2018 (8) TMI 382 - HC - Income Tax

Grant of exemption under Section 10(23C)(vi) - whether for the purpose of approval under Section 10(23c)(vi), the objects of the Trust should include only educational purpose? - Held that - As relying on JAYPEE INSTITUTE OF INFORMATION TECHNOLOGY SOCIETY VERSUS DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), DELHI 2009 (8) TMI 83 - DELHI HIGH COURT the first respondent has not even made any observation as regards the elaborate submissions made by the petitioner with regard to the manner in which they are conducting the institution for over 13 years as of 2011. Further, the specific assertion made by the petitioner that for all the years they have been on academics only, has not been found to be incorrect by the first respondent. Thus, on account of narrow interpretation of the provisions, an erroneous order has been passed. Thus, for the above reasons, the writ petition is allowed and the impugned order is set aside . The first respondent is directed to consider the application of the petitioner and grant approval to the petitioner Trust under Section 10(23C)(vi) of the Act within a period of four weeks from the date of receipt of a copy of this order from the date of the application/relevant assessment year.

Summary

Issues:
1. Eligibility for exemption under Section 10(23C)(vi) of the Income Tax Act, 1961.

Analysis:
The petitioner, an educational trust, sought exemption under Section 10(23C)(vi) of the Income Tax Act, 1961. The trust was established to promote the Montessori method of education and had been running a school for 13 years. The trust's objects focused on the integrated development of children and educational activities. However, the first respondent rejected the application, citing that the trust's objects should solely be for educational purposes. The High Court found the first respondent's approach narrow and pedantic, emphasizing that the trust's activities and submissions were not adequately considered. The court highlighted that the trust's commitment to education was evident, and the rejection lacked proper justification.

In support of its decision, the Revenue referred to judgments from other cases. However, the court distinguished these cases from the present situation, emphasizing that each case must be evaluated based on its unique circumstances. The court also referenced a Division Bench decision from Delhi, which emphasized a broader interpretation of "any educational institution" under Section 10(23C)(vi) of the Act. This broader perspective was crucial in understanding the trust's eligibility for exemption.

Additionally, the court discussed a previous case involving the renewal of recognition for exemption under Section 10(23C)(vi). In that case, the court stressed the importance of considering the substance of the claim rather than just the formal objectives stated in the trust deed. The court highlighted that the authority should focus on the trust's actual activities and fund utilization to determine eligibility for exemption. Applying these principles to the current case, the court concluded that the rejection of the trust's application was unjustified and unsustainable due to a narrow interpretation of the law.

Ultimately, the court allowed the writ petition, setting aside the impugned order. The first respondent was directed to reconsider the trust's application for approval under Section 10(23C)(vi) within a specified timeframe. The court's decision was based on the trust's genuine commitment to education and the need for a more comprehensive evaluation of the trust's activities to determine eligibility for exemption under the Income Tax Act.