This Court In The Case Of Vanita Vishram Trust v. Chief Commissioner Of Income Tax Reported In (2010) 327

PGK Writ Petition No.53 of 2011 Ram & Ashok Education Society, Mumbai.... Petitioner v/s. Chief Commissioner of Income tax,Mumbai & ors....... Respondents Mr.A.R. Singh with Mr.P.S. Savla and Mr.Sameer Dalal for Petitioner.Mr.Suresh Kumar for Respondents. ----- SMT.ROSHAN DALVI, JJ. P.C.: 1.Rule. Rule is made returnable forthwith. 2.The Petitioner is aggrieved by the order of the Chief Commissioner of Income Tax, Mumbai (�CCIT� for short)dated 16[th] September 2010, whereby the application seeking exemption under Section 10(23C)(vi) of the Income tax Act, 1961 has been rejected. The Petitioner is also aggrieved by the order dated 10[th] November 2010 passed by the CCIT, declining to entertain the Rectification Application filed by the Petitioner. 3.The Petitioner-Trust came into existence in the year 1980. The Petitioner-Trust is registered as a Charitable Trust under the provisions of the Bombay Public Trusts Act and is also registered under the Income Tax Act, 1961. 4.On insertion of Clause (vi) in Section 10(23C) of the Income Tax Act, with effect from 1.4.1999, the exemption to an Educational Institution became available only if the Institution existed solely for educational purposes and not for profit. 5.By the impugned order dated 16[th] of September 2010, the CCIT has rejected the application for exemption, mainly on three grounds viz. (a) the object of the Trust apart from education also includes encouraging the development of physique of the rising generation by starting physical cultural - institutions, to erect, conduct and run hostels and recreational centres for students and to do all such other things as are incidental or conductive to the attainment of the above aims and objects, (b) the trustees are getting benefit / deriving profit from the Trust by way of lease rent and interest free deposit of Rs.1 Crore by letting out the property of the trustees of the Trust and (c) in the Assessment Year in question the accumulated surplus is more than 60% of the amount received by way of fees. 6.This Court in the case of Vanita Vishram Trust vs. Chief Commissioner of Income Tax reported in (2010) 327 ITR 121 (Bom) has held that where the objects of the existing Trust are wide, one has to see what is the activity actually carried out by the assesee. In the present case, no such finding has been recorded by the Assessing Officer. The CCIT has held that the trustees are making profits by leasing their immovable properties to the Trust on lease rent and also by receiving interest free deposit of Rs.1 Crore. Whether the lease rent and the notional interest on interest free deposit of Rs.1 Crore together exceed the market rent payable on the property leased to the Trust by the trustees has not been considered by the CCIT. It is only if the amount received by the trustees exceeds fair market rent, it can be said that the trustees are making profits. Similarly the finding recorded by the CCIT that the accumulated surplus is more than the permissible limit is explained by the Petitioner by stating that they have spent nearly 98% of the receipts for educational purposes. However, the same could not be considered by the CCIT in view of the fact that the above explanation forwarded by the assesee was received by the CCIT subsequent to the passing of the impugned order. 7.In this view of the matter, we set aside the orders of the CCIT dated 16[th] September 2010 and 10[th] November 2010 and restore the matter to the file of the CCIT for a decision afresh and in accordance with law.the CCIT dated 16[th] September 2010 and 10[th] November 2010 and restore the matter to the file of the CCIT for a decision afresh and in accordance with law. 8.Rule is made absolute in the above terms. No costs. (ROSHAN DALVI, J.) (J.P. DEVADHAR,J.)