VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHA, MUMBAI V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), MUMBAI

ITA 5123/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6531 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Appeal Filed On: 02-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SATYANARAYAN RAJUDR
• Assessee Lawyers: RAJNIKANT V CHANIYARI
• Keywords: Charitable institution; Opportunity of being heard
• Section: 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , .., , ! BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.5123/MUM/2017 ASSESSMENT YEARS: 2017-18 SHRI VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHA, NEW LAXMI NIWAS, KIROL LANE, CAMA LANE, GHATKOPAR, MUMBAI-400086 / VS. COMMISSIONER OF INCOME TAX (EXEMPTIONS), 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 ( $%& ' /ASSESSEE) ( ( / REVENUE) P.A. NO.AAATS8056N $%& ' / ASSESSEE BY SHRI RAJNIKANT V. CHANIYARI- AR ( / REVENUE BY SHRI B. SATYANARAYAN RAJU-DR ) (*+' , / DATE OF HEARING : 17/01/2019 +' , / DATE OF PRONOUNCEMENT 17/01/2019 ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 2 / O R D E R PER JOGINDER SINGH (VICE PRESIDENT) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 30/05/2017 OF THE LD. COMMISSIONER OF INCOME TAX (EXEMPTIONS), MUMBAI, DENYING APPROVAL UNDER SECTIO N 10(23C)(VI) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R THE ACT). 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI RAJNIKANT V. CHANIYARI, CONTENDED THAT THE ASS ESSEE IS PROVIDING LODGING, BOARDING, CLOTHING, BOOKS, SCHOO L FEES AND OTHER FACILTIES TO THE STUDENT OF KDO JAIN COMM UNITY, THEREFORE, APPROVAL UNDER SECTION 10(23C)(VI) OF TH E ACT WAS WRONGLY DENIED TO THE ASSESSEE. OUR ATTENTION WAS I NVITED TO THE OBJECTS OF THE ASSESSEE. ON THE OTHER HAND, THE LD. DR, B. SATYANARAYAN RAJU, EXPLAINED THAT THE ASSESS EE IS NEITHER AN UNIVERSITY NOR AN EDUCATIONAL INSTITUTIO N, THEREFORE, THE APPROVAL WAS RIGHTLY DENIED TO THE A SSESSEE. IT WAS ALSO POINTED OUT THAT ALL THE FACILITIES ARE MERELY PROVIDED TO THE STUDENT OF JAIN COMMUNITY AND NOT T O THE STUDENTS OF PUBLIC AT LARGE. ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 3 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE A DVERTING FURTHER, IT IS OUR BOUNDED DUTY TO EXAMINE SECTION 10(23C)(VI) OF THE ACT FOR READY REFERENCE AND ANAL YSIS:- 10(23C)( VI ) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FO R PURPOSES OF PROFIT, OTHER THAN THOSE MENTIONED IN SUB-CLAUSE ( IIIAB ) OR SUB-CLAUSE ( IIIAD ) AND WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY. 2.2. IT IS NOTED THAT SUB-CLAUSES (VI) AND (VIA) W ERE INSERTED BY THE FINANCE (NO.2) ACT, 1998 EFFECTIVE FROM 01/04/1999, PROVIDING APPROVAL/EXEMPTION TO ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS WHICH ARE EXISTING SOLELY FOR EDUCATIONAL PURPOSES. IF THE OB JECTS OF THE ASSESSEE ARE ANALYZED ADMITTEDLY, THESE ARE OF CHARITY IN NATURE BUT AT THE SAME TIME (AS ADMITTED BY LD. COUNSEL FOR THE ASSESSEE ALSO), THE ASSESSEE IS NEITHER AN UNIVERSITY NOR AN EDUCATIONAL INSTITUTIONS. THE OBJECTS OF THE ASSESSEE ARE TO PROVIDE LODGING, BOARDING, CLOTHING, BOOKS A ND OTHER FACILITIES TO THE STUDENTS OF KDO JAIN COMMUNITY. T HESE STUDENTS ARE PURSUING STUDIES IN OTHER EDUCATIONAL INSTITUTIONS AND THE ASSESSEE ITSELF IS NOT AN EDUC ATIONAL INSTITUTIONS. IT SEEMS THAT THE ASSESSEE IS SIMPLIC ITER A ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 4 HOSTEL FOR THE STUDENTS OF JAIN COMMUNITY. THE PROV ISION THROUGH SUB-CLAUSE (VI) TO SECTION 10(23C) OF THE A CT HAS BEEN MADE FOR AN UNIVERSITY OR AN EDUCATIONAL INSTI TUTION. THE CONDITION LAID DOWN IN SECTION 10(23C)(VI) IS C ONFINED TO AN EDUCATIONAL INSTITUTION, THUS, THE ASSESSEE HAS NOT FULFILLED THE REQUIREMENT OF THE ACT, AS THE ASSESS EE IS MERELY PROVIDING HOSTEL FACILITIES TO THE STUDENTS OF JAIN COMMUNITY. OUR VIEW FIND SUPPORTS FROM THE DECISION FROM HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF NE W NOBLE EDUCATION SOCIETY VS CCIT (2012)(12 TAXMANN.C OM 267)(AP), WHEREIN, IT HAS BEEN OBSERVED AS UNDER:- AN EDUCATIONAL SOCIETY, RUNNING AN EDUCATIONAL INS TITUTION SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PUR POSE OF PROFIT, MUST BE REGARDED AS 'OTHER EDUCATIONAL INSTITUTION' UNDER SECTION 10 (23C)(VI) . IT WOULD BE UNREAL AND HYPER-TECHNICAL TO HOLD TH AT THE ASSESSEE-SOCIETY WAS ONLY A FINANCING BODY AND WOULD NOT COME WITHIN THE SCOPE OF 'OTHER EDUCATIONAL INSTITU TION'. IF, IN SUBSTANCE AND REALITY, THE SOLE PURPOSE FOR WHICH T HE ASSESSEE HAS COME INTO EXISTENCE IS TO IMPART EDUCATION AT T HE LEVEL OF COLLEGES AND SCHOOLS, SUCH AN EDUCATIONAL SOCIETY S HOULD BE REGARDED AS AN 'EDUCATIONAL INSTITUTION'. EDUCATION AL INSTITUTIONS, WHICH ARE REGISTERED AS A SOCIETY, WOULD CONTINUE T O RETAIN THEIR CHARACTER AS SUCH AND WOULD BE ELIGIBLE TO APPLY FO R EXEMPTION UNDER SECTION 10 (23C)(VI) . THE DISTINCTION CANNOT MADE BETWEEN THE SOCIETY AND THE EDUCATIONAL INSTITUTION RUN BY IT. [PARA 8] IN ORDER TO BE ELIGIBLE FOR EXEMPTION UNDER SECTION 10 (23C)(VI) , IT IS NECESSARY THAT THERE MUST EXIST AN EDUCATIONA L INSTITUTION. SECONDLY, SUCH INSTITUTION MUST EXIST SOLELY FOR ED UCATIONAL PURPOSES AND, THIRDLY, THE INSTITUTION SHOULD NOT E XIST FOR THE PURPOSE OF PROFIT. IN DECIDING THE CHARACTER OF THE RECIPIENT OF THE INCOME, IT IS NECESSARY TO CONSIDER THE NATURE OF T HE ACTIVITIES UNDERTAKEN. IF THE ACTIVITY HAS NO CO-RELATION TO E DUCATION, ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 5 EXEMPTION HAS TO BE DENIED. THE RECIPIENT OF THE IN COME MUST HAVE THE CHARACTER OF AN EDUCATIONAL INSTITUTION TO BE ASCERTAINED FROM ITS OBJECTS. THE EMPHASIS IN SECTI ON 10 (23C)(VI) IS ON THE WORD 'SOLELY'. 'SOLELY' MEANS EXCLUSIVEL Y AND NOT PRIMARILY. IN USING THE SAID EXPRESSION, TH E LEGISLATURE HAS MADE IT CLEAR THAT IT INTENDS TO EXEMPT THE INC OME OF THE INSTITUTIONS ESTABLISHED SOLELY FOR EDUCATIONAL PUR POSES AND NOT FOR COMMERCIAL ACTIVITIES. THIS REQUIREMENT WOULD M ILITATE AGAINST AN INSTITUTION PURSUING THE OBJECTS OTHER T HAN EDUCATION. EVEN IF ONE OF THE OBJECTS ENABLES THE INSTITUTION TO UNDERTAKE COMMERCIAL ACTIVITIES, IT WOULD NOT BE ENTITLED TO APPROVAL UNDER SECTION 10 (23C)(VI) . IT IS ONLY IF THE OBJECTS REVEAL THAT THE VERY BEING OF THE ASSESSEE-SOCIETY, AS AN EDUCATIONAL IN STITUTION, IS EXCLUSIVELY FOR EDUCATIONAL PURPOSES AND NOT FOR PR OFIT, THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION UNDER SECTI ON 10 (23C)(VI) . [PARA 9] IN THE CASE OF A DISPUTE WHETHER THE CLAIM OF THE A SSESSEE TO BE EXEMPTED FROM TAX IS ADMISSIBLE OR NOT, IT IS NECES SARY FOR THE ASSESSEE TO ESTABLISH THAT IT IS PART OF AN INSTITU TION WHICH IS ENGAGED SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT, AND THE INCOME, IN RESPECT OF W HICH EXEMPTION IS CLAIMED, IS A PART OF THE INCOME OF THE INSTITUT ION. THE ACTIVITIES OF THE INSTITUTION, ITS OBJECTS, ITS SOU RCE OF INCOME AND ITS UTILIZATION, MUST BE ANALYZED BY THE PRESCRIBED AUTHORITY TO ASCERTAIN WHETHER IT EXISTS SOLELY FOR EDUCATION AN D NOT FOR PROFIT, AND IT IS HIS DUTY TO ASCERTAIN WHETHER THE INCOME IS APPLIED WHOLLY AND EXCLUSIVELY FOR THE EDUCATIONAL OBJECTS FOR WHICH THE APPLICANT IS ESTABLISHED. [PARA10] THE OBJECT OF ESTABLISHING AN EDUCATIONAL INSTITUTI ON SHOULD NOT BE TO MAKE PROFIT. THERE CAN, HOWEVER, BE A REASONA BLE REVENUE SURPLUS WHICH MAY BE USED BY THE EDUCATIONAL INSTIT UTION FOR THE PURPOSE OF DEVELOPMENT OF EDUCATION AND EXPANSION O F THE INSTITUTION. IT IS NOT POSSIBLE TO CARRY ON EDUCATI ONAL ACTIVITY IN SUCH A WAY THAT THE EXPENDITURE EXACTLY BALANCES TH E INCOME, AND THERE IS NO RESULTANT PROFIT. PROFITS/SURPLUS C ANNOT BE DIVERTED FOR ANY OTHER USE OR PURPOSE, AND CANNOT B E USED FOR PERSONAL GAIN OR FOR ANY OTHER BUSINESS OR ENTERPRI SE. THE TEST OF PREDOMINANT OBJECT OF THE ACTIVITY IS TO BE SEEN, W HETHER IT EXISTS SOLELY FOR EDUCATION AND NOT TO EARN PROFIT. THE DE CISIVE TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER, THE OBJEC T IS TO CARRY ON EDUCATIONAL ACTIVITIES OR TO MAKE PROFIT. [PARA 11] IT IS EVIDENT FROM THE PROVISOS TO SECTION 10 (23C)(VI) , THAT THERE IS A DIFFERENCE BETWEEN STIPULATION OF CONDITIONS A ND COMPLIANCE ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 6 THEREWITH. AT THE INITIAL STAGE, WHEN AN APPLICATIO N FOR EXEMPTION IS SUBMITTED BY AN EDUCATIONAL INSTITUTION, THE SCO PE OF INQUIRY IS RESTRICTED ONLY TO ASCERTAIN THE GENUINENESS OF THE ACTIVITIES OF SUCH AN INSTITUTION. SUCH AN INQUIRY MAY EVEN EXTEN D TO AN EXAMINATION OF THE ACCOUNTS OF THE INSTITUTION, APP LICATION OF ITS INCOME TO THE OBJECT AND PURPOSES OF EDUCATION AND OTHER COGNATE ASPECTS. ONCE ON THE BASIS OF THE GENUINENE SS OF THE ACTIVITIES OF AN EDUCATIONAL INSTITUTION, APPROVAL IS GRANTED FOR EXEMPTION, THEN THE MONITORING PROVISIONS WOULD COM E INTO PLAY. [PARA 13] THE THRESHOLD CONDITIONS ARE AIMED AT DISCOVERING T HE ACTUAL EXISTENCE OF AN EDUCATIONAL INSTITUTION AND APPROVA L OF THE PRESCRIBED AUTHORITY FOR WHICH AN APPLICATION IN TH E STANDARDIZED FORM, IN TERMS OF THE FIRST PROVISO, H AS TO BE GIVEN BY EVERY APPLICANT. IF THE PRE-REQUISITE CONDITION OF ACTUAL EXISTENCE OF THE EDUCATIONAL INSTITUTION IS FULFILL ED, THEN THE QUESTION OF COMPLIANCE WITH THE REQUIREMENTS CONTEM PLATED BY VARIOUS PROVISOS, WOULD ARISE. ONLY IF THE EDUCATIO NAL INSTITUTION ACTUALLY EXISTS FOR EDUCATIONAL PURPOSES ALONE, SHO ULD IT BE PERMITTED TO OPERATE SUBJECT TO THE MONITORING COND ITIONS TO BE STIPULATED BY THE PRESCRIBED AUTHORITY. [PARA 14] COMPLIANCE WITH MONITORING CONDITIONS/REQUIREMENTS UNDER THE THIRD PROVISO, LIKE APPLICATION, ACCUMULATION, DEPL OYMENT OF INCOME IN SPECIFIED ASSETS, WHOSE COMPLIANCE DEPEND S ON EVENTS THAT HAVE NOT TAKEN PLACE ON THE DATE OF THE APPLIC ATION FOR INITIAL APPROVAL, CAN BE STIPULATED AS CONDITIONS BY THE PR ESCRIBED AUTHORITY SUBJECT TO WHICH APPROVAL MAY BE GRANTED, PROVIDED THEY ARE NOT IN CONFLICT WITH THE PROVISIONS OF THE ACT. WHILE IMPOSING CONDITIONS, SUBJECT TO WHICH APPROVAL IS G RANTED, THE PRESCRIBED AUTHORITY MAY INSIST ON A CERTAIN PERCEN TAGE OF THE ACCOUNTING INCOME TO BE UTILIZED/APPLIED FOR IMPART ING EDUCATION. SIMILARLY, THE PRESCRIBED AUTHORITY MAY GRANT APPROVAL ON SUCH TERMS AND CONDITIONS AS IT DEEMS F IT IN CASE WHERE THE INSTITUTION APPLIES FOR INITIAL APPROVAL FOR THE FIRST TIME. THE PRESCRIBED AUTHORITY MUST GIVE AN OPPORTU NITY TO THE APPLICANT-INSTITUTION TO COMPLY WITH THE MONITORING CONDITIONS WHICH HAVE BEEN STIPULATED FOR THE FIRST TIME BY TH E THIRD PROVISO. HOWEVER, AFTER GRANT OF APPROVAL, IF IT IS BROUGHT TO THE NOTICE OF THE PRESCRIBED AUTHORITY THAT THE CONDITIONS, ON WH ICH APPROVAL WAS GIVEN, ARE BREACHED OR THAT CIRCUMSTANCES MENTI ONED IN THE THIRTEENTH PROVISO EXISTS, THEN THE PRESCRIBED AUTH ORITY CAN WITHDRAW THE APPROVAL EARLIER GIVEN BY FOLLOWING TH E PROCEDURE MENTIONED IN THAT PROVISO. STIPULATION OF MONITORIN G CONDITIONS IS DIFFERENT FROM COMPLIANCE WITH THOSE CONDITIONS. COMPLIANCE ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 7 OR NON-COMPLIANCE CAN ONLY BE GAUGED AT THE ASSESSM ENT STAGE, AS AVAILABILITY OF EXEMPTION HAS TO BE EVALUATED EV ERY YEAR IN ORDER TO FIND OUT WHETHER THE INSTITUTION EXISTED D URING THE RELEVANT YEAR SOLELY FOR EDUCATIONAL PURPOSES.. [PA RA 15] ACCORDINGLY, IN CASES WHERE APPROVAL UNDER SECTION 10 (23C)(VI) IS INITIALLY SOUGHT, THE OBJECTS IN THE MEMORANDUM OF ASSOCIATION OF A SOCIETY/TRUST ARE CONCLUSIVE PROOF OF SUCH A TRUST EXISTING SOLELY AS AN EDUCATIONAL INSTITUTION ENTIT LED FOR THE BENEFITS, AND AS BEING ELIGIBLE FOR APPROVAL UNDER SECTION 10 (23C)(VI) . IN ADDITION, AN APPLICATION IN THE PRESCRIBED PROFORMA SHOULD BE SUBMITTED TO THE PRESCRIBED AUTH ORITY WITHIN THE TIME STIPULATED AND THE SPECIFIED DOCUMENTS SHO ULD BE ENCLOSED THERETO. HOWEVER, IN CASES WHERE AN APPLIC ATION IS SUBMITTED SEEKING RENEWAL OF THE EXEMPTION GRANTED EARLIER, THE PRESCRIBED AUTHORITY SHALL, IN ADDITION TO THE COND ITIONS AFOREMENTIONED, ALSO EXAMINE WHETHER THE INCOME OF THE APPLICANT-SOCIETY HAS BEEN APPLIED SOLELY FOR THE P URPOSES OF EDUCATION IN TERMS OF SECTION 10 (23C)(VI) , THE PROVISOS THEREUNDER, THE INCOME-TAX RULES, AND THE DOCUMENTS ENCLOSED TO THE APPLICATION SUBMITTED IN FORM NO. 56D. [PARA 16 ] SO FAR AS REGISTRATION OF SOCIETIES UNDER THE A.P. ACT WAS CONCERNED, ON A CONJOINT READING OF THE EXPLANATION TO SECTION 1 ( 3 )(A) , SECTION 2 ( 4 ) AND 2 ( 5 ) OF THE A.P. ACT, IT IS EVIDENT THAT A SOCIETY RUNNING AN EDUCATIONAL INSTITUTION IN THE S TATE OF ANDHRA PRADESH IS A PUBLIC CHARITABLE INSTITUTION. THE SUB MISSION THAT IN THE ABSENCE OF REGISTRATION, THE PROVISIONS OF THE A.P. ACT ARE NOT APPLICABLE WAS NOT TENABLE. THE PROVISIONS OF THE A .P. ACT APPLY TO ALL PUBLIC CHARITABLE INSTITUTIONS WHETHER REGIS TERED OR NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. A PUBLIC CHARITABLE INSTITUTION IS REQUIRED, IN LAW, TO CONDUCT THE MAN AGEMENT OF ITS AFFAIRS STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF THE A.P. ACT OF 1987. REGISTRATION UNDER THE A.P. ACT WOULD ALSO ENSURE THAT THE ACTIVITIES OF THE EDUCATIONAL AGENCY ARE MONITO RED BY THE STATE AGENCIES. [PARA 23] THE CHIEF COMMISSIONER IS STATUTORILY BOUND UNDER S ECTION 10 (23C)(VI) THE FIRST AND SECOND PROVISOS THEREUNDER AND RULE 2CA OF THE RULES, TO SATISFY HIMSELF THAT THE OBJEC TS OF THE SOCIETY ARE SUCH THAT THE EXISTENCE OF THE EDUCATIONAL INST ITUTION IS SOLELY FOR EDUCATIONAL PURPOSES, AND NOT FOR THE PURPOSE O F PROFIT. EVEN IN CASES WHERE A SOCIETY IS REGISTERED AS A CHARITA BLE INSTITUTION UNDER A.P. ACT 30 OF 1987, THE CHIEF COMMISSIONER I S NOT ABSOLVED OF HIS STATUTORY DUTY TO VERIFY THE STATUT ORILY PRESCRIBED DOCUMENTS, AND TO SATISFY HIMSELF THAT THE APPLICAN T-SOCIETY IS NOT ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 8 ONLY A CHARITABLE INSTITUTION BUT ALSO THAT ITS CHA RITABLE OBJECTS ARE EXCLUSIVELY FOR EDUCATIONAL PURPOSES AND FOR NO OTHER. SINCE THE STATUTORY PROVISIONS OF THE ACT PRESCRIBE THIS AS A THRESHOLD EXAMINATION REQUIREMENT, SATISFACTION OF WHICH ALON E WOULD REQUIRE THE CHIEF COMMISSIONER TO GRANT APPROVAL, I N CASES WHERE THE CHIEF COMMISSIONER IS SATISFIED, AFTER EX AMINATION OF THE RECORDS, THAT THE APPLICANT EXISTS SOLELY FOR E DUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT, AND TH E APPLICATION IS MADE IN THE STIPULATED FORM ACCOMPANIED BY ALL T HE DOCUMENTS SPECIFIED UNDER THE ACT AND THE RULES, HE WOULD NOT BE JUSTIFIED IN DENYING APPROVAL MERELY ON THE GROUND THAT THE A PPLICANTS DID NOT REGISTER THEMSELVES AS CHARITABLE INSTITUTIONS UNDER A.P. ACT 30 OF 1987. WHETHER OR NOT A CHARITABLE INSTITUTION IS REGISTERED UNDER THE SAID ACT, THE PROVISIONS OF THE A.P. ACT 30 OF 1987 ARE APPLICABLE TO ALL PUBLIC CHARITABLE INSTITUTIONS IN THE STATE OF A.P. FURTHER, WHILE FAILURE TO REGISTER THEMSELVES UNDER THE A.P. ACT 30 OF 1987 MAY ATTRACT THE PENAL PROVISIONS THEREIN , THE SAID ACT DOES NOT PROHIBIT PUBLIC CHARITABLE INSTITUTIONS FR OM CARRYING ON THEIR ACTIVITIES EVEN THOUGH THEY ARE NOT REGISTERE D UNDER THE ACT. CONSEQUENTLY, WHILE THE CHIEF COMMISSIONER IS BOUND TO SATISFY HIMSELF THAT THE APPLICANT IS A CHARITABLE INSTITUT ION EXISTING SOLELY FOR THE PURPOSES OF EDUCATION, HE IS ALSO EN TITLED TO PRESCRIBE REGISTRATION, UNDER A.P. ACT 30 OF 1987, WITHIN A SPECIFIED PERIOD AS A CONDITION SUBJECT TO WHICH AP PROVAL MAY BE GRANTED INASMUCH AS REGISTRATION, AS A CHARITABLE I NSTITUTION, UNDER THE A.P. ACT 30 OF 1987 WOULD BE ONE OF THE F ACTORS TO SHOW THAT THE SOCIETY CONCERNED EXISTS FOR THE CHAR ITABLE PURPOSE OF CARRYING ON EDUCATIONAL ACTIVITIES. [PARA 25] THE CERTIFICATE SIGNED BY THE COMMISSIONER OF ENDOW MENTS, AS THE APPROPRIATE AUTHORITY UNDER SECTION 43 OF THE A .P. ACT, IS BUT ONE OF THE FACTORS, AND NOT CONCLUSIVE PROOF OF AN ASSESSEE UNDER THE INCOME-TAX ACT BEING A CHARITABLE INSTITUTION E XISTING SOLELY FOR THE PURPOSES OF EDUCATION AND EVEN IN CASE THE ASSESSEE PRODUCES A CERTIFICATE OF REGISTRATION UNDER SECTIO N 43 OF A.P. ACT, THE CHIEF COMMISSIONER HAS TO INDEPENDENTLY EX AMINE THE OBJECTS OF THE APPLICANT-SOCIETIES, THEIR APPLICATI ON 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 AND FORM 56D, THAT THE EXISTENCE OF THE EDUCATI ONAL INSTITUTION IS SOLELY FOR THE PURPOSES OF EDUCATION AND NOT FOR THE PURPOSES OF PROFIT AND ONLY IF HE IS SO SATISFIED, TO GRANT APPROVAL. REGISTRATION UNDER SECTION 43 OF THE A.P. ACT IS NOT A CONDITION PRECEDENT FOR SEEKING APPROVAL UNDER SECT ION 10 (23C)(VI) . THE CHIEF COMMISSIONER CAN, HOWEVER, PRESCRIBE ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 9 REGISTRATION UNDER THE A.P. ACT AS A CONDITION SUBJ ECT TO WHICH APPROVAL IS GRANTED UNDER SECTION 10 (23C)(VI) . [PARA26] IF THERE ARE SEVERAL OBJECTS OF A SOCIETY SOME OF W HICH RELATE TO 'EDUCATION', AND OTHERS WHICH DO NOT AND THE TRUSTE ES OR THE MANAGERS, IN THEIR DISCRETION, ARE ENTITLED TO APPL Y THE INCOME OR PROPERTY TO ANY OF THOSE OBJECTS, THE INSTITUTION W OULD NOT BE ELIGIBLE TO BE REGARDED AS ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES, AND NO PART OF ITS INCOME WOULD BE EXEMPT FROM TAX. IN OTHER WORDS, WHERE THE MAIN OBJECTS OF SOCIETY ARE DISTRIBUTIVE, EACH AND EVERYONE OF THEM MUST RELATE TO 'EDUCATION ' IN ORDER THAT THE INSTITUTION MAY BE HELD ENTITLED FOR THE B ENEFITS UNDER SECTION 10 (23C)(VI) . BUT IF THE PRIMARY OR DOMINANT PURPOSE OF AN INSTITUTION IS 'EDUCATIONAL', ANOTHER OBJECT WHI CH IS MERELY ANCILLARY OR INCIDENTAL TO THE PRIMARY OR DOMINANT PURPOSE WOULD NOT DISENTITLE THE INSTITUTION TO THE BENEFIT . THE TEST WHICH HAS , THEREFORE, TO BE APPLIED IS WHETHER THE OBJEC T, WHICH IS SAID TO BE NON-EDUCATIONAL, IS THE MAIN OR PRIMARY OBJEC T OF THE INSTITUTION OR IT IS ANCILLARY OR INCIDENTAL TO THE DOMINANT OR PRIMARY OBJECT WHICH IS 'EDUCATIONAL'. THE TEST IS THE GENUINENESS OF THE PURPOSE TESTED BY THE OBLIGATION CREATED TO SPEND THE MONEY EXCLUSIVELY ON 'EDUCATION'. IF THAT OBLIGATIO N IS THERE, THE INCOME BECOMES ENTITLED TO EXEMPTION. [PARA 30] OBJECTS OF A SOCIETY SUCH AS MAINTAINING UNITY AMON G MEMBERS, SOLVING PROBLEMS OF MEMBERS ON SOCIAL GROUNDS, PROV IDING EMPLOYMENT, PROMOTING ECONOMIC NEEDS, AND UPLIFTMEN T OF THE SOCIALLY AND ECONOMICALLY WEAKER SECTIONS OF THE SO CIETY, COULD NOT BE CHARACTERIZED AS THOSE WHEREBY THE EDUCATION AL INSTITUTION COULD BE SAID TO EXIST SOLELY FOR THE PURPOSES OF E DUCATION. EVEN IF THE APPLICANT HAD NOT APPLIED ITS INCOME TO ACHI EVE THOSE NON- EDUCATIONAL OBJECTS, THEY WOULD STILL BE DISENTITLE D TO THE BENEFIT OF BEING EXEMPTED UNDER SECTION 10 (23C)(VI) , AS THE EXEMPTION THEREUNDER IS AVAILABLE ONLY TO EDUCATIONAL INSTITU TION WHOSE EXISTENCE IS SOLELY FOR THE PURPOSES OF EDUCATION. THE AFORESAID OBJECTS WERE NEITHER INTEGRALLY CONNECTED WITH, NOR WERE THEY ANCILLARY OR INCIDENTAL TO, THE PRIMARY OBJECT OF ' EDUCATION'. [PARA 31] THE EXISTENCE OF AN EDUCATIONAL INSTITUTION SOLELY FOR THE PURPOSES OF EDUCATION IS A PRE-CONDITION FOR GRANT OF APPROVAL AND AS THE OBJECTS AFOREMENTIONED WERE NOT FOR EDUC ATIONAL PURPOSES, THE CHIEF COMMISSIONER COULD NOT BE FAULT ED FOR REJECTING THE APPLICATIONS SEEKING APPROVAL UNDER S ECTION 10 (23C)(VI) . [PARA 33] ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 10 PUBLICATION OF JOURNALS, MAGAZINES, OR OTHER MEDIA FOR DIFFUSION OF USEFUL KNOWLEDGE FOR PROMOTION OF EDUCATION IS I NCIDENTAL AND ANCILLARY TO THE PRIMARY OBJECT OF THE SOCIETY, I.E., TO RUN AN EDUCATIONAL INSTITUTION. IT WAS THE APPLICANT'S CAS E THAT PUBLICATION OF JOURNALS AND MAGAZINES WAS TO PROVID E KNOWLEDGE TO STUDENTS AND THE TEACHING STAFF. INASMUCH AS THE APPLICANT WAS AN EDUCATIONAL INSTITUTION, THE MERE FACT THAT THE OBJECT OF PUBLICATION OF JOURNALS AND MAGAZINES FOR PROMOTION OF EDUCATION WAS NOT RESTRICTED, IN SO MANY WORDS, ONL Y FOR THE BENEFIT OF STUDENTS AND TEACHING STAFF WAS OF NO SI GNIFICANCE. IT WAS NOT EVEN THE CASE OF THE PRESCRIBED AUTHORITY T HAT PUBLICATION OF THOSE JOURNALS AND MAGAZINES WAS FOR ANYONE ELSE. THE PRESCRIBED AUTHORITY WAS, THEREFORE, NOT JUSTIF IED IN REJECTING THE APPLICATION ON THAT GROUND. [PARA 35] THE OBJECT OF THE SOCIETY TO CONDUCT SEMINARS, SYMP OSIUMS, WORKSHOPS AND TO INVITE EXPERTS FROM INDIA AND ABRO AD TO IMPROVE THE QUALITY OF EDUCATION AND TO SUPPORT STU DENTS TO ELEVATE THEMSELVES TO INTERNATIONAL STANDARDS, WHIC H THE PRESCRIBED AUTHORITY HELD NOT TO BE FOR THE PURPOSE S OF EDUCATION WAS INCIDENTAL AND ANCILLARY TO THE PRIMARY OBJECT OF CARRYING ON EDUCATIONAL ACTIVITIES BY THE EDUCATIONAL INSTITUTI ON. THE CHIEF COMMISSIONER WAS, THEREFORE, NOT JUSTIFIED IN REJEC TING THE SOCIETY'S APPLICATION ON THAT GROUND. [PARAS 36 AND 37] IN VIEW OF THE TWELFTH PROVISO TO SECTION 10 (23C)(VI) , MONEY ADVANCED TO ANOTHER EDUCATIONAL INSTITUTION CANNOT BE TREATED AS APPLICATION OF INCOME TO THE OBJECTS FOR WHICH THE ASSESSEE- SOCIETY IS ESTABLISHED; SUCH A TRANSACTION WOULD ON LY MEAN THAT THE FUNDS OF THE APPLICANT-SOCIETY HAS NOT BE UTILI ZED SOLELY FOR THE PURPOSES OF EDUCATION; AND THE SOCIETY WOULD, T HEREFORE, BE DISENTITLED FOR BEING GRANTED APPROVAL BY THE PRESC RIBED AUTHORITY UNDER SECTION 10 (23C)(VI) . THE PRESCRIBED AUTHORITY COULD NOT BE FAULTED IN REJECTING THE APPLICANT'S A PPLICATION ON THAT GROUND. [PARA 39] IT IS ONLY IN CASES WHERE ANY PART OF THE INCOME OR THE PROPERTY OF A CHARITABLE INSTITUTION, IS USED, DIRECTLY OR I NDIRECTLY, FOR THE BENEFIT OF THE PERSON REFERRED TO IN SECTION 13 ( 3 ) THAT THE PROVISIONS OF SECTION 13 ( 1 )(C) WOULD BE ATTRACTED. UNDER SECTION 13 ( 2 ) , THE INCOME OR PROPERTY OF THE INSTITUTION SHALL, FOR THE PURPOSES OF SECTION 13 ( 1 )(A) , BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SECTION 13 ( 3 ) , IF ANY ONE OF CLAUSES (A) TO (H) OF SECTION 13 ( 2 ) ARE APPLICABLE. THE PERSONS, REFERRED TO IN SECTION 13 ( 3 ) , WOULD BE BENEFITED ONLY IF THE AMOUNT PAID TO HIM CONSTITUTES A BENEFIT TO HIM OR IF ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 11 CLAUSES (A) TO (H) OF SECTION 13 ( 2 ) ARE ATTRACTED. IN THE INSTANT CASES, IT WAS ONLY IF THE RENT PAID TO THE SECRETAR Y OF SOCIETY WAS MORE THAN THE PREVAILING MARKET RATES, THAT THE REC IPIENT OF THE RENT/RENTAL ADVANCE COULD BE SAID TO HAVE BENEFITED THEREBY. THE ASSESSEE HAD BEEN DENIED THE OPPORTUNITY OF ESTABLI SHING BEFORE THE PRESCRIBED AUTHORITY, THAT THE PROVISIONS OF SE CTION 13 ( 1 )(C) WERE NOT ATTRACTED. WHETHER OR NOT THE AMOUNT PAID AS RENT WAS MORE THAN THE PREVAILING MARKET RATES WAS A MATTER WHICH NECESSITATED EXAMINATION BY THE PRESCRIBED AU THORITY AFTER GIVING THE ASSESSEES AN OPPORTUNITY OF BEING HEARD. IN CASE THE PRESCRIBED AUTHORITY, AFTER CAUSING NECESSARY ENQUI RY IN THAT REGARD, WAS SATISFIED THAT THE PROVISIONS OF SECTIO N 13 ( 1 )(C) WERE ATTRACTED, THE ASSESSEES WOULD NOT BE ENTITLED TO A PPROVAL UNDER SECTION 10 (23C)(VI) . [PARA 44] WHERE THE AMOUNT WAS GIVEN AS INTEREST-FREE ADVANCE TO THE SECRETARY OF THE SOCIETY, A PERSON WHO FALLS WITHIN THE AMBIT OF SECTION 13 ( 3 )(CC) , THE PROVISIONS OF SECTION 13 ( 1 )(C) WERE ATTRACTED AND THE ORDER OF THE PRESCRIBED AUTHORITY , IN REJECTING THE APPLICATION UNDER SECTION 10 (23C)(VI) ON THAT GROUND, DID NOT NECESSITATE INTERFERENCE. IT IS ALSO OBSERVED THAT SECTION 10(23C)(VI) LAID D OWN THE CONDITIONS THAT THE EDUCATIONAL INSTITUTION SHO ULD BE APPROVED BY THE PRESCRIBED AUTHORITY. OUR VIEW FIND SUPPORT FROM THE DECISION FROM HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF MAHARASHTRA ACADEMY OF ENGINEE RING & EDUCATIONAL RESEARCH VS DGIT (2009) 319 ITR 399(B OM.) AND THE RATIO LAID DOWN IN SCIENTIFIC EDUCATIONAL ADVANCEMENT SOCIETY VS UOI (2010) 323 ITR 84 (P & H ) AND VALLIAMMAI SOCIETY VS DGIT (2010) 327 ITR 377 (MAD. ) AND DELHI MUSIC SOCIETY VS DGIT (2013) 357 ITR 265 (DEL .). THE SOLE OBJECT OF THE ASSESSEE IS NOT EDUCATION AND TH E ITA NO.5123/MUM/2017 VIRJI LADHABHAI KDO JAIN VIDYARTHI GRIHS 12 ASSESSEE HAS NOT FULFILLED THE CONDITIONS PROVIDED U/S 10(23C)(VI) OF THE ACT, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL S), CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS DISMISS ED. FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17/01/2019. SD/- (N.K. PRADHAN) SD/- (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $%& / VICE PRESIDENT ! ) * MUMBAI; 1 DATED : 17/01/2019 F{X~{T? P.S/. $.. , '()*+,+-) / COPY OF THE ORDER FORWARDED TO : 1. 234 / THE APPELLANT 2. 534 / THE RESPONDENT. 3. 6 6 ) 7' , ( 2 ) / THE CIT, MUMBAI. 4. 6 6 ) 7' / CIT(A)- , MUMBAI 5. 9(:$'$ , 6 2,2 , ! ) * / DR, ITAT, MUMBAI 6. ;%* / GUARD FILE. / BY ORDER, $/ (DY./ASSTT. REGISTRAR) , ! ) * / ITAT, MUMBAI