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2017 (6) TMI 389 - AT - Income TaxGrant of approval u/s 10(23C)(vi) rejected - whether a trust exists solely for educational purposes and not for the purpose of profit? - Held that - The assessee has been granted exemption u/s 12AA of the Act vide order dated 15.01.2013 and the Trust is also found to be eligible for exemption u/s 11 of the Act for block assessment period 01.04.1989 to 22.12.1998 by the coordinate Bench of the Tribunal in assessee s own case in order dated 28.07.2015 (supra). Even perusal of the original Trust Deed shows that the predominant object was educational though noneducational objects were also there. So, merely because of the fact that there were other objects of the Trust, the educational institution did not exist solely for educational purpose. But, in the instant case, the assessee Trust has gone one step further by amending the original Trust Deed vide registered amended Trust Deed dated 26.03.2012 deleting all the non-educational objectives. So, the impugned order passed by ld. Pr. CCIT is not sustainable. Thus when it is proved on record that the assessee Trust is running an educational institution, the application to grant approval u/s 10(23C)(vi) cannot be denied merely because there are other objects in the original Trust Deed also. But, in the instant case, assessee has gone one step further even by amending the original Trust Deed which has been declared invalid by the ld. Pr. CCIT and rejected the application by ignoring the settled principle of law laid down by Hon ble Apex Court in American Hotel and Lodging Association Educational Institute (2008 (5) TMI 17 - SUPREME COURT OF INDIA ) and Queen s Educational Society (2015 (3) TMI 619 - SUPREME COURT ). So, we are of the considered view that impugned order is not sustainable, hence set aside and Pr.CCIT is directed to decide the application afresh in view of the observations made herein above. - Decided in favour of assessee.
Issues Involved:
1. Validity of the amended Trust Deed dated 26.03.2012. 2. Denial of exemption under section 10(23C)(vi) of the Income-tax Act, 1961. 3. Consideration of non-educational objects in the original Trust Deed. 4. Compliance with CBDT Circular No. 14/2015. 5. Applicability of Supreme Court judgments in similar cases. Issue-wise Detailed Analysis: 1. Validity of the amended Trust Deed dated 26.03.2012: The Principal Chief Commissioner of Income-tax (Pr. CCIT) declared the amended Trust Deed dated 26.03.2012 invalid, reasoning that the Governing Body Members of the assessee Trust did not have the mandate to delete or remove any objects. This conclusion was based on Clause 27 of the original Trust Deed dated 19.11.1997, which allowed Permanent Trustees to amend clauses for the Trust's benefit. The Pr. CCIT relied on the Supreme Court's decision in CIT vs. Kamala Town Trust, which held that a Trust Deed could be rectified through a competent civil court or by the settler executing a supplementary Trust Deed. 2. Denial of exemption under section 10(23C)(vi) of the Income-tax Act, 1961: The Pr. CCIT denied the exemption under section 10(23C)(vi), arguing that the Trust did not exist solely for educational purposes as it had non-educational objects in its original Trust Deed. The Tribunal, however, noted that the amended Trust Deed dated 26.03.2012, which deleted non-educational objectives, should be considered. The Tribunal emphasized that the actual existence of the educational institution is a threshold precondition for approval under section 10(23C)(vi), as clarified by the Supreme Court in American Hotel and Lodging Association Educational Institute vs. CBDT. 3. Consideration of non-educational objects in the original Trust Deed: The Tribunal observed that while the original Trust Deed included both educational and non-educational objectives, the predominant purpose was educational. The Trust had amended its Deed to focus solely on educational activities. The Tribunal found that the Pr. CCIT's focus on the original Trust Deed without considering the amendment was beyond his jurisdiction. 4. Compliance with CBDT Circular No. 14/2015: The Tribunal highlighted that the CBDT Circular No. 14/2015, based on the Supreme Court's judgment in American Hotel and Lodging Association Educational Institute, clarified that the prescribed authority should be satisfied with the institution's existence solely for educational purposes at the time of granting approval. The compliance with monitoring conditions could be assessed later, and approval could be withdrawn if conditions were breached. 5. Applicability of Supreme Court judgments in similar cases: The Tribunal referred to several Supreme Court judgments, including American Hotel and Lodging Association Educational Institute, Queen’s Educational Society, and CIT vs. Kamala Town Trust, to support its decision. These judgments emphasized that the primary purpose of the institution should be educational, and incidental surpluses do not negate this purpose. The Tribunal also noted that the assessee Trust had been granted exemption under section 12AA and was eligible for exemption under section 11 in previous assessments, reinforcing its educational purpose. Conclusion: The Tribunal set aside the Pr. CCIT's order, directing a fresh decision on the application for approval under section 10(23C)(vi), considering the observations made. The appeal filed by the assessee was allowed, recognizing the Trust's sole focus on educational activities post-amendment.
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