2009 (5) TMI 103 - HC - Income Tax

Application before the Chief Commissioner of Income-tax for giant of a certificate of registration rejected by the Chief Commissioner of Income-taxon the ground that the purpose for which the society has been established are religious in nature and consequently the society can not be said to exist solely for the purpose of education. - Merely because the object of the society is also to serve the church and the nation would not mean that the educational institution is not existing solely for educational purpose. impugned order is set aside

Summary

Issues:
1. Writ petition under Article 226 seeking to quash an order passed by the Chief Commissioner of Income-tax.
2. Rejection of application for tax exemption under section 10(23C)(vi) of the Income-tax Act.
3. Dispute over whether the educational institution exists solely for educational purposes.

Analysis:
1. The petitioner filed a writ petition under Article 226 seeking to quash the order dated October 25, 2007, passed by the Chief Commissioner of Income-tax, Allahabad, rejecting their application for tax exemption. The petitioner argued that the rejection was based on irrelevant considerations and misdirection by the Chief Commissioner, emphasizing that the institution exists solely for educational purposes as required under section 10(23C)(vi) of the Act.

2. The dispute centered around the interpretation of whether the educational institution, run by the petitioner-society, exists solely for educational purposes to qualify for tax exemption. The Chief Commissioner rejected the application citing religious nature of the society's objects, implying that the institution did not meet the criteria for tax exemption. However, the petitioner contended that the mere presence of other objects like serving the church and nation does not negate the primary purpose of education.

3. The High Court, after considering the arguments presented by both parties, relied on the decision of the apex court in American Hotel and Lodging Association Educational Institute case. The court emphasized that as long as the educational institution exists for educational purposes and not for profit, additional objectives like serving the church and nation do not disqualify it from tax exemption. The court set aside the Chief Commissioner's order and directed a fresh decision in line with the observations made, ensuring compliance with the relevant provisions of the Income-tax Act.

In conclusion, the High Court's judgment in this case clarified the requirements for tax exemption under section 10(23C)(vi) of the Income-tax Act, emphasizing that as long as an educational institution primarily exists for educational purposes and not for profit, additional objectives such as serving other entities do not disqualify it from tax benefits.