CCIT vs. Geetanjali University Trust; 352 ITR 433 (Raj): 257 CTR 239 (Raj):
During the relevant year, i.e. A. Y. 2008-09, the admission to the college run by the assessee-trust were not on the basis of the system approved by the medical council of India and Rajasthan University. The Single Judge and the Division Bench of the High Court held that the admission was illegal. A Special Leave Petition filed by the assessee was pending before the Supreme Court. The Chief Commissioner rejected the application of the assesee for approval for exemption u/s. 10(23C)(vi) of the Income-tax Act, 1961 holding as under:
“In the institution’s case, the Hon’ble High Court has held that the admissions made for the academic year 2008-09 were illegal. The purpose of education would not be served, if the education is for students who have been illegally admitted. The purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise. The spending of funds on education of students who have been admitted illegally will not amount to application of income for the purpose of education. In the trust’s case, neither the condition regarding existence for the purpose of education nor the application of funds for the objects, are being fulfilled.”
However, an order granting approval was passed for the A. Y. 2010-11 and onwards.
On a writ petition challenging the order of rejection, the Single Judge of the Rajasthan High Court (352 ITR 427) set aside the order of rejection for fresh disposal and observed as under:
“The sanction was to be granted within the parameters laid down u/s. 10(23C) which are relevant and not the admission procedure undertaken by the assessee.”
On appeal by the Revenue, the Division Bench of the High Court upheld the decision of the Single Judge and held as under:
“i) U/s. 10(23C)(vi) and (via), what is required for the purpose of seeking approval is that the university or other educational institution should exist “solely for educational purposes and not for purposes of profit”. It was nowhere the case or the finding of the Chief Commissioner that on account of the defect in the admission procedure, the assessee ceases to exist solely for educational purposes or it existed for the purpose of profit. Further, it was not the case of the Revenue that the students who were admitted were not imparted education in the college in which they were admitted or the admissions granted were fake or non-existent or that the income generated by admitting the students was not used for the purpose of the assessee.
ii) The emphasis on the part of the Chief Commissioner that the purpose of education would not be served if the education is for students who have been illegally admitted and the purpose of education as contemplated in the section would be served only if the studentshave been legally admitted and not otherwise, went beyond the requirements of the section.
iii) Of course, the requirement of an educational institution to provide admission strictly in accordance with the prescribed rules, regulations and statute need to be adhered to in letter and spirit, but violation could not lead to its losing the character as an entity existing solely for the purpose of education.
iv) Therefore, there is no interference with the order of the Single Judge.”
