It is notable that CBDT on 17/08/2015 has issued circular no. 14/2015 setting out the scope of enquiry  before granting exemption and conditions which do not have a bearing on the approval to an educational institute u/s 10(23C)(vi). This Step by CBDT would certainly put to end arbitrary orders of rejections on frivolous and untenable grounds.

One of such interesting and untenable reason advanced for rejection has been set aside by the High Court of Uttarakhand. It was contended by the Chief Commissioner of Income Tax that the application for approval under Section 10(23C)(vi) must be made by the educational institution itself and not by the trust/society who runs such educational institute.

Case No.: Special Appeal No. 340/2015
CIT (Appellant) vs Maharani Luxmi Bai Memorial  Educational Society (Respondent)
Order Date: 29-07-2015
Coram: K.M. Joseph, C.J. ;  V.K. Bist, J.

Facts of the Case:
Maharani Luxmi Bai Memorial Educational Society was running an educational institution in the name and style of Doon (PG) College of Agriculture Science and Technology. It was granted registration under Section 12A of the Income Tax Act by the CIT,  Dehradun, treating it as a charitable society. The Society applied for exemption under Section 10(23C)(vi) of the Income Tax Act for the financial year 2008-2009. The same was rejected stating that few objects of the society as mentioned in the memorandum, do not fall within the definition of “solely for educational purposes”.  On appeal, The Single Judge Bench of the High Court allowed the writ petition setting aside the order with direction to the Prescribed Authority to take a decision afresh. An special appeal was preferred by CIT before a division bench of the High Court against the order of the Single Judge.

The first contention raised before the division bench was that the educational institution itself is required to move the Application for the approval ; whereas, in this case, the application has been moved by the Society who is running the educational institute.

Held:
The High Court rejected the contention of the CIT holding that there was no merit in it.

Excerpts of the Judgment:

“The word ‘person’ is undisputedly defined to include persons like the writ petitioner, which is a registered Society. Therefore, on a conjoint reading of Section 10(23C)(vi) of the Income Tax Act and also the definition of the word ‘person’, we would think that there is no merit in the contention of the learned counsel for the appellant. In this context, we also notice that Form 56D, which is the form prescribed under Section 10(23C)(vi), also refers in the first column to the educational institution and, at the second column, to the trust or society. It provides for the signing of the application obviously by the person, who is competent to certify the facts made in the application. When a society is running the educational institution, then, we would think that, both, for the reason that it is running the institution and also conceiving the impossibility of an institution as such de hors the society making an application, we would reject the contention. When an application is made by the society, it is being made on behalf of the institution. The society would be assessed, if it is denied the benefit of Section 10(23C)(vi), for running the institution and deriving an income out of it and it is the income from the educational institution derived by the society, which is to be excluded from the total income under Section 10(23C)(vi). Therefore, we reject the said contention.”

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