The petitioner-society was established in 1953 with the aim and object of teaching music and dancing in all its forms. It was allotted government land and was claiming tax exemption u/s.10(22) of the Income-tax Act, 1961. During the financial year 2008- 09, gross receipts of the petitioner exceeded Rs.1 crore and thus, it had to comply with the condition prescribed in section 10(23C)(vi), as to procurement of approval from the prescribed authority, to continue enjoying the tax exemption. Accordingly, the petitioners moved an application before the prescribed authority, i.e., DG (Exemption) for approval. The prescribed authority rejected the claim for exemption on ground that it did not satisfy criteria of being an ‘educational institution’. As per prescribed authority the petitioner was not awarding any degree or certificate and was merely imparting coaching/training in India as per norms of foreign colleges; that it was not an institution recognised by the UGC or by any board constituted by government for imparting formal education in the field of western music. The prescribed authority observed that the petitioner could not be distinguished from any coaching or training institute preparing the students for appearing in any examination for obtaining a formal degree by a formally recognised institution. The prescribed authority, therefore, held that the petitioner was not entitled to be characterised as an ‘educational institution’ within the meaning of section 10(23C)(vi).
The Delhi High Court allowed the writ petition filed by the assessee-society and held as under:
“(i) The Supreme Court in the case of Sole Trustee, Loka Sikshana Trust v. CIT, (1975) 101 ITR 234 interpreted the word ‘education’ in section 2(15) and held that the word has been used to denote systematic instruction, schooling or training given to the young in preparation for the work of life and it also connotes the whole course of scholastic instruction which a person has received. It has further been observed that the word also connotes the process of training and development of knowledge, skill, mind and character of students by normal schooling.
(ii) It is seen that the petitioner is being run like any school or educational institution in a systematic manner with regular classes, vacations, attendance requirements, enforcement of discipline and so on. These provisions in the rules and regulations satisfy the condition laid down in the judgment of the Supreme Court in Sole Trustee, Loka Sikshana Trust (supra). It cannot be doubted that having regard to the manner in which the petitioner runs the music school, that there is imparting of systematic instruction, schooling or training given to the students so that they attain proficiency in the field of their choice — vocal or instrumental in western classical music.
(iii) The Calcutta High Court in CIT v. Doon Foundation, (1985) 154 ITR 208/22 Taxman 9 has observed that section 10(22) does not impose a condition that an educational institution to be eligible for exemption thereunder should be affiliated to any university or any board. As per the High Court, so long as the income is derived from an education institution existing solely for educational purposes and not for purposes of profit, such income is entitled to exemption u/s.10(22). This judgment takes care of the objection of the prescribed authority that the petitioner is not affiliated to, or recognised by any university or board in India and that it merely awards certificates or grades which are issued by the Trinity College and Royal School of Music, London. Since section 10(23C)(vi) also uses the same language as section 10(22), the same principle should govern the interpretation of that provision also.
(iv) The Supreme Court in S. Azeez Basha v. Union of India, AIR 1968 SC 662 has considered the nature of an educational institution. It was held by the Supreme Court that there is a good deal in common between educational institutions which are not universities and those which are universities in the sense that both teach students and both have teachers for the purpose. It was further observed by the Supreme Court that what distinguishes a university from any other educational institution is that a university grants degrees of its own, whereas other educational institutions cannot. These observations of the Supreme Court support the stand of the petitioner that the fact that it does not conduct its own examination or awards degrees of its own is not decisive of the question whether it is an educational institution or not. It also lends support to the petitioner’s stand before the prescribed authority that it is not a mere coaching centre preparing students for competitive examinations.
(v) For the above reasons, it is held that the petitioner meets the requirements of an educational institution within the meaning of section 10(23)(c)(vi).
(vi) Accordingly, the impugned order passed by the prescribed authority is quashed. The prescribed authority will now deal with the asses-see’s application for approval afresh in accordance with law. The writ petition is accordingly allowed.”
