The Commissioner Of Income Tax(Exemptions), Pune v. Deccan Education Society

R.M. AMBERKAR (Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL (IT) NO. 400 OF 2016 The Commissioner of Income Tax(Exemptions), Pune..Appellant Versus Deccan Education Society ..Respondent ................... Mr. Suresh Kumar for the AppellantMr. Suresh Kumar for the Appellant ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : NOVEMBER 26, 2018. P.C.: 1.This appeal is filed by the Revenue challenging thejudgment of the Income Tax Appellate Tribunal, Pune ("theTribunal" for short) dated 13.7.2015. The appeal relates tothe Assessment Year 2008-09. The Revenue has presented the following question for our consideration : “(i) Whether on the facts and in the circumstances of the caseand in law, the Tribunal was justified in holding that exemptionu/S. 10(23C)(iiiab) is available to the society as a whole, whenin fact some of the institutions under the assessee trust areunaided and fall outside the purview of Section 10(23C)(iiiab)of the Act?”and in law, the Tribunal was justified in holding that exemptionu/S. 10(23C)(iiiab) is available to the society as a whole, whenin fact some of the institutions under the assessee trust areunaided and fall outside the purview of Section 10(23C)(iiiab)of the Act?” 2.The respondent - assessee is a registered PublicCharitable Trust. The assessee runs a large number ofeducational institutions such as primary and highersecondary schools, arts, science, commerce and lawcolleges, vocational institutions like nursing, physiotherapy,management and nursing colleges. These institutions aresituated at various places in the State of Maharashtra. TheTrust was established by Lokmanya Tilak and is in existencesince more than 125 years. For the said assessment year2008-09 in the return filed, the assessee claimed exemptionunder Section 10(23C)(iiiab) of the Income Tax Act, 1961( "the Act" for short ). The assessing ofÏcer examined theaudited accounts of the assessee in detail. In so far as theinstitutions which were receiving grants from theGovernment and those which did not receive such grants butwhose total receipts were less than Rs. One Crore, theassessing ofÏcer did not disturb the assessee's claim ofexemption. However, the assessing ofÏcer noticed that therewere three educational institutions run by the assesseewhich did not receive grant from the Government and whosetotal receipts exceeded Rs. One Crore during the relevant period. He was of the opinion that qua these institutions, theassessee's claim of exemption was not valid. Accordingly, heframed assessment. The CIT (Appeals) rejected the appealof the assessee upon which the issue was carried in furtherappeal before the Tribunal. The Tribunal by the impugnedjudgment, allowed the assessee's appeal. The Tribunalrejected the Revenue's contention that the assessee was notexisting solely for educational purpose. The Tribunal was ofthe opinion that the exemption under Section 10(23C)(iiiab)was in relation to the assessee and was not specific to theinstitutions individually run by the Trust. The Tribunalreferred to and relied upon the Judgment of the SupremeCourt in the case of Aditanar Educational Institution Vs.Additional Commissioner of Income Tax reported in[1997] 90 Taxman 528 (SC). 3.Learned counsel for the Revenue submitted that theTribunal committed serious error in allowing the assessee'sappeal. He pointed out that there were three educationalinstitutions run by the assessee trust which neither receivedGovernment grant and their income would not be exempt since the total receipts exceeded Rs. One Crore. Qua theseinstitutions, the assessee's claim of exemption was not valid.Learned counsel argued that in the decision in the case ofAditanar Educational Institution (supra), this question did notcome up for consideration before the Supreme Court. 3.Learned counsel for the Revenue submitted that theTribunal committed serious error in allowing the assessee'sappeal. He pointed out that there were three educationalinstitutions run by the assessee trust which neither receivedGovernment grant and their income would not be exempt since the total receipts exceeded Rs. One Crore. Qua theseinstitutions, the assessee's claim of exemption was not valid.Learned counsel argued that in the decision in the case ofAditanar Educational Institution (supra), this question did notcome up for consideration before the Supreme Court. 4.Having heard the learned counsel for the Revenue andhaving perused the material on record, in our opinion, thecentral question is whether the exemption under Section10(23C)(iiiab) is specific to the assessee trust or whethersuch exemption can be examined by further bifurcating theposition of different institutions which are run by theassessee trust. The Revenue's ground that the assesseetrust did not exist solely for the purpose of educationalactivity, needs to be recorded for rejection. It is by now wellsettled through various series of judgments of the SupremeCourt that an educational institution is not precluded fromgenerating reasonable surplus. Merely because, in theprocess of running an educational institution, the surplusfunds are generated, would not disqualify the institution frombeing an institution existing solely for the educational purpose. In fact, this was a view taken by the Supreme Courtin the case of Aditanar Educational Institution (supra). 5.Section 10(23C)(iiiab) grants exemption in relation toany income received by any person on behalf of anyuniversity or other educational institution existing solely foreducational purposes and not for the purpose of profit, andwhich is wholly or substantially financed by the Government.This provision, thus, exempts the income received by aperson on behalf of the institutions specifying therequirements of the said clause. The exemption is notrelatable to the individual institution run under the commonumbrella of a Trust. Therefore, if the assessee trust satisfiesthe statutory requirement noted above, the exemptionprovision would apply, irrespective of the fact that in isolatedcases of a few institutions runs by such Trust, therequirement may not be seen to have been fulfilled. From theabove, it is very clear that it is the trust or the society thathas to apply for registration and claim exemption. Had itbeen the intention of the legislature to grant exemption onlyto the institutions individually or independently and not to the society as a whole, the language would have beendifferent. The society or trust may run more than oneinstitutions. Therefore, the argument of the Revenue that itshould be institution specific and not the society as a wholein our opinion is not correct. 6.Thus, we are broadly in agreement with the viewexpressed by the Tribunal. No question of law arises. TheIncome Tax Appeal is dismissed. [ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ]