The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S Intant Jesus Education Society

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. LTA. No. 36 of 2017DATE OF DECISION: 14.07.2017 The Commissioner of Income Tax (Exemptions), Chandigarh APPELLANT Versus M/s Intant Jesus Education Society —... RESPONDENT CORAM :- HON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE AVNEESH JHINGAN Present:Mr. Denesh Goyal, Advocate,for the appellant. "SRO AVNEESH JHINGAN, J. 1]The appellant-revenue impugns the order dated 26.04.2016,Annexure A-2, passed by the Income Tax Appellate Tribunal, DivisionBench, Chandigarh (in short “the Tribunal’) through the present appeal filedunder Section 260-A of the Income Tax Act, 1961 (in short “the Act”) in ITANo. 777/Chd/2015, claiming following substantial questions of law :- (1) Whether on the facts and circumstances of thecase, the order of the Tribunal is not perverse indirecting the Principal Chief Commissioner ofIncome Tax to grant approval under Section 10(23C) (v1) of the Act on the ground that the Rightof Children to Free and Compulsory EducationAct, 2009, is not applicable in the case ofapplicant whereas the Principal ChiefCommissioner of Income Jax had denied ITA No. 36 of 2017 exemption on the ground that applicant wasexisting for the purposes of profit as it was notproviding reservation to EWS in admission withgrant of full tuition fee waiver to them therebyindicating its profit motive, (11) Whether on the facts and circumstances of thecase, the Jribunal’s order is not perverse indirecting grant of approval on the basis ofgenuineness of activities which is a conditionenvisaged in the second proviso and cannotoverride the basic requirement of existing solelyfor educational purposes and not for profit. (111) Whether on the facts and circumstances ofthe case, the Tribunal was justified 1n directing togrant exemption without commenting on thePrincipal Chief Commissioner of Income Tax'sobservation that the assessee had failed to fulfilthe crucial condition that it was existing solelyfor educational purpose and not for purpose of profit. (iv) Whether on the facts and circumstances ofthe case, the Tribunal has erred in directing theapproval to be accorded instead of reverting itback for re-examination in the light of itsfindings, |Briefly, the facts of the appeal, necessary for adjudication of thecontroversy involved, may be noted. The respondent-assessee 1s a societyregistered under the Societies Registration Act, 1860, on 12.09.1986. Thesociety 1s running St. Stephen's Preparatory School in Sector 46-A,Chandigarh, since the year 2006 and the school 1s from Class Play to Class K.G. The respondent-assessee applied for grant of exemption under Section| ITA No. 36 of 2017 -~3 10 (23C) (v1) of the Act for the year 2013-14 onwards. The exemption wasapplied vide application dated 22.-09.2014. The application for exemptionwas processed and a letter dated 16.09.2015 was issued by the PrincipalChief Commissioner of Income Tax, N.W. Region, Chandigarh, asking forcertain information including the information about compliance made toRight of Children to Free and Compulsory Education Act, 2009 (commonlyknown as RIE Act). The respondent-assessee filed reply providing theinformation asked for and further, the assessee took the stand that the RTEAct is not applicable to it, as its school 1s only from Class Play to Class K.G,3]The Principal Chief Commissioner of Income Tax, vide orderdated 30.09.2015, Annexure A-1, rejected the application under Section 10(23C) (v1) of the Act, primarily on the ground that the assessee had not beencomplying with the provisions ofRTE Act. 4 Agerieved of the order of the Principal Chief Commissioner ofIncome Tax, the respondent-assessee filed appeal before the Tribunal. TheTribunal, vide order dated 26.04.2016, allowed the appeal of the assessee. Itheld that provisions of the RTE Act are not applicable to the school beingrun by the respondent — assessee. The Tribunal set aside the order of thePrincipal Chief Commissioner of Income Tax and directed him to grantregistration to the assessee. Hence the present appeal by the revenue, 4]We have heard learned counsel for the appellant-revenue,6]It would be expedient to examine relevant statutory provisions.7 Section 10 (23C) (v1) of the Act 1s re-produced below | “any university or other educational institutionexisting solely for educational purposes and not ITA No. 36 of 2017 for purposes ofprofit, other than those mentionedin sub-clause (iilab) or sub-clause (iliad) andwhich may be approved by the prescribedauthority. Under the aforesaid provision, any income derived by an assessee shall not form part of its taxable income in the case of any university or othereducational institution which is existing solely for educational purposeswithout any profit motive other than those mentioned in sub-clause (111ab)or (111ad) provided prior approval is accorded by the prescribed authority.8 Clauses (1) and (n) of Section 2 and Section 12 of the RTE Act read thus :- “2 (f) — “elementary education” means theeducation from first class to eighth class, 2 (n) - “school” means any recognised schoolimparting elementary education and includes - (i) a _ school established, owned controlled by the appropriate Governmentor a local authority; (ii) an aided school receiving aid or grantsto meet whole or part of its expenses fromthe appropriate Government or the localauthority, (iii) a school belonging to specifiedcategory, and (iv) an unaided school not receiving anykind of aid or grants to meet its expensesfrom the appropriate Government or thelocal authority. ITA No. 36 of 2017 12, Extent ofschool's responsibility forfree andcompulsory education —(1) For the purposes ofthis Act, a school, - (a)specified in sub-clause (i) of clause(n) of Section 2 shall provide freeandcompulsoryelementaryeducation to all children admittedtherein,(n) of Section 2 shall provide freeandcompulsoryelementaryeducation to all children admittedtherein, (b)specified in sub-clause (ii) of clause(n) of Section 2 shall provide freeandcompulsoryelementaryeducation to such proportion ofchildren admitted therein as itsannual recurring aid or grants soreceived bears to its annualrecurring expenses, subject to aminimum oftwenty-five per cent,(n) of Section 2 shall provide freeandcompulsoryelementaryeducation to such proportion ofchildren admitted therein as itsannual recurring aid or grants soreceived bears to its annualrecurring expenses, subject to aminimum oftwenty-five per cent,(c)specified in sub-clauses (iii) and (iv)of clause (n) of Section 2 shall admitin Class I, to the extent of at leasttwenty-five per cent of the strengthof that class, children belonging toweaker section and disadvantagedgroup in the neighbourhood andprovide free and compulsoryelementary education ill _ itcompletion :of clause (n) of Section 2 shall admitin Class I, to the extent of at leasttwenty-five per cent of the strengthof that class, children belonging toweaker section and disadvantagedgroup in the neighbourhood andprovide free and compulsoryelementary education ill _ itcompletion : Providedfurther that where a schoolspecified in clause (n) ofSection 2 impartspre-school education, the provisions ofclauses (a) to (c) shall applyfor admissionto such pre-school education. (2) The school specified in sub-clause (iv) of clause (n) of Section 2providing free and compulsory elementaryeducation as specified in clause (c) ofsub-section (1) shall be reimbursedexpenditure so incurred by it to the extentof per-child-expenditure incurred by theState, or the actual amount charged fromthe child, whichever is less, in such maneras may be prescribed | Providedfurther that where a schoolspecified in clause (n) ofSection 2 impartspre-school education, the provisions ofclauses (a) to (c) shall applyfor admissionto such pre-school education. (2) The school specified in sub-clause (iv) of clause (n) of Section 2providing free and compulsory elementaryeducation as specified in clause (c) ofsub-section (1) shall be reimbursedexpenditure so incurred by it to the extentof per-child-expenditure incurred by theState, or the actual amount charged fromthe child, whichever is less, in such maneras may be prescribed | Provided that such reimbursementshall not exceed per-child-expenditureincurred by a school specified in sub-clause (i) of clause (n) of Section 2 : Provided further that where suchschool is already under obligation toprovide free education to a_ specifienumber ofchildren on account of ifhavingreceived any land, building, equipment orother facilities, either free of cost or at aconcessional rate, such school shall not beentitled for reimbursement to the extent ofsuch obligation. (3) Every school shall provide suchinformation as may be required by theappropriate Government or the localauthority, as the case may be.5 Q The “elementary education” has been defined 1n Section 2 (f) of the RTE Act to mean education from class 1 to &. The definition of “school!contained in Section 2 (n) of the RTE Act inter-alia postulates that schoolwhich imparts education from class | to 8 including school owned of ITA No. 36 of 2017 _/- controlled by Government or local authority, a school which 1s fully aided orpartially aided by Government or local authority for its expenses, schoolbelonging to specified category and unaided school not receiving any kindof aid or grants to meet its expenses from the appropriate Government orlocal authority. Section 12 of the RTE Act deals with extent of school'sresponsibility for free and compulsory education. It provides for situationsWhere schools are under obligation to impart free and compulsoryeducation. 10,The only issue involved in the present appeal is whether theprovisions of the RIFE Act would apply to the school being run bythe assessee-society, which imparts education from Class Play to Class K.Gonly. 114It is not disputed that the school in question 1s only upto K.Gclass. No doubt has been raised with regard to the genuineness of theactivities of the society. There was no challenge with regard to genuinenessof the activities of the society either before the Tribunal or before this court,12.The Tribunal, after considering Sections 2 (1), (n) and 12 of theRTE Act, came to the conclusion that these provisions are applicable to theschools imparting education from Ist Class to 8[th]Class, and hence the schoolof the respondent — assessee will not be governed by the RTE Act. Theoperational part of the order of the Tribunal 1s reproduced below :- “A bare perusal ofthe provisions ofSection 2 (n)read with Section 2 (f) would reveal that theschools which are covered by the provisions ofRTE Act are those which impart elementary “A bare perusal ofthe provisions ofSection 2 (n)read with Section 2 (f) would reveal that theschools which are covered by the provisions ofRTE Act are those which impart elementary education, meaning education from class I toclass &. In the present case it is an undisputedfact that the school run by the assessee society isimparting education below class I. Clearly theassessee society is not a school as per thedefinition given in the RTE Act in section 2 (n)and is therefore not covered by the provisions ofthe RTE Act. Further the provisions ofSection 12(1) (C) read along with the proviso reveals thatwhere the schools imparting elementaryeducation are also imparting pre schooleducation, the provision ofcompulsory admissionto 25% students belonging to the weaker sectionof the society, shall apply to the pre schooleducation admission also. In the present case theschool run by the assessee society is notimparting elementary education in the first placetherefore the question of attracting the provisionofsection 12 (1) (C) and the proviso thereto doesnot arise at all. Therefore in our consideredopinion the school is not governed by theprovision OfRTE Act at all and the basic premiseof the learned Principal Chief Commissioner ofIncome Tax for denying approval of the assesseesociety thereforefails.” 13.Learned counsel for the appellant — revenue has not been ableto show that the provisions of the RTE Act are applicable in the presentcase. He has further not been able to show that the findings recorded by theTribunal are in any way illegal or perverse warranting interference by this ITA No. 36 of 2017 Court. Consequently, no substantial question of law arises and the appeal stands dismissed. (AVNEESH JHINGAN )JUDGE July 14, 2017 ndjWhether speaking/reasonedWhether Reportable (AJAY KUMAR MITTAL)JUDGE YesYes