Navadisha Educational Trustno v. The Chief Commissioner Of Income Tax Chennai – Iii

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P.No.5560 of 2012and M.P.No.1 of 2012 Navadisha Educational TrustNo.635/1, 3[rd] Cross StreetKalki NagarNear AG'S Colony VI Main RoadVelachery, Chennai – 600 042.Represented by its Managing TrusteeMs.Rukmani Ramachandran. Vs. ... Petitioner 1.The Chief Commissioner of Income Tax Chennai – III, 124, M.G.Road Chennai – 600 034. 2.The Director of Income-tax (Exemptions), 124, M.G.Road Chennai – 600 034. 3.The Assistant Director of Income-tax (Exemptions) - III 124, M.G.Road Chennai – 600 034.... Respondents Writ Petition filed under Article 226 of the Constitution ofIndia praying for the issuance of Writ of Certiorari, callingfor the records of the first respondent and quash the impugnedorder in C.No.CC III/19/10(23C)(vi)/10-11 dated 24.03.2011 anddirect the 1[st] respondent to grant approval under Section 10(23C)(Vi) of the Act. For Petitioner : Mr.R.Venkadesh NarayananFor Respondents : Ms.Hema Muralikrishnan. ORDER The petitioner is an educational trust having beenconstituted pursuant to a Deed of Public Trust dated 28.05.1997,registered as Document No.1061 of 1997, on the file of Sub- https://hcservices.ecourts.gov.in/hcservices/ Registrar, Adyar. The preamble part of the Trust Deed statesthat the author of the Trust is deeply involved in theMontessori method of education of children. She has post-graduation in English from a reputed institution in Chennai inthe year 1998 and has completed her International Diploma inMontessori Studies, awarded by the Association MontessoriInternationale, having its head-quarters in Netherlands in theyear 1991, successfully. The author of the Trust DeedMs.Rukmani Ramachandran hails from a literary family and hermother is a Tamil writer and a classical dance teacher atKalakshetra. Her grandfather was a freedom fighter and arenowned Tamil literary figure. 2. The author of the Trust has been in Montessori method ofeducation for six years prior to the date on which the TrustDeed was registered and she is committed to the Montessorimethod of education and she edited Dr.Maria Montessori'slectures into a book titled “Creative Development in the Child-The Montessori Approach”. The author of the Trust was desirousof establishing a Trust of Public nature under the name“Navadisha Educational Trust” and the objects of the Trust beingto work for intergrated development of children, to establish,run, maintain and carry on educational institution orinstitutions vocational training centres and polytechnics and ifthought fit, to start or take over other educationalinstitutions and to receive gifts or donation in cash or in kindeither as contribution towards the corpus fund or for carryingout any specific purpose or objects of the Trust. 3. The petitioner applied for grant of exemption underSection 10(23C)(vi) of the Income Tax Act, 1961 for the year2009-10 dated 31.03.2010 in Form No.56D. The respondent videcommunication dated 13.01.2011 called for certain details forconsidering the application for grant of exemption, which werefurnished by the petitioner vide letter dated 04.02.2011. Thiswas followed by a response dated 23.03.2011 to a proceedingsissued by the Income Tax Officer (Head Quarters) dated08.03.2011, wherein the petitioner stated about the objects ofthe Trust and the Trust has started a school and has beenrunning the school for 13 years and that they adopted MontessoriSystem of Education and a detailed note on the nature of theeducational activities of the school was enclosed with theresponse dated 23.03.2011. Further the petitioner would statethat for the past 13 years they have been in academics andrunning educational institutions and their objects neitherprovide for any commercial activities or addressing to thesociety in general nor they have conducted any activity of suchnature. Thus, they reiterated that the Trust exists solely forthe purpose of running educational institution and no otheractivity of any nature. A detailed note on “How the children participate and learn” was enclosed with the response dated23.03.2011. 4. The first respondent has passed the impugned orderstating that Section 10(23C)(vi) of the Act stipulates that theinstitution/trust should exist solely for educational purposeand not for any other purpose including objects of generalpublic utility. Further the first respondent stated that he hastaken a stand in several cases that for the purpose of approvalunder Section 10(23C)(vi), the objects of the Trust/Institutionshould include only educational purpose and not for any otherpurpose. Therefore, the application made by the petitionerTrust was found not eligible for granting approval under Section10(23C)(vi) of the IT Act and hence the application wasrejected. Challenging the same, this writ petition has beenfiled. 5. Heard Mr.R.Venkadesh Narayanan, learned counsel for thepetitioner and Ms.Hema Muralikrishnan, learned standing counselfor the respondents and carefully perused the materials placedon record. 5. Heard Mr.R.Venkadesh Narayanan, learned counsel for thepetitioner and Ms.Hema Muralikrishnan, learned standing counselfor the respondents and carefully perused the materials placedon record. 6. I am of the considered view that the impugned order isan outcome of narrow and pedantic approach on the part of thefirst respondent, namely the Chief Commissioner of Income Tax.Though the first respondent in the impugned order has referredto the objects Trust, it lost sight of the fact that objects ofTrust cannot be read in a truncated fashion. The firstrespondent was carried away by one of the objects of the Trust,namely “to work for the integrated development of children”.Unfortunately, the first respondent did not take note of thedocuments, which were called for from the petitioner andfurnished by the petitioner along with a letter dated04.02.2011, after which there was personal hearing which wasfixed and further documents were given and the petitioner hassubmitted a representation styled as “response to the noticedated 08.03.2011”, wherein they have given a detailed write upon as to how the children participate and learn. Withoutconsidering all these aspects, the respondent, has mechanicallypassed the impugned order and also by stating that he has takena stand in several cases that for the purpose of approval underSection 10(23c)(vi), the objects of the Trust should includeonly educational purpose. There is no finding by the firstrespondent that one of the objects of the Trust that “to workfor the integrated development of children” does not includeeducational activity, more particularly, based on the materialsfurnished by the petitioner. There is not even a whisper thatthe materials furnished by the petitioner is either been foundincorrect or is a false statement. Therefore, theseobservations would be sufficient to set aside the impugnedorder. 7. Nevertheless, learned counsel for Revenue sought tosustain the impugned order by referring to the decision of aHon’ble Division Bench of High Court of Andhra Pradesh inR.R.M.Educational Society Vs.Chief Commissioner of Income Taxreported in [2011] 339 ITR 323 (AP). The Division Bench whileconsidering the objects of the Society in the said case heldthat the main or primary objects are distributive, each andeveryone of the objects must relate to “education” in order thatthe institution may be held entitled for the benefits underSection 10(23-c)(vi) of the Act. In paragraph 2 of theJudgement, the objects of the Society have been set out whereapart from opening institutions, the said Society was desirousof opening hostels for poor students, organising workshop etc.,Therefore, in my view, the said decision cannot be applied tothe facts and circumstances of this case and the said decisionis clearly distinguishable. 8. The next decision relied on by the learned counsel forRevenue is an order passed by a learned single Judge of thisCourt dated 11.03.2016 in the case of B.S.Abdul Rahman Instituteof Science and Technology Vs. The Chief Commissioner of IncomeTax in W.P.No.34102 of 2015. I am informed that the Societyfiled writ appeal against the said order and the writ appeal waswithdrawn since due to subsequent events, the Society got arelief. Therefore, the issue which was considered in the casehas to be left open and moreover, the Court rejected the plea ofthe said writ petitioner largely relying upon Clause 4 of theobjects of the Trust. Hence, the said decision also does notapply to the facts of the case. 8. The next decision relied on by the learned counsel forRevenue is an order passed by a learned single Judge of thisCourt dated 11.03.2016 in the case of B.S.Abdul Rahman Instituteof Science and Technology Vs. The Chief Commissioner of IncomeTax in W.P.No.34102 of 2015. I am informed that the Societyfiled writ appeal against the said order and the writ appeal waswithdrawn since due to subsequent events, the Society got arelief. Therefore, the issue which was considered in the casehas to be left open and moreover, the Court rejected the plea ofthe said writ petitioner largely relying upon Clause 4 of theobjects of the Trust. Hence, the said decision also does notapply to the facts of the case. 9. Learned counsel for the petitioner referred to thedecision of a Division Bench of High Court of Delhi in the caseof Jaypee Institute of Information Technology Society Vs.Director General of Income Tax (Exemption) reported in (2009)227 CTR (Del) 124. In the said case, the claim for exemptionunder Section 10(23C)(vi) was rejected on the ground that thepetitioner Institute is having multiple objectives, of whicheducation is only one of them. While testing the correctness ofthe said order, the Hon’ble Division Bench observed that theorder of the Chief Commissioner was a very narrow and pedanticapproach. After referring to several decisions, it was held thatthe expression "any educational institution" occurring inSection 10(23C)(vi) of the Act, should be given a wider meaning.At this juncture, it would be relevant to quote paragraph 12 ofthe judgment, which reads as follows:“12. On the contrary, the Supreme Court has given widermeaning to the expression "any educational institution"occurring in Section 10(23C)(vi) of the Act. Under thisphrase, even those institutions would be covered which may or may not have to do anything with the university.The courts have expressed the opinion, by catena ofjudgments, that categories provided in the aforesaidprovision are so different that the university cannot bethe genus and "other educational institution" the speciesthereof. Once a college is established by an institution,that would come within the expression "other educationalinstitution". {See – Addl Commissioner of Income Tax v.Aditanar Educational Institution, 224 ITR 310 (SC); Addl.CIT v. M/s. Hamdard Dawakhana (Wakf), 157 ITR 639 (Del);CIT v. M/s. Venkatasubbiah Reddiar (K.S.), 221 ITR 18(Mad)}.” may or may not have to do anything with the university.The courts have expressed the opinion, by catena ofjudgments, that categories provided in the aforesaidprovision are so different that the university cannot bethe genus and "other educational institution" the speciesthereof. Once a college is established by an institution,that would come within the expression "other educationalinstitution". {See – Addl Commissioner of Income Tax v.Aditanar Educational Institution, 224 ITR 310 (SC); Addl.CIT v. M/s. Hamdard Dawakhana (Wakf), 157 ITR 639 (Del);CIT v. M/s. Venkatasubbiah Reddiar (K.S.), 221 ITR 18(Mad)}.” 10. This Court had an occasion to test the correctness ofthe order passed by the Chief Commissioner in the case of TamilNadu Kalvi Kapu Arakkattalai Vs. Chief Commissioner of IncomeTax reported in (2014) 90 CCH 0184 ChenHC. The order impugnedin the said writ petition was an order rejecting the renewal ofrecognition sought for by the petitioner under Section 10(23C)(vi) on the ground that the said Trust is not existing solelyfor the purpose of education. This Court considered thestatutory provisions and held as follows:“14. In my view, while considering the claim forexemption, the substance of the claim would be morerelevant than the form. In other words, the Authorityshould not be safely guided by the objects set out invarious clauses in the Instrument of Trust (Deed ofTrust). Rather, the authority should be guided by theactivities of the Trust, as to how the funds areemployed, since the exemption sought for is under Chapter–III of the Act, which deals with incomes which do notform part of the total income. Thus, under Chapter-III,more particularly, Sections 10 to 13A of the Act, the Actbrings certain categories of exemption and incomesfalling within those categories are completely exemptfrom the purview of the Act, as they are not at all to beincluded in the total income of the assessee. Therefore,such type of exemption/s has/ have to be distinguishedfrom certain types of income, which are included in thetotal income of the assessee, but in respect of whichstatute provides relief by way of deduction in computingthe total income, by granting rebate of tax and bygranting certain other reliefs from the tax payers.” 11. Thus, applying the decisions in the case of JaypeeInstitute of Information Technology Society Vs. Director Generalof Income Tax (Exemption) reported in (2009) 227 CTR (Del) 124and Tamil Nadu Kalvi Kapu Arakkattalai Vs. Chief Commissioner ofIncome Tax reported in (2014) 90 CCH 0184 ChenHC to the facts ofthe case on hand, the only conclusion that could be arrived isto hold that the impugned order is unsustainable. Unfortunately, the first respondent has not even made anyobservation as regards the elaborate submissions made by thepetitioner with regard to the manner in which they areconducting the institution for over 13 years as of 2011.Further, the specific assertion made by the petitioner that forall the years they have been on academics only, has not beenfound to be incorrect by the first respondent. Thus, on accountof narrow interpretation of the provisions, an erroneous orderhas been passed. Thus, for the above reasons, the writ petition is allowedand the impugned order is set aside . The first respondent isdirected to consider the application of the petitioner and grantapproval to the petitioner Trust under Section 10(23C)(vi) ofthe Act within a period of four weeks from the date of receiptof a copy of this order from the date of theapplication/relevant assessment year. No costs. Consequently,the connected miscellaneous petition is closed. Sd/-Assistant Registrar(CS V) //True copy// gpa Sub Assistant Registrar To 1.The Chief Commissioner of Income Tax Chennai – III, 124, M.G.Road Chennai – 600 034. 2.The Director of Income-tax (Exemptions), 124, M.G.Road Chennai – 600 034. Thus, for the above reasons, the writ petition is allowedand the impugned order is set aside . The first respondent isdirected to consider the application of the petitioner and grantapproval to the petitioner Trust under Section 10(23C)(vi) ofthe Act within a period of four weeks from the date of receiptof a copy of this order from the date of theapplication/relevant assessment year. No costs. Consequently,the connected miscellaneous petition is closed. Sd/-Assistant Registrar(CS V) //True copy// gpa Sub Assistant Registrar To 1.The Chief Commissioner of Income Tax Chennai – III, 124, M.G.Road Chennai – 600 034. 2.The Director of Income-tax (Exemptions), 124, M.G.Road Chennai – 600 034. 3.The Assistant Director of Income-tax (Exemptions) - III 124, M.G.Road Chennai – 600 034. +1cc to Mrs.Hema Muralikrishnan, Advocate SR.No.48648+1cc to Mr.Subbarayan Ayar, Advocate SR.No.48711 PVS(CO)GN(13/08/2018) W.P.No.5560 of 2012and M.P.No.1 of 2012 https://hcservices.ecourts.gov.in/hcservices/