9911796707
TMI Blog2010 (5) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ns conducted by the Petitioner where students and the supporting staff reside. The main object for which the Petitioner has been constituted is stated to be the education of women. Clause III (b) of the Memorandum of Association inter alia provides as follows: "(b) To ameliorate the condition of Gujarati Hindu women of the Bombay Presidency and other places and to alleviate their social status by arousing their interest and educating them in subjects tending to their material, proper and suitable fields of work, usefulness and influence in Hindu society and for the purposes aforesaid to establish and conduct in the Bombay Presidency or elsewhere: (1) "Ashrams" or Homes for Gujarati Hindu women and girls, particularly widows and orphan girls either as free or as paying inmates. (2) Schools for imparting religious, secular and Industrial education and training in fine arts as far as possible through the instrumentality of women, the inmates of the Ashrams and other women and girls. (3) Libraries including circulating libraries and reading rooms with a view to bring wholesome and instructive literature within reach of the inmates of the Ashrams and other Gujarati Hindu women and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and did not fulfill the condition that it should exist solely for the purpose of education. The Petitioner was called upon to furnish details of the amounts spent on any activity other than education. The First Respondent also stated that the Trust was seen to have earned a surplus over twelve percent from its activities which was invested in making additions to its assets and increasing its bank balances. The Petitioner was, therefore, called upon to submit as to how the Trust could be regarded as existing solely for educational purposes and not for profit. 5. In its response dated 17 March 2009, the Petitioner submitted that the only object contained in the Memorandum of Association was education for women. The Petitioner submitted that even if the amplitude of the object clause permitted varied activities, yet since the Trust was carrying on only an educational activity, it could not be denied approval under Section 10(23C)( vi). The Petitioner submitted that it was running a school at Mumbai and a school and college at Surat apart from which no other activities, except for education, were being carried on by the Trust. In so far as the surplus was concerned, the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l institutions; (iii) It has not been disputed that the hostel which is conducted by the Petitioner at Surat is only for accommodating outstation students of the institution conducted by the Petitioner and for the supporting staff; (iv) The existence incidentally of a surplus which is generated from the activity of conducting schools and colleges would not detract from the character of the Petitioner as existing solely for educational purposes and not for profit; (v) The entire surplus is utilized only for the purpose of education and there is a specific provision in the Memorandum under which no part of the profits can be distributed; (vi) The provisions made in Section 10(239 C) would indicate that the existence of a surplus does not disentitle an institution to the grant of approval; (vii) The purpose of the surplus is to build up a corpus for the capital enhancement of the educational institutions conducted by the Trust. This is not a commercial purpose, but a purpose which is directly proximate to the main object of conducting educational institutions. 8. On the other hand, Counsel appearing on behalf of the Respondents submitted that the threshold requirement of Section 10( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity is empowered to make such enquiries as it deems necessary. The third proviso stipulates inter alia that where a University or other educational institution referred to in subclause (vi) applies its income or accumulates it for application wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after 1 April 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years. For the purpose of these proceedings, it would not be necessary to advert every one of the provisos in further detail save and except to note that where a University or educational institution referred to in subclause (vi) has been approved by the prescribed authority and subsequently, the authority is satisfied that the institution/University had not applied its income in accordance with the stipulation contained in the third proviso or that the activities are not genuine or are not carried out in accordance with the conditions subject to which the approval was granted, the approval can be withdrawn after furnishing to the institution/University an opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver eighty years during the course of which the only activity is of conducting educational institutions. 11. The fact that the Trust exists solely for educational purposes is evidenced from the assessment orders for Assessment Years 2000-01 and 2006-07, copies of which form a part of the record before the Court. Both these orders which have been made under Section 143(3) of the Act, contain a statement to the effect that the assessee is running schools with Gujarati and English as media of instruction at the primary and secondary stage and that the assessee also conducts a college for girls with the sole intent of imparting education. The record of these proceedings also contains a judgment of a Division Bench of this Court dated 29 June 2005 in a Reference under Section 256(1) to which the Petitioner was the applicant. The issue before the Court in the Reference was whether the assessee was entitled to exemption under Section 10(22) on interest earned on surplus funds of the school run by the Trust for Assessment Years 1979-80 and 1980-81. The Division Bench observed that merely because a certain surplus arose from the operations of the Trust, it could not be held that the insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where fifteen per cent of income is accumulated on or after 1 April 2002, the period of the accumulation of the amount exceeding fifteen per cent, shall in no case exceed five years. This provision would establish that Parliament did not regard the accumulation of income by a University or educational institution governed by subclause (vi) as a disabling factor, so long as the purpose of accumulation is the application of the income wholly and exclusively to the objects for which the institution has been established. Parliament has, however, prescribed that where more than fifteen per cent of the income is accumulated after 1 April 2002, the amount exceeding fifteen per cent shall not be accumulated for a period in excess of five years. 13. For all these reasons, we are of the view that the rejection of the approval by the First Respondent was manifestly misconceived. Only two reasons have weighed with the First Respondent in rejecting the approval, both of which have been found to suffer from manifest error. In Aditanar Educational Institution (supra), the Supreme Court, while construing the provisions of Section 10(22), held that the availability of exemption should be ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to earn more income. 15. If the facts as they appear in the judgment of the Uttarakhand High Court are considered, the case would be entirely distinguishable. The judgment of the High Court would indicate that the assessee in that case was construed to be one which existed with the object of enhancing the income and of earning profits as opposed to the provision of education. However, it would be necessary for this Court to observe that some of the observations contained in the judgment of the Uttarakhand High Court may not be in conformity with the law laid down by the Supreme Court in Aditanar's case (supra). The High Court took exception to the conduct of the assessee on the ground that though it was entitled to pursue other "noble and pious" objects, the assessee had done nothing to achieve them and had only pursued the main object of providing education and earning profit. Now, it must be appreciated that in order to obtain the benefit of the exemption under Section 10(23C)(vi), the University or, as the case may be, educational institution must exist solely for educational purposes and not for the purposes of profit. The requirement that the institution must exist solely for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
