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TMI Blog2022 (4) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... l purposes. They were for purposes incidental to the imparting of training and did not take away from the character of the institutions, which were essentially being run on a non-profit basis. Consequently, the Court is of the view that neither the collection of the amount towards placement and training nor its utilisation by the Petitioner can be said to be in a manner that is not solely for educational purposes. There appears to be a sufficient nexus demonstrated by the Petitioner between the expenditure incurred on the incidental activities of providing food, lodging and transport and other facilities to the trainers, the trainees and the staff etc. and the object for which the Petitioner s institutions are operating. This cannot be completely separated from the essential activity of imparting education and training. Consequently, the Court sets aside the impugned order of the CCIT and directs that an exemption will be granted to the petitioner from payment of tax under Section 10 (23C) (vi) of the Act for the FY 2008-09, the consequential orders shall be passed within a period of 4 weeks. - WRIT PETITION (CIVIL) No.28803 of 2013 - - - Dated:- 26-4-2022 - THE CHIEF JUS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification of the Government of Orissa Industry department prescribing the fees structure. (iii) The copy of the audit report showing the details of expenditure made for imparting education to the students. (iv) The copy of the letters of approval of the said two Institutions of the petitioner granted by the A.I.C.T.E. 5. According to the Petitioner, after production of the documents for verification by the CCIT, the Petitioner also explained how the two institutions were working and that the receipt of fees by them was in accordance with the Government rules and norms. According to the Petitioner, the fees collected for Placement and Training are part and parcel of the educational activities for which the fees structure has also been prescribed by the AICTE and Industry Department of the Government of Odisha. 6. On 30th September 2010 the CCIT rejected the prayer of the Petitioner on the ground that the Petitioner-Trust did not exist solely for educational purposes; it had been created with other aims and objectives which were clearly in the nature of business. Further, according to the CCIT, on verification of the audited income and expenditure statements fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udents. Thus, it was concluded that the Petitioner has failed to prove the fees collected by it under the head 'Placement and Training was in consonance with the notification of the Government of Odisha in this regard. 9. The CCIT next drew attention to the utilisation of the fees collected under the head 'Placement and Training . Here, it was noticed from the ledger account that the expenditure incurred during FY 2008-09 amounted to ₹ 7,31,189/- which was the direct expenses for Placement and Training and the balance had been spent under different heads as indirect expenses, which amounted to ₹ 4,62,811/-. Thus, it was concluded that a substantial amount had been spent towards 'fooding/hostel room rent/purchase of memento etc. , which cannot be treated as expenditure incurred solely for educational purpose. It was then concluded that the explanation offered by the Petitioner for the incidental expenses towards fooding, memento etc. was vague and non-specific . The CCIT held that the Petitioner had failed to establish any direct nexus between the above expenditure and the object of providing education to the students from whom it had collected fees. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained. As regards the differential amount between ₹ 12,14,000/- and ₹ 11,94,000/- i.e. ₹ 20,000/- he explained that this comprised the refund of excess collection of fee and that this amount had in fact been returned to the students. He further pointed out that CCIT had ignored the report of the CIT who had conducted a detailed enquiry and had also verified the accounts and documents maintained by the Petitioner. 13. Mr. R.S. Chimanka, learned Senior Standing Counsel appearing for the Department referred to the counter affidavit, in which the stand taken was that the Petitioner could not justify the collection of fees towards Placement and Training in the sum of ₹ 4,62,811/- satisfactorily. This according to the Department must have a substantial sum and was collected not for educational purposes. The expenditure also was not strictly for educational purposes. He referred to the fact that the Petitioner could not furnish the details of the expenses, and therefore, the CCIT was justified in negativing its claim for exemption under Section 10(23C)(vi) of the Act. He maintained that the collection by the Petitioner of the above amounts from the students was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lely from educational activity. It was observed the general proposition in law that the word solely appearing in Section 10(23C)(vi) of the Act emphasises that the income of institution has to be from activities which are solely educational and not commercial if the income has to be exempted from tax, was a settled position . 17. The Court would also like to refer to the decision of the Supreme Court in Aditanar Educational Institution (supra) where it was observed in para 8 that after meeting the expenditure if any surplus results incidentally, from the activity lawfully carried on by the educational solution it will not cease to be one existing solely for educational purposes since the object is not to make profit. The decisive acid test was whether on an overall view of the matter, the object is to make profit. In evaluating or apprising the above, one should also bear in mind the difference between the corpus, the objects and the powers of the concerned entity. 18. In Addl. Commissioner of Income Tax, Gujarat v. Surat Art Silk Cloth Manufacture s Association, 1980 (121) ITR 1 (SC), it was observed as under: 17 ..Every trust or institution must have a purpose fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly indicate that the activity is not propelled by a dominant profit motive. What is necessary to be considered is whether having regard to all the facts and circumstances of the case, the dominant object of the activity is profit-making or carrying out a charitable purpose. If it is the former, the purpose. would not be a charitable purpose, but, if it is the latter, the charitable character of the purpose would not be lost. 21. In the present case, when the facts are viewed in the light of the law explained by the Supreme Court in the above decisions, it is seen that the essential purpose of the Trust is to run both institutions on non-profit basis. That essential object does not appear to have changed. Secondly, the explanation offered for the incidental expenses as part of the imparting of training appears to be a plausible one. Too narrow a view could not have been taken of the purposes for which the expenses were incurred even if they were not strictly for educational purposes. They were for purposes incidental to the imparting of training and did not take away from the character of the institutions, which were essentially being run on a non-profit basis. 22. Consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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