institution - Whether the requirement of clause (vi) of sub-section (23C) of Section 10 of the Act has been fulfilled or not Held that - As decided in American Hotel & Lodging Association, Educational Institute Vs. Central Board of Direct Taxes 2008 (5) TMI 17 - SUPREME COURT OF INDIA - the authority was required to consider the nature and genuineness of the activities - the authority is only required to examine that the petitioner s institution comes within the phrase exists solely for the educational purpose and not for profit - mere existence that there is some profit does not disqualify the petitioner if the sole purpose of existence was not profit making but educational activities - The authority has to find out the predominant object of the activity and see whether the institution exists solely for education and not to earn profit - Merely because some profit arises from its activity will not mean that the predominant object of the activity is to earn profit and that it is not an educational activity - the threshold conditions are actual existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application in the standardised form in terms of the first proviso thus, the order of the Tribunal is to be set aside and the matter is remitted back to the CIT(A) for fresh adjudication Decided in favour of assessee.
Issues: Petitioner's application for registration under Section 10(23C)(vi) of the Income Tax Act rejected based on the society's memorandum of association having objects not related to educational purposes.
Analysis: The petitioner, a society running an educational institution, applied for registration under Section 10(23C)(vi) of the Income Tax Act, seeking exemption from income tax as an educational institution existing solely for educational purposes and not for profit. The Chief Commissioner of Income Tax rejected the application citing the society's memorandum of association containing objects unrelated to educational purposes, relying on a decision of the Andhra Pradesh High Court. The petitioner challenged this decision through a writ petition. The Division Bench in Ewing Christian College Society Vs. Chief Commissioner of Income Tax held that the presence of non-educational objects in the society's memorandum does not disqualify it as an educational institution existing solely for educational purposes. The key question was whether the petitioner society fulfilled the requirements of Section 10(23C)(vi) of the Act. The Supreme Court in American Hotel & Lodging Association case emphasized that the authority should focus on the actual existence of an educational institution and not on the application of income or profit-making activities at the initial approval stage. The authority must assess whether the institution primarily exists for educational purposes and not for profit. The nature, activities, and genuineness of the institution should be examined, and the authority should determine if the institution exists solely for education, regardless of any incidental profit. The Supreme Court clarified that the authority's role is to ascertain the predominant object of the institution's activities, focusing on whether the institution exists solely for education and not for profit. The prescribed authority should ensure that the balance of income is applied exclusively to the institution's established purpose. The threshold conditions for approval are the actual existence of an educational institution and the prescribed authority's approval based on the application submitted. Compliance with other provisos can be considered after meeting these prerequisites. In conclusion, the High Court quashed the impugned orders rejecting the petitioner's application for registration under Section 10(23C)(vi) of the Income Tax Act. The Chief Commissioner of Income Tax was directed to reconsider the application within three months, adhering to the observations made in the judgment and after hearing all concerned parties.
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