Educational institution: Exemption u/s. 10(23C)(vi); Rule 2CA of I. T. Rules, 1962: Assessee society running a degree college made application for approval u/s. 10(23C) (vi) for A. Y. 2009-10 onwards: Commissioner rejected application on grounds that (i) approval u/s. 10(23C)(vi) was available only to an educational institution existing solely for educational purposes while memorandum of assessee stipulated other objects as well,

The assessee, a society, was registered under the Societies Registration Act, 1860. It was running a degree college in Mainpuri. It was also registered with the Income-tax Department. It made an application for approval for exemption u/s. 10(23C)(vi) for assessment year 2009-10 onwards. The Commissioner rejected the said application on the grounds that (i) the approval u/s. 10(23C)(vi) was available only to an educational institution existing solely for educational purposes while the memorandum of the assessee-society stipulated other objects as well, and (ii) the application for approval should have been filed by the educational institution while it had been made by the society.

The Allahabad High Court allowed the writ petition filed by the assessee and held as under:

“i) The first and foremost question which is required to be considered is whether the application for approval u/s. 10(23C)(vi) at the instance of the assessee-society was maintainable or not. The Supreme Court in the case of American Hotel & Lodging Association Educational Institute vs. CBDT [2008] 301 ITR 86/ 170 Taxman 306 had considered the effect of insertion of clause (vi) in section 10(23C) by the Finance (No. 2) Act, 1998, w.e.f. 01-04-1999 and held that the provisions of clause (vi) of section 10(23C) are analogous to provisions of section 10(22). The Punjab and Haryana High Court had the occasion to consider the effect of section 10(23C)(vi) in the case of Pinegrove International Charitable Trust vs. Union of India [2010] 327 ITR 73/ 188 Taxman 402 and while replying to a specific question whether a society registered under the Societies Registration Act, 1860 was eligible to apply for approval u/s. 10(23C)(vi) held that the application for approval u/s. 10(23C)(vi) was maintainable at the instance of a society. Similar view had been taken by the Delhi High Court in the case of Digember Jain Society for Child Welfare vs. DGIT (Exmp.) [2010] 329 ITR 459/185 Taxman 255. Therefore, the application filed by the assessee-society cannot be rejected on the ground that it is not at the instance of ‘educational institution’ as referred to u/s. 10(23C)(vi) and rule 2CA.

ii) The next question which now arises for consideration is whether the assessee’s application for approval u/s. 10(23C)(vi) can be rejected on the ground that the memorandum of association provides for various other objects apart from educational activities. In this regard, the argument of the assessee is that even though under the unamended bye-laws of the society various other aims and objects were mentioned, but according to application for approval the society is only carrying on educational activities. In the application, there is a specific assertion that the only source of income of the society is the nominal fees being charged from students and it has no other source of income. The assessee has placed strong reliance on the judgment of the Allahabad Court in the case of C.P. Vidya Niketan Inter College Shikshan Society vs. Union of India [Writ petition No. 1185 of 2011, dated 16-10-2012].

iii) Perusal of the impugned order shows that the pleading in this regard has not been taken into consideration. Further in the impugned order although there is a finding that the assesseesociety is having many objects other than educational, but there is no application of mind to the assertion made by the society that it is only pursuing the educational activity and no other. Where a society is pursuing only educational objects and no other activity, then the application by such a society for grant of approval u/s. 10(23C)(vi) cannot be rejected on the ground that its aims and objects contain several other objects apart from educational and application by such a society is perfectly maintainable.

iv) Therefore, the impugned order passed by the Commissioner was liable to be quashed. The matter required to be sent back to the Commissioner for a fresh decision in accordance with the observations made above.”