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TMI Blog2025 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... dical facilities and not related to education hence assessee is not eligible for approval under section 10(23C)(vi). As upon conversion of Society into Section 8 Company there is no change in activities of the assessee. There is no finding in the impugned order passed by learned CIT(E) that the assessee is carrying on any activity other than education and more importantly the conversion has been made on the basis of going concern implying that the entire activities of the erstwhile society has been taken over by the assessee company and the assessee company is carrying on exactly the same operations as were being performed by the erstwhile society. The main objection of the learned CIT(E) that the words used "Rehabilitation Centre, Medical Centre, Medical Institutions, Clinics, providing free medical services to poor people" and nowhere has the learned CIT(E) either brought on record as to whether these activities are actually being performed by the Assessee or that the Assessee is undertaking any activity other than imparting of education. The learned CIT(E), in our opinion, has lost sight of the fact that the Assessee is solely engaged in the activity of providing education an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act, 1961 ("the Act"). 2. In its appeal, the assessee has raised following grounds:- "1. On the facts and circumstances of the case and in law, the learned CIT Exemption, Pune has grossly erred in rejecting assessee's application for approval u/s 10(23C)(vi) of IT Act. The order passed by CIT Appeals is illegal, invalid and against the principles of natural justice. 2. On the facts and circumstances of the case and in law, the learned CIT Exemption, Pune ought to have granted approval under section 10(23C) (vi) of IT Act to the Appellant as the Appellant has duly complied with all the conditions as prescribed under law for grant of approval under section 10(23C) (vi) of the Act. 3. On the facts and circumstances of the case and in law, the learned CIT Exemption, Pune has grossly erred in holding that the objects of the appellant are not solely and/or incidental to educational activities. 4. The Appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of Appeal." 3. Facts in Brief:- The assessee was incorporated on 18/02/2024 under section 8 of the Companies Act with the main object "To convert existing Society "G.H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration / approval shall also be liable to be cancelled. The assessee was also given an opportunity of being heard vide the said notice. The notice was duly served on the assessee through e-portal and email. However, the assessee did not respond to the said notice. Hence, another notice was issued on 30/07/2024 as under METAX DEPAR "(1) Copy of MOU/Agreement entered into between GHR Edu Foundation (Co) and GHR Edu Foundation Society (Trust), copies of resolution and minutes of proceedings of the trust and the company regarding transfer and taking over of activities has not been furnished. (ii) Year-wise details of donations with full name, address, PAN of donors, date and mode of donation, amount, receipt no. issued. has not been furnished. (iii) Present application has been filed u/s 10(23C) (iv) (B) for grant of registration u/s 10(23C) (vi) of the Act. Provisions of said section applies to an institution existing solely for educational purposes. However, as noticed from the MOA of the institution, the objects provide for many activities other than edu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust/Society with name and title 'GHR Educations Foundation Society Nagpur having PAN AAATG7303E. The objects of the trust were as under: 1) To spread good education among the masses of Rural and Urban area. 2) To start institutions and organization like Pre-Primaries, Primaries, Secondary Schools, College, Hostels, Guidance Centers, Physical Training insinuations, Teachers Training organization, Rehabilitation centers, Libraries, Institutions of Social Science, Engineering Colleges, Medical Colleges, Hospitals Ayurvedic College, Homeopathic College, Dental College, Nursing College, Law College, Institution of Management etc. 3) To create self-discipline value of manual labour, feeling of equality and morality amongst the students. 4) In general to provides an ideal education without any religion bias with the principles of equality, Liberty, Justice and respect for all. 5) To undertake and facilitate research in all branches of knowledge and establish institutions of this purpose. 6) To work for promotion and over all educational development of Hindi Speaking community according to Government Strategy 7) To promote education among economically backward classes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llaboration with other institutions, organization, societies, trusts or companies to impart promote and improve the standard and education in the institutions established by the present- society." 4.1 Further, the trust got itself converted into a section 8 company under the name and title of 'GHR Education Foundation' having PAN AALCG0443P on 18.02.2024 with following objects: "2. To spread good education among the masses of Rural and Urban area. 3. To establish, promote, run, consent and accreditation of Schools, Colleges, Institutions and Universities for imparting higher education in all disciples of education in India including collaborations with foreign universities where considered necessary. 4. To start institutions and organization like Pre-Primaries, Primaries, Secondary, School, Colleges, Hostels, Institutions, Universities, Guidance Centres, Physical Training Institutions, Teachers Training organization, Rehabilitation Centres, Libraries, Institution of Social Science, Engineering Colleges, Medical Colleges, Hospitals, medical centres, medical institutions, clinics, Ayurvedic College, Homeopathic College, Dental College, Nursing College, Law College, In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in various areas of education." 5. On perusal of the objects of both the entities, it is observed that 'G H R Education Foundation' has amended many of the objects (highlighted above for reference) which were not the part of the objects of the trust 'G HR Educations Foundation Society Nagpur'. It may be noted that there are many objects viz. running rehabilitation centres, medical centres, clinics, providing free medical services to poor people, etc which are neither solely for educational or incidental while achieving the sole object of education. 5.1 The law does allow the assessee to interpret the words as per its own convenience when their plain and ordinary meaning are clear and unambiguous. The assessee in its deed/MoA has consciously inserted these words which in fact was not available (excluding word of rehabilitation centres) in the deed of 'GHR Educations Foundation Society Nagpur These words have also not been used as conjunction with previous objects as claim by the assessee. The assessee has applied for registration u/s 10(23C)(vi) of the Act which says "10. In computing the total income of a previous year of any person, any income falling w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) i.e., P. RAMANATHA AIYAR, ADVANCED LAW LEXICON, (6th Edn.), Pg. 5249-5250 (2019). Solely, Cambridge Dictionary (4th Edn.) (2013). the 'predominant object' test was applied unquestioningly in cases relating to charitable institutions claiming to impart education. The obvious error in the opinion of this court which led the previous decisions in American Hotel (supra) and in Queens Education Society (supra) was that Surat Art (supra) was decided in the context of a society that did not claim to impart education. It claimed charitable status as an institution set up to advance objects of general public utility. The Surat Art (supra) decision picked the first among the several objects (some of them being clearly trading or commercial objects) as the 'predominant' object which had to be considered while judging the association's claim for exemption. The approach and reasoning applicable to charitable organizations set up for advancement of objects of general public utility are entirely different from charities set up or established for the object of imparting education. In the case of the latter, the basis of exemption is Section 10(23C) (iiiab), (iiiad) and (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n statute" If the language is unambiguous and capable of one meaning, that alone should be applied and not any other, based under surmise that the Parliament or the legislature intended it to be so. In other words, it is only in cases of ambiguity that the court can use other aids to discem the true meaning. Where the statute is clear and the words plain, the legislation has to be given effect in its own terms. 53. In A.V. Femandez v State of Kerala23, a constitution bench discussed how tax laws should ordinarily be construed: "29. It is no doubt, true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter". 54. It is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a v. Motibhai Nagjibhai, 1966 (1) SCR 367. Indore Development Authority v. Manoharial, (2020) 8 SCC 129 57. The scope of a proviso was dealt with in great detail in S. Sundaram Pillai v. V.R. Pattabiraman.27 This court observed that normally a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. A proviso cannot be tom apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment. After quoting previous decisions and authoritative texts, this court summarized the correct legal position, as follows: "43. We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment: (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable: (3) it may be so embedded in the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve discussion, this court is of the opinion that the interpretation adopted by the judgments in American Hotel (supra) as well as Queens Education Society (supra) as to the meaning of the expression 'solely' are erroneous. The trust or educational institution, which seeks approval or exemption, should solely be concerned with education, or education related activities. If, incidentally, while carrying on those objectives, the trust earns profits, it has to maintain separate books of account. It is only in those circumstances that 'business' income can be permitted-provided, as stated earlier, that the activity is education, or relating to education. The judgment in American Hotel (supra) as well as Queens Education Society (supra) do not state the correct law, and are accordingly overruled. ........" 6. As such, the Hon'ble court has held the principle of sole objects of education and/ or incidental objects relating to activity of education, to get registered u/s 10(23C) (vi) of the Act. The Hon'ble Apex Court has also held that the judgement will be prospective so that the educational institutions have time to amend its objects accordingly to continue b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese objects are related to providing of medical education where medical centre and clinics are pre-requisites of medical education hence the learned CIT(E) is not correct in holding that the objects are not solely for educational purpose. The learned Counsel for the assessee argued that these activities are akin to running medical colleges as there cannot be a medical college run without there being clinics wherein the patients are treated. He emphasised the fact that every medical college also has a hospital attached to it which is a prerequisite for running an effective medical education institution. The learned Counsel for the assessee further argued that these words must be read in conjunction with previous words of the main object clause. They cannot be read in isolation. The specific words in the main object are to start institutions like pre-primary, Primaries, Secondary Schools, Colleges, Universities etc which are followed by the general words like rehabilitation centre, clinics, etc. The specific words are solely related to education and as such the general words would take colour from the specific words which are related to education only. He further argued that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority below. It is undisputed fact that the assessee was a Society having registration no. MAH/830/04 dated 21/12/2004 (PAN: AAATG7303E). The said society was an approved educational institution under section 10(23C)(vi) of the Act vide order dated 28/04/2009 which was renewed by order dated 28/05/2021 from assessment Year 2022-23 to 2026-27. The said society is converted into Section 8 Company on 18/02/2024 as going concern under section 366 to 374 of Part 1- Chapter XXI of the Companies Act, 2013. The learned CIT(E) has compared object clauses of both the entities i.e., Society (prior to conversion) and Section 8 Company (after conversion) and noticed that certain objects like Rehabilitation Centre, Medical Centre, Medical Institutions, Clinics, providing free medical services to poor people have been added in the present object clauses which were not there in the previous object clauses of the Society. He held that these objects are related to medical facilities and not related to education hence assessee is not eligible for approval under section 10(23C)(vi). We further find that upon conversion of Society into Section 8 Company there is no change in activities of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken solely on the ground that he might, on some future uncertain date, undertake those activities which in the opinion of the learned CIT(E) might not be held to be wholly attributable to the purpose of imparting education. Even for the sake of argument if it is held that such activities would not amount to the purpose of imparting education, then it would be open for the Department in future upon the assessee undertaking the said activities to re-evaluate the registration is granted and take suitable action including cancellation of registration if they so deem fit. However, rejecting the application for registration, for the acts which have not yet been undertaken by the assessee would amount to and be equivalent to punishing someone for a crime which he is not yet committed and which in the opinion of the officer in charge he might commit in future. Such presupposition while evaluating application for registration under section 10(23C), in our opinion, is not proper and cannot be sustained. Under any case, the assessee has already modified its objects by removing the "objectionable" objects referred to and relied upon by the learned CIT(E) and as such there remains no cau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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