Educational institution: Exemption u/s. 10(23C)(vi): Assessee-society was running a school: Its application for exemption u/s. 10(23C)(vi) was rejected on ground that its objects, viz., to manage/maintain a library, reading-room, and conduct classes of stitching, embroidery, weaving, centre for adult education and to make necessary arrangements for overall development and growth of children when required, were non-educational in nature: Rejection not proper.

The assessee-society was running a school. Its objects were:

(a) establishment of a school for the intellectual development of children;
(b) to conduct the classes and activities for all the levels of study and education;
(c) to manage/maintain a library, reading-room, and conduct classes of stitching, embroidery, weaving centre for adult education and education in the field of entertainment, arts, etc.; and
(d) To make necessary arrangements for the overall development and growth of children when required.

For the A.Ys. 2005-06 and 2006-07, the assesseesociety had been granted exemption u/s. 10(23C) (vi). It filed application for grant of approval for exemption u/s.10(23C)(vi) for A.Y. 2007-08. The Commissioner rejected the assessee’s application on the ground that the objects of the society mentioned in clauses (c) and (d) of the object clause were non-educational and, thus, the society did not exist solely for educational purpose.

The Madhya Pradesh High Court allowed the writ petition filed by the assessee-society and held as under:

“(i) In view of the judgment of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT, (1975) 101 ITR 234 the word ‘education’ used in clause (15) of section 2 means the process of training and developing the knowledge, skill, mind and character of the students by normal schooling.

(ii) In the instant case, clause (c) of the objects was to manage and maintain a library, reading-room and conduct classes of stitching, embroidery, weaving and schooling, adult education and education in the field of entertainment, arts, etc. The assessee-society had followed the instructions issued by the Board of Secondary Education in regard to practical examinations for home science and in the aforesaid instructions, stitching, embroidery, weaving subjects had been mentioned. The adult education is also a part of education. If the assessee-society introduced the aforesaid object, it could not be said that the object of the assessee-society was not of educational purpose.

(iii) Clause (d) of the objects was to make necessary arrangement for the complete development of the children. That object was also in consonance with the modern concept of education, because the education is not only to impart education through book reading, but it also includes sports activities and other recreational activities, dance, theatre and even having educational tour within the country and abroad, so that the children can develop their overall talent. It could not be said that the said object was not for educational purpose.

(iv) Apart from that, from the audited accounts of the society, it was clear that it had not used the amount and income for any other business activities. In such circumstances, rejecting the application of the assessee-society at threshold was arbitrary and illegal.

(v) It was also a fact that for prior two years, the assessee-society was granted exemption and after the year 2006-07, the assesseesociety had deleted the clauses (c) and (d) in its memorandum of association. In such circumstances, the order passed by the authority was illegal and against the provisions of section 10(23C)(vi).

(vi) Consequently, the petition was to be allowed. The impugned order was to be quashed. The application filed by the assessee for grant of approval u/s. 10(23C)(vi) was to be accepted.”