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TMI Blog2010 (12) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... are not solely for the purposes of education. In such circumstances no reason to exercise discretion to interfere, set aside the order of the first respondent, and remand the matter for his consideration afresh, only for him to reject the petitioner's application on the ground that their objects are not solely for the purposes of education. - - - - - Dated:- 22-12-2010 - RAO V. V. S., RAMESH RANGANATHAN, JJ. JUDGMENT Ramesh Ranganathan J.- 1. The relief sought for in this writ petition is to declare the order of the first respondent dated September 24, 2009, as arbitrary and illegal, and, consequently, to direct the first respondent to grant approval in terms of section 10(23C)(vi) of the Income-tax Act, 1961 (hereinafter called "the Act"). 2. The objects of the petitioner, a society registered under the Andhra Pradesh (Telangana Areas) Public Societies Registration Act, 1350 Fasli, with Registration No. 201 of 1989 dated February 4, 1989, were as under : (i) To start educational institutions, libraries and law colleges, etc. (ii) To organize social services, and (iii) To do the needful for the poor children and students on social grounds. 3. Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner was misplaced ; the first respondent ought to have given them an opportunity of being heard before passing the impugned order, which would have enabled them to bring to his notice that they had filed the first application as early as on May 31, 2005 ; the first respondent failed to notice that the amendment, prescribing limitation for submitting an application under section 10(23C)(vi), came into force only from June 1, 2006, whereas the petitioner had submitted their first application even prior thereto on May 31, 2005. 7. In the counter-affidavit filed by the second respondent it is stated that, as per the records in their office, the petitioner did not file any application on May 31, 2005, seeking approval under section 10(23C)(vi) ; and their claim that they did so was not evidenced by the records of their office. In so far as the petitioner's claim to have filed another application on March 26, 2007, is concerned, the second respondent would state that the inward register, pertaining to the period April 1, 2006, to March 31, 2007, was not readily traceable and, as per their records, the petitioner did not file any application, in Form 56D, either on May 31, 2005, or Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income if the aggregate annual receipts of such an educational institution do not exceed Rs. 1 crore. 3. Where the annual receipts of an educational institution exceeds Rs.1 crore, the benefit of exclusion from the total income is available not under sub-clause (iiiad) but under sub-clause (vi) of section 10(23C) whereunder approval is also required to be obtained from the prescribed authority. 4. Except that approval is now required to be obtained from the prescribed authority, section 10(23C)(vi) is analogous to section 10(22), as it existed prior to its omission by the Finance Act, 1998, with effect from April 1, 1999. To that extent judicial pronouncements, made in the context of section 10(22), would equally apply to section 10(23C)(vi) of the Act (American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC)). 5. It would be unreal and hyper-technical to hold that an educational society, running an educational institution solely for educational purposes and not for the purpose of profit, is only a financing body and will not come within the scope of "other educational institution". If, in substance and reality, the sole purpose for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is regarded as an activity that is charitable in nature. "Education" is not regarded as a trade or business where profit is the motive (State of Bombay v. R. M. D. Chamarbaugwala, AIR 1957 SC 699 ; T. M. A. Pai Foundation v. State of Karnataka, AIR 2003 SC 355 ; Islamic Academy of Education v. State of Karnataka [2003] 6 SCC 697). 12. Section 2(15) of the Income-tax Act defines "charitable purpose" to include "education". The sense in which the word "education" has been used in section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education", in section 2(15), has not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education. What education connotes, in that clause, is the process of training and developing the knowledge, skill, mind and character of students by for-mal schooling (Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC)). This definition of "education" is wide enough to cover the case of an "educational institution" as, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the purpose tested by the obligation created to spend the money exclusively on "education". If that obligation is there, the income becomes entitled to exemption (Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC)). 19. On a conjoint reading of sub-sections (3) and (4) of section 8 of the A. P. Societies Registration Act, 2001, it is only when the amendment to the objects of a society (educational agency) is intimated and the Registrar, on being satisfied that the amendment is not contrary to the provisions of the Act, registers and certifies such an alteration, would it be a valid alteration under the Act. It is only from the date the Registrar certifies the alteration that the amendment, to the objects of the society, comes into force. 20. In the case of a dispute, whether the claim of the assessee to be exempted from tax is admissible or not, it is necessary for the assessee to establish that it is a part of an institution which is engaged solely for educational purposes and not for the purposes of profit, and the income in respect of which exemption is claimed is a part of the income of the institution (Oxford University Press v. CIT [2001] 247 ITR 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which it is established. The applicant has not only to impart, but must also apply its income exclusively for the purposes of, education (American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 (SC)). 27. The words "not for the purposes of profit" accompanying the words "existing solely for educational purposes" has to be read and interpreted keeping in view the third proviso to section 10(23C)(vi) which prescribes the methodology for utilisation and accumulation of income at the hands of the educational institution. As a result 85 per cent. of the income has to be applied by the educational society for the purpose of education. Capital expenditure, if incurred, for the attainment of such objects has to be deducted from the gross receipts/income. The word "wholly" in the third proviso refers to the quantum of expenditure and the word "exclusively" refers to the motive, object or the purpose of expenditure (Pinegrove International Charitable Trust v. Union of India [2010] 327 ITR 73 (P H)). 28. The third proviso indicates that accumulation of income by an educational institution, governed by sub-clause (vi), is not a disabling factor as long as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13(3)(cc) of the Income-tax Act), would amount to a part of the income or property of the educational institution being used for the benefit of such a person, and the provisions of section 13(1)(c) of the Act would be attracted thereby. 34. The fourteenth proviso to section 10(23C) of the Act, in its entirety, was inserted by the Finance Act, 2006, with effect from June 1, 2006, and, prior to its amendment by the Finance Act, 2009, required an educational institution which makes an application, on or after the first day of June, 2006, for the purpose of grant of exemption or continuance thereof to make an application at any time during the financial year immediately preceding the assessment year. After its amendment by the Finance Act, 2009, with retrospective effect from April 1, 2009, the fourteenth proviso to section 10(23C) stipulates that where an educational institution, referred to in the first proviso, makes an application, on or after the first day of June, 2006, for the purpose of grant of exemption or continuance thereof, such application shall be made on or before the 30th day of September of the relevant assessment year for which the exemption is sought. 35. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of association of a society/trust are conclusive proof of such a trust existing solely as an educational institution entitled for the benefits, and as being eligible for approval, under section 10(23C)(vi) of the Act. In addition, an application in the prescribed proforma should be submitted to the prescribed authority within the time stipulated, and the specified documents should be enclosed thereto. 40. In cases where an application is submitted, seeking renewal of the exemption granted earlier, the prescribed authority shall, in addition to the conditions aforementioned, also examine whether the income of the applicant-society has been applied solely for the purposes of education in terms of section 10(23C)(vi) of the Act, the provisos thereunder, the Income-tax Rules, and the documents enclosed to the application submitted in Form 56D. 41. The threshold conditions are aimed at discovering the actual existence of an educational institution and approval of the prescribed authority for which an application in the standardised form, in terms of the first proviso, has to be given by every applicant. If the pre-requisite condition, of actual existence of the educational insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Act 30 of 1987), is applicable to all charitable institutions regardless of religion (Parsi Zoroastrian Anjuman of Secunderabad and Hyderabad v. Deputy Commissioner of Endowments [2000] 1 ALT 256 (AP)). 48. "Charitable purpose", under section 2(5) of A. P. Act 30 of 1987, brings within its ambit, amongst others, education also. To find out the object for which a society has been established, the provisions of section 2(5) of A. P. Act 30 of 1987, which only excludes those "exclusively of a religious nature", also has a role to play (Commissioner of Endowments v. All India Sai Seva Samaj [2001] 6 ALT 539)). 49. The provisions of A. P. Act 30 of 1987 apply to all public charitable institutions whether registered or not in accordance with the provisions of the Act. A public charitable institution is required, in law, to manage its affairs strictly in accordance with the provisions of A. P. Act 30 of 1987. Registration under A. P. Act 30 of 1987 would also ensure that the activities of the educational agency are monitored by the State agencies. The mere fact that the authorities failed to act in the matter to get the institution registered under the provisions of the Act is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of education. 54. Even in case the assessee produces a certificate of registration under section 43 of A. P. Act 30 of 1987, the prescribed authority has to independently examine the objects of the applicant-society, their application seeking approval under section 10(23C)(vi), and the prescribed documents enclosed thereto, and satisfy himself, in the light of the provisions of section 10(23C)(vi), the provisos thereto, rule 2CA of the Rules and Form 56D, that the existence of the educational institution is solely for the purposes of education and not for the purpose of profit, and only if he is so satisfied to grant approval. 55. Registration under section 43 of A. P. Act 30 of 1987 is not a condition precedent for grant of approval under section 10(23C)(vi) of the Act. The prescribed authority can, however, prescribe registration under A. P. Act 30 of 1987 as a condition subject to which approval is granted under section 10(23C)(vi) of the Act inasmuch as registration, as a charitable institution, under A. P. Act 30 of 1987 would be one of the factors to show that the society concerned exists for the charitable purpose of carrying on educational activities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details being furnished regarding the date on which the objects were registered, even if August 13, 2009 (the date of which the meeting, wherein the objects were amended, is said to have been held) is taken as the relevant date the amended objects would be applicable only for the assessment year 2010-11 or, at best, the assessment year 2009-10 and not prior thereto. As noted hereinabove, approval was granted by the first respondent for the assessment year 2009-10. 13. The petitioner would, however, contend that this is not the reason for the first petitioner rejecting their application. The jurisdiction exercised by this court under article 226 of the Constitution of India is discretionary, and a writ is not issued as a matter of course. A writ of mandamus is not a writ of course or a writ of right but is, as a rule, discretionary (C. R. Reddy Law College Employees' Association v. Bar Council of India [2004] 5 ALT 1 ; [2004] 5 ALD 180)). One of the limitations imposed by this court, on itself, is that it would not exercise jurisdiction unless substantial injustice has ensued or is likely to ensue. It would not allow itself to be turned into a court of appeal to set right mere e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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