People’s University v. The Principal Chief Commissioner

HIGH COURT OF MADHYA PRADESH AT JABALPUR Writ Petition No. : 12193 OF 2015 People’s University - V/s - The Principal Chief Commissioner of Income Tax & Another Present: Hon’ble Shri Justice Rajendra Menon, Acting Chief Justice; and, Hon’ble Shri Justice Anurag Shrivastava. ---------------------------------------------------------------------------------------- Shri Sumit Nema, learned counsel for the petitioner. Shri Sanjay Lal, learned counsel for respondent/Revenue. ---------------------------------------------------------------------------------------- O R D E R––(27072016) Challenging order annexure P-1 and P-2 dated 31.03.2014 and 31.03.2015 in the matter of assessment of liability on the petitioner/assesse for the year 2012-2013 and 2013-2014 onward this writ petition has been filed. Various grounds are raised in the writ petition and the contention advanced is that the Revenue has committed error in refusing to grant exemption to the petitioner, an educational institute, under Section 10(23C)(vi) of the Income Tax Act and has imposed liability without considering the provisions correctly. Shri Sanjay Lal learned counsel for the revenue by filing detailed return has refuted the aforesaid. During the course of hearing, it transpires that recently on 10.03.2015 the Hon’ble Supreme Court in the case of Queen’s Educational society Vs. Commissioner of Income Tax (2015) 55 Taxmann.com 255 has considered the question of imposing liability on Educational Institution. The provisions of Section 10(23C) and the profit motive in the matter of running and functioning of an Educational Institute and after detailed analyses of various aspects of the matter, the law has been crystalized in para 11 in following terms : 11. Thus, the law common to Section 10(23C) (iiiad) and (iv) may be summed up as follows: (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. –(2) The predominant object test must be applied the purpose of education should not be submerged by a profit making motive. (3) A distinction must be drawn between the making of a surplus and an institution being carried on “for profit”. No inference arises that merely because imparting education results in making a profit, it becomes an activity for profit. (4) If after meeting expenditure, a surplus arises incidentally from the activity carried on by the educational institution, it will not be cease to be one existing solely for educational purposes. (5) The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons. Now in the light of aforesaid judgment the question has to be considered and a decision taken. That apart, in para 25 also certain analyses have been made with observations regarding right of an assesse to be considered. The Hon’ble Supreme Court in this case has remanded the matter back to the Assessing Officer for reconsideration, keeping in view the same we deem it appropriate to remand the matter back to the Principal Chief Commissioner Income Tax, Aaykar Bhawan, Hoshangabad Road, Bhopal for reconsideration, accordingly, on the assesse filing a certified copy of this order along with a copy of the order passed in the case of Queen’s Educational Society (supra). The Chief Commissioner shall take note of the principle laid down by the Supreme Court as indicated hereinabove and after considering the provisions of sub section 1(iii) of Section 10(23C) and the proviso thereto shall take a decision in the matter. We make it clear that we have not expressed any opinion on the merits of the claim and it is exclusively for the Chief Commissioner to take a decision in the matter. We make it clear that we have not expressed any opinion on the merits of the claim and it is exclusively for the Chief Commissioner to take a decision in the matter. That apart, during the course of hearing Shri Sanjay Lal, learned counsel for the Revenue had raised an objection to say that Annexure P-1 dated 31.3.2014 pertains to assessment year 2012-2013 and 2013-2014 onwards, petitioner had not challenged the aforesaid order and, therefore, they cannot be permitted to challenge it now after assessment order annexure P-2 was passed on 31.3.2015 for the subsequent year. However, Shri Sumit Nema, learned counsel for the petitioner submits that Annexure P-1 dated 31.3.2014 was not challenged because no tax liability was imposed upon petitioner but now as certain findings recorded in annexure P-1 is relied upon to pass the impugned order annexure P-2 to impose liability and assessment tax the petitioner is required to challenge the same. ss We find no force in the objection raised by Shri Sanjay Lal in the matter of challenging the order annexure P-1. Both the orders are set aside and remanded back to the competent authority for reconsideration. With the aforesaid, the writ petition stands disposed of. (RAJENDRA MENON) ACTING CHIEF JUSTICE (ANURAG SHRIVASTAVA) JUDGE