SETHU EDUCATIONAL TRUST, V. THE CHIEF COMMISSIONER OF

WP(MD)/8828/2011

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The case involves Sethu Educational Trust, represented by its Managing Trustee, Sri S. Mohammed Jaleel, who filed a writ petition challenging the rejection of their application for tax exemption under Section 10(23C)(vi) of the Income Tax Act, 1961. The Trust argued that their primary objective is educational, and incidental objects should not bar their claim for exemption. The Chief Commissioner of Income Tax had rejected the application based on the Trust's failure to meet certain conditions regarding the supplementary deed and the collection of capitation fees. The court referenced similar cases and precedents, suggesting that an affidavit of undertaking could address the respondent's concerns.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 697932 (HC-MADURAI)
• Appeal Type: Others
• Pronouncement Date: 24-08-2011
• Assessment Year: misc
• Other Referred Cases: digember Jain Society for Child Welfare vs. Director General of Income Tax (Exemptions)(2009) 185 Taxman 255 Delhi, M/s.Vels Institute of Science, Technology and Advanced Studies, rep. by its Managing Trustee vs. The Chief Commissioner of Income Tax III, Chennai-34
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R SATHYAMOORTHY
• Assessee Lawyers: V SANJEEVI
• Keywords: Capitation Fee; Educational trust; Income Tax; Non-profit; Writ of Certiorarified Mandamus; Management Quota
• Section: 10(23C)(vi)

Judgement Text

"1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 24.08.2011 CORAM: THE HONOURABLE MR.JUSTICE R.SUDHAKAR W.P(MD)No.8828 of 2011 and M.P(MD)No.1 of 2011 Sethu Educational Trust, Rep. by its Managing Trustee, Sri S.Mohammed Jaleel, 392, Anna Nagar, Madurai - 625 020 .. Petitioner Vs. The Chief Commissioner of Income Tax, Office of the Chief Commissioner of Income Tax, No.2, V.P.Rathinasamy Nadar Road, Bibikulam, Madurai- 625 002. .. Respondent PRAYER: Writ Petition is filed under Article 226 of the Constitution of India, to issue a Writ of Certiorarified Mandamus calling for the proceedings in C.No.2113/12/CC/MDU/TECH/2009-10, dated 30.03.2011, on the file of the respondent and quash the same and further direct the respondent to grant approval under Section 10(23C) Vi of the Income Tax Act to the petitioner herein. For Petitioner : Mr.V.Sanjeevi For Respondent : Mr.R.Sathyamoorthy O R D E R This Writ Petition has been filed to quash the proceedings in C.No.2113/12/CC/MDU/TECH/2009-10, dated 30.03.2011, issued by the respondent and to direct the respondent to grant approval under Section 10(23C)(vi) of the Income Tax Act, 1961, to the petitioner Trust. 2. Heard Mr.V.Sanjeevi, learned counsel for the petitioner and Mr.R.Sathyamoorthy, learned counsel, who appears for the respondent. 3. By consent, the Writ Petition itself is taken up for final hearing. 4. The Writ petition has been filed challenging the order passed by the Chief Commissioner of Income Tax, Madurai rejecting the petitioner Trust's application for approval under Section 10(23c)(vi) of the Income Tax Act, 1961. 5. The short facts are as follows: (1) The petitioner Trust by name Sethu Educational Trust started in the year 1994 with the following objects: Objects: The objects for which the Trust is established are education, relief to the poor, medical relief and https://hcservices.ecourts.gov.in/hcservices/ 2 advancement of any other charitable objects of general public utility not involving the carrying on of any activity for profit and for such purposes. a) To establish, support, acquire, run and/or grant aid and other financial assistance to schools, colleges, libraries, reading rooms, hostels, boarding houses, laboratories and other institutions of like nature at any place or places in the Indian Union for use of the students and the staff and also generally for the development and/or advancement of education and diffusion of knowledge amongst the public in general. b) To establish, Maintain and/or run studentships, scholarships and render other kind of aid to individuals including supply of medicines, books, stipends, medals and other incentives to study, without any distinction or casts, colour or creed. c) To grant aid, to promote, establish, support and/or maintain institution for the promotion of Science Literature, Music, Drama and Fine Arts, for the preservation of old historical monuments and for the research and other institution having similar objects for the benefit or the public in general. d) To do any other act for the advancement of general public utility not involving the carrying on or any activity for profit, without distinction of caste, colour or creed. (2) The petitioner Trust is running an Institute of Technology at Madurai and its application under the same provision was rejected on the ground that the Trust Deed should specifically show that the purposes of the Trust is only for educational purpose. It appears that the petitioner Trust has made a supplementary deed and thereafter re- submitted the application as above which was considered and rejected for following three reasons: (i) Supplementary deed is not in terms of a civil Court decree. (ii) The representative of the College has not proved that they do not collect capitation fee from students. (iii) The details of students like name and address, admitted under management quota has not been furnished. 6. The learned counsel for the petitioner contended that de hors the Supplementary Trust Deed, the original Trust deed itself is for educational purposes primarily and there are other incidental objects which will not bar the authority from considering the claim of the petitioner Trust as the motive of the Trust and its activity is purely on non-profit basis and that is the object which has to be considered by the authority. https://hcservices.ecourts.gov.in/hcservices/ 3 7. The learned counsel for the petitioner relied upon the decision rendered by this Court in W.P.No.28289 of 2010 on 13.12.2010 which decision relied upon the judgment of the Delhi High Court in digember Jain Society for Child Welfare vs. Director General of Income Tax (Exemptions)(2009) 185 Taxman 255 Delhi), wherein the Court directed the authorities to consider the claim in terms of Section 10(23C)(vi) of the Income Tax on condition that the Trust in that case shall file an affidavit of undertaking that the petitioner society would not breach any of the conditions and further the surplus funds will be utilized only for educational purposes and will not be diverted to other non-educational objectives. 8. Following the said decision, in the Writ Petition mentioned above, similar order was passed by this Court in M/s.Vels Institute of Science, Technology and Advanced Studies, rep. by its Managing Trustee vs. The Chief Commissioner of Income Tax III, Chennai-34, directing the authority to consider and grant approval under Section 10(23C)(vi) of the Income Tax Act on submitting the affidavit by the petitioner Trust. 9. It is also the contention of the learned counsel for the petitioner that no capitation fee is collected from any student and that has been set out in the affidavit filed in support of this Writ Petition and it is Governed by the Tamil Nadu Educational Institutions(Prohibition of Collections of capitation fee) Act, 1992 (Act No.57 of 1992). 10. Therefore when there is a specific law banning the collection of capitation fee, the query raised by the authority will have no relevance as the breach of such provision will entail serious consequences to the Trust or Institution concerned and there is no adverse remarks as against the Institution so far. 11. The learned counsel for the petitioner further contended that the admission in the State of Tamil Nadu, is governed by a Committee headed by a retired judge of the High Court as per the order of the Government in terms of the Supreme Court direction. Therefore, the question of admitting the students under management quota does not arise in this case. 12. The learned counsel appearing for the respondent Department contended that the petitioner can submit a detailed representation with their explanation and the same will be considered by the authority on merits. He further submitted that the authority has the power to enquire that the provisions of the Act are not misused by the Trust once it gets exemption under the Act. The said contention is justified. 13. Since the above stated provision of law has been overlooked, the authority may be directed to re-look into the issue afresh. In the present case, it is seen that objects of the petitioner Trust is primarily for educational purposes and the incidental objects are relatable to the main objects. In this case, the Department's apprehension of diversion of funds towards other objects can be purposefully considered if the petitioner Trust gives an affidavit of undertaking supported by materials to show that the income generated by https://hcservices.ecourts.gov.in/hcservices/ 4 the Institution will be utilised solely for educational purposes. The authority can impose any such condition as it may justify to ensure the object as above is achieved. If the petitioner Trust satisfies the requirement of utilisation of the income solely for educational purpose and if the petitioner is able to establish before the authority on such terms, the respondent authority can consider the claim for grant of exemption under Section 10(23C)(vi) of the Income Tax Act by imposing similar condition as has been imposed in the case in Digember Jain Society for Child Welfare vs. Director General of Income Tax (Exemptions) [(2009) 185 Taxman 255 Delhi] and in M/s.Vels Institute of Science, Technology and Advanced Studies rep. by its Managing Trustee vs. The Chief Commissioner of Income Tax III, Chennai in W.P.No.28289 of 2010, dated 13.12.2010. 14. In view of the above, the impugned order passed by the respondent dated 30.03.2011, is set aside and the matter is remitted back to the file of the respondent for reconsideration on the above lines. The Writ Petition is ordered as above. No Costs. Consequently, connected miscellaneous petition is closed. Sd/- Assistant Registrar (AE) /True copy/ Sub Assistant Registrar To The Chief Commissioner of Income Tax, Office of the Chief Commissioner of Income Tax, No.2, V.P.Rathinasamy Nadar Road, Bibikulam, Madurai- 625 002. +1CC TO M/S.V.SANJEEVI, ADVOCATE SR.28994 +1CC TO M/S.R.SATHIAMOORTHY, ADVOCATE SR.28956 Pm SR : 08.09.2011 : 4p/4c W.P.(MD)No.8828 of 2011 24.08.2011 https://hcservices.ecourts.gov.in/hcservices/ "