2015 (8) TMI 926 - HC - Income Tax

Exemption under Section 10(23C)(vi) denied - Whether educational institution must itself move the Application is concerned - Held that - When a society is running the educational institution, then, we would think that, both, for the reason that it is running the institution and also conceiving the impossibility of an institution as such de hors the society making an application, we would reject the contention. When an application is made by the society, it is being made on behalf of the institution. The society would be assessed, if it is denied the benefit of Section 10(23C)(vi), for running the institution and deriving an income out of it and it is the income from the educational institution derived by the society, which is to be excluded from the total income under Section 10(23C)(vi). Therefore, we reject the said contention. We are of the view that the contention of the appellant, which appears to be that they indicate that the society can earn from other objects which do not amount to imparting education, may not be correct. The objects appear to be ancillary to the main object of running the institution. We are not persuaded to hold that the objects can be anything, but ancillary to the main purpose, which is for imparting education. Therefore, we see no merit in the said contention. It is for the authority concerned to take a decision. The only limitation, which has been put on the authority, was that it should decide the matter in accordance with the observations. We see nothing in the observations, which will stand in the way of the authority to take a decision in accordance with law, which the authority is free to do.

Summary

Issues:
1. Interpretation of Objects 3, 4 & 5 in the memorandum of the Society for tax exemption under Section 10(23C)(vi) of the Income Tax Act.
2. Whether the educational institution or the Society should move the application for exemption.
3. Compliance with the judgment of the Hon'ble Apex Court in the case of American Hotel & Lodging Association, Educational Institute vs. Central Board of Direct Taxes & Others regarding the authority's entitlement to call for information.

Analysis:
1. The High Court analyzed the memorandum of the Society, focusing on Objects 3, 4 & 5, to determine if they align with the definition of "solely for educational purposes" under Section 10(23C)(vi) of the Income Tax Act. The Single Judge found these objects ancillary to educational purposes, leading to the rejection of the exemption application. However, the High Court disagreed, stating that the objects support the main educational purpose, thus upholding the Society's eligibility for tax exemption.

2. The appellant argued that the educational institution itself should file the application for exemption, not the Society. The Court referenced Section 10(23C)(vi) of the Income Tax Act, which includes "any person" receiving income on behalf of an educational institution. Since the Society falls under the definition of "person," the Court rejected the appellant's contention, affirming that the Society's application on behalf of the institution is valid.

3. Regarding compliance with the judgment in the American Hotel & Lodging Association case, the Court clarified the authority's right to seek information for up to the past four years. The respondent had provided documents for the previous three years, which the Court deemed sufficient. The Court emphasized that the authority has the discretion to make decisions in accordance with the law, ensuring no hindrance from the observations made in the judgment.

In conclusion, the High Court dismissed the appeal, upholding the Society's eligibility for tax exemption under Section 10(23C)(vi) of the Income Tax Act. The Court directed the authority to make a decision within two months based on the judgment, ensuring compliance with legal requirements.