Income Tax Appellate Tribunal - Lucknow
St. Don Bosco Educational Society vs The Cit on 30 December, 2003
Equivalent citations: [2004]90ITD477(LUCK), (2004)84TTJ(LUCK)805
ORDER
Phool Singh, Judicial Member
1. This appeal of the assessee arises out of order dated 30.9.2002 passed by CIT-I, Lucknow under Section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Act).
2. The relevant facts giving rise to this appeal are that assessee is a Society duly registered under the Societies Registration Act, 1860 under the name and style of St. Don Bosco Educational Society (hereinafter referred to as the Assessee Society). The objects of the Assessee Society as evident from the Memorandum of Association are as under:-
"The object of the Society is to impart education to persons in India or any part thereof, irrespective of caste, creed, religion or community. The Society shall be solely for educational purposes and not for the purpose of profit.
In furtherance to the above object, the society will carry out the following:
i) Teach literary, scientific, social, cultural, moral, religious, industrial, technical, commercial and other useful educational knowledge.
ii) Conduct classes, seminars, workshops, debates, symposiums, meetings and other activities considered necessary for the promotion of the education.
iii) Give loans, scholarships, freeships, prizes and monetary assistance to students to meet the cost of their education.
iv) Print and publish any news-letters, periodicals, journals, leaflets, books, etc that the society may consider necessary for the furtherance of its objects.
v) Establish libraries, reading rooms and equip them with the necessary supply of books, newspapers, periodicals, furnitures etc for the purpose of educational activities.
vi) Establish, construct, organize, consolidate, support, develop, acquire, takeover, conduct, equip, endow, improve, alter, extend, maintain and administer educational institutions of their branches in India or any part thereof, irrespective of caste, creed, religion.
vii) Start, take over, establish, support, maintain and administer hostels for students, staff, member, employees and. other personnel connected with the work of the Society.
viii) Receive any gifts or money/monies or either properties both moveable/immovable, or any other bequests for the objects of the Society.
ix) To raise from financial institutions and others and do all such other acts, deeds and things as are incidental or conducive to the attainment of the above objects.
3. To achieve the above referred to objects, the Assessee Society was found running educational institution in the name and style of St. John Bosco College, Gomti Nagar, Lucknow with a branch in the name and style of St. John's School, Indira Nagar, Lucknow. Apart from the same, the Assessee Society was undertaking various activities as listed Objects - Clause IV of Memorandum of Association. Rule No. 20 of the Rules and Regulations of the Assessee Society reads as under:-
"20. DISSOLUTION OF THE SOCIETY In case dissolution of the Society at any time, the net funds at the disposal of the Society after meeting all debts shall be disposed of in accordance with the provisions of Section 14 of the Society Registration Act."
4. Section, 14 of the Societies Registration Act, 1860 provides that upon dissolution of the Society, no member to receive profit. It is admitted fact that upto assessment year 1997-98, the Assessee Society was claiming exemption under Section 10(22) of the Act and the Department had been accepting the case of the Assessee Society. As Section 10(22) of the Act was omitted with effect from 1.4.1998, the Assessee Society claimed its income as exempt under Section 10(23) (c)(iii ad) of the Act for assessment years 1998-99 to 2001-2002 and claim of the Assessee Society was accepted by the Department. As receipts of the Assessee Society were more than Rs. 1 crore during financial year 2001-2002 relevant to assessment year 2002-2003, the year under consideration, the Assessee Society moved an application under Section 12AA of the Act for registration and CIT-I, Lucknow proceeded to make necessary enquiry about the information given by the Assessee Society and in respect of genuineness of the activities of the Assessee Society, so that it may be registered.
5. In doing so, CIT-I, Lucknow perused the accounts filed for financial years ending on 31.3.1999, 31.3.2000 and 31.3.2001 and noted that huge surplus were being generated every year. From the perusal of College account which was said to be the main account, the CIT-I noted the excess of income over expenditure of Rs. 21,09,644/- for financial year 1998-99, Rs. 31,34,715/- for financial year 1999-2000 and Rs. 44,20,504/- for financial year 2000-2001. He also noted from Form No. 10B of the Report of Auditors that excess so generated had been applied in formation of capital assets. The CIT-I also observed that substantial amounts have been generated from College account to Society account and he gave an amount of Rs. 4 lakhs in financial year 1999-2000 and Rs. 50,000/- in financial year 2000-2001. In the same way, CIT-I noted the figures from accounts of the School which was found running on smaller scale and excess of income over expenditure was Rs. 26,760/-, Rs. 60,333/- and Rs. 18,867/- in financial years 1998-99 to 2000-2001. The CIT-I also noted that there were revenue surplus in these three financial years out of which substantial amount was applied for land/building capitalization. On all these factual position, the CIT-I formed opinion that the Institution is being run on commercial lines and he called upon the assessee as to how Assessee Society can be called a Charitable Society within the meaning of Section 2(15) of the Act, in particular reference was made to the Apex Court decision in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (1992) 3 SCC 390. The Assessee Society filed reply and it was contended that Assessee Society is purely an Educational Society and its income upto assessment year 1997-98 was exempt under Section 10(22) of the Act and upto assessment year 2001-2002, the same was exempt under Section 10(23)(c)(iii ad) of the Act and application had been moved as its receipt have crossed Rs. 1 crore. The Assessee Society referred to the provisions of Section 2(15) of the Act, which defined the charitable purpose, and imparting education is also included in that definition. The Assessee Society further asserted that Department was not justified in working out surplus on the basis of income and expenditure account which restricts itself merely to revenue items. For a charitable Society, there is no difference whether they incur revenue expenditure or capital expenditure as they are all allowed in the year in which they are incurred. It was also contended that Apex Court decision in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) was delivered under a different Act and not applicable to the proceedings under the Income-tax Act. It was also one of the contention of the Assessee Society that Department has allowed registration under Section 12A to large number of similar other institutions in the past. Case law was also referred to.
6. The CIT-I, Lucknow considered the submissions and referred to the decision of the Apex Court in the case of Sole Truste, Loke Shikshna Trust v. CIT, 101 ITR 234 in the context of Section 2(15) of the Act, in which it was laid down that definition given under that section was only inclusive and exhaustive. It purports only to indicate a concept of charity, which would include the four categories of objects mentioned there. The CIT-I further referred to the dictionary meaning of word "charity" and further referred to the provisions of Section 115(4)(a) of the Municipal Corporation of Delhi Act with which the Hon'ble Supreme Court of India was concerned in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) and "charitable purpose" in the Explanation attached to that section was found to have the same words as used in Section 2(15) of the Act. The CIT-I further noted that fee being charged from students was in the range of Rs. 400/- to Rs. 600/- per month and the same was noted to be on higher side resulting into excess of income over expenditure each year. The CIT-I also noted that surplus has been used to create huge capital infrastructure and every year the surplus was being generated. The Assessee Society was found fed out of students' fee which was a fact not fit well in the matrix of claim of the Assessee Society for charitable purposes. The CIT-I also referred to the ratio of the Apex Court decision in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) in which their Lordships had given out that assessor who levied municipal tax on that Society found that Society was run commercial line. Secondly instead of Society feeding school, assessor found that school was feeding the Society; and thirdly the donations were not voluntary but being forced on students. The CIT-I was of the view that the first few observations of the Lordships were fully applicable in the case of the assessee.
7. The CIT-I further reproduced para 65 to 68 of the order of the Apex Court in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) which reads as under:-
"65. In this background, we will consider whether education per se is a charitable purpose and its application to appellant society. The case relied on strongly is Pemsel's. The dictum of Lord Macnaghten at page at 96 is as follows:
"Charity in its legal sense comprises four principal divisions: trust for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads. The trusts last referred are not the less charitable in the eyes of law, because incidentally they benefit rich as well as poor, as indeed every charity that deserves the name must do, either directly or indirectly.
66. One thing that is clear is that each of the Law Lords emphasized the underlying idea of charity involving an element of philanthropy or something derived from pity of early times as being the fundamental of the concept of charity. Lord Bramwell at page 83 states.
"I think a charitable purpose is where assistance is given to the bringing up, feeding, clothing, lodging, education of those who, from poverty or comparative poverty, stand in need of such assistance."
67. Again Lord Herchell at page 88 observed:
"It is the helplessness of those who are objects of its care which evokes the assistance of the benevolent. I think, then, that the popular conception of a charitable purpose covers the relief of any form of necessity, destitution, or helplessness which excites the compassion or sympathy of men, and so appeals to their benevolence for relief."
In the background of above, court held that education imparted with a profit motive cannot be called a charitable purpose. Looking to their importance court's findings are quoted below:
68. THEREFORE, AN ELEMENT OF PUBLIC BENEFIT OR PHILANTHROPY HAS TO BE PRESENT. THE REASON WHY WE STRESS ON THIS ASPECT OF THE MATTER IS IF EDUCATION IS RUN OR COMMERCIAL LINES, MERELY BECAUSE IT IS A SCHOOL, IT DOES NOT MEAN IT WILL BE ENTITLED TO EXEMPTION........"
8. Ultimately placing reliance on the last paragraph No. 77, in which the Lordships observed that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object, as education has acquired a wider meaning in the modern day, CIT-I was of the view that judgment of their Lordships is an example of dynamic nature of law. It takes into account the fact that today meaning of "education" has become very wide and this aspect has to be kept in view while giving the meaning to it. The CIT-I was of the view that their Lordships have taken a note of present day scenario where running of school has become business for many. The CIT-I opined that there cannot be a charity where parents are subjected to unusually high fees merely to create huge surplus to be used in constructing huge buildings. The CIT-I distinguished the case law referred to by the ld.counsel for the assessee and on the basis of above, he was of the view that the object of the Assessee Society which is running the educational institution on commercial principles are not charitable. The Assessee Society was not conducting any charitable activity and does not exist for a charitable purpose. It is not fit for registration and application was accordingly rejected, against which the assessee is in appeal.
9. The learned counsel who appeared for the assessee referred to the history of the Assessee Society as noted above and with reference to order of the CIT-I, it was contended that his order is based on the observations of the Lordships in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra), which the CIT-I had picked up without context. He referred to the decision of the Hon'ble Supreme Court of India in the case of Sun Engineering Works (P) Ltd., 198 ITR 297 in which it was laid down that it is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The learned counsel further referred to the decision of the Apex Court in the case of Padma Sundra Rao, 255 ITR 147 which is also in the same context and a word of caution had been given to all the authorities subordinate to Apex Court while referring to different case laws decided by it.
10. So far as the decision of the Hon'ble Supreme Court of India in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) is concerned, the learned counsel submitted that the same was not in respect of Income Tax proceedings, but it was relating to levy of tax by the Delhi Municipal Corporation. The Apex Court was required to consider the question of exemption of Assessee Society from municipal tax in view of Section 115(4) of the Delhi Municipal Corporation Act, 1957. The Lordships have reproduced Section 115(4)(a) of the Act which require that exemption from levy of tax will be available provided that such Society or body is supported wholly or in part by voluntary contribution applying its profit, if any, or other income in promoting its objects and does not pay any dividend or bonus to its members. The learned counsel submitted that in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) this proviso was found lacking that is why Assessee Society's case was not found allowable for exemption. Their Lordships have framed the questions and the same were reproduced in para 56 of the said order and then the case of the Society was thrown away as the said Society was not found supporting wholly or in part by voluntary contribution. Not only this, the learned counsel pointed out that their Lordships have specifically mentioned in para 78 that ruling arising out of Income-tax Act may not be of great help because in the Income-tax Act "charitable purpose" included the relief of the poor, education, medical relief and the advancement of any other object of general public utility, but the definition under the Delhi Municipal Corporation Act was narrower in scope. On the basis of these observations, the contention of the ld.counsel for the assessee is that CIT-I, Lucknow was not justified to apply the same ratio to the facts of the present case, particularly when their Lordships made it clear that provisions of Income Tax Act are wider in terms than to the provisions of Delhi Municipal Corporation Act.
11. The learned counsel further submitted that in the case of the Assessee Society, it is to be noted that the same was formed only and solely for the object of educational institution and that object is being followed, as the strength of students from 1997 onwards had been more than 1500 and numbers of staff is also around 50 numbers. The Assessee Society was running school from classes Pre-Nursery to V and college was being run from class VI to XII. Not only this, the school enjoys all clearance and approval from the State Education Department. The school has recently been found affiliated with ICSC Board after fulfilling all the requirements needed for clearance by the ICSC Board for class X and XII examinations. The students had been appearing in class X examinations since 1998 and from 2000 onwards students are appearing in class XII examinations also.
12. On the basis of the above factual position, the learned counsel contended that instead of looking into the activities of the Assessee Society, the CIT-I had looked into the income and expenditure account and placed reliance on the decision of the Apex Court in the case referred to above while the CIT-I was under obligation to examine as to whether the Society has made application as per Section 12A read with Rule 17A of the Income Tax Rules and whether the objects are charitable or not. In this context, the decision of the Jurisdictional High Court in the case of Fifth Generation Education Society v. CIT, 185 ITR 634 was referred to, in which the scope of the power of CIT while processing application for registration under Section 12A of the Act were discussed and it was concluded that CIT-I is not to examine the application of income, but he may examine as to whether application is made in accordance with the requirement of Section 12A read with Rule 17A and whether form 10A has been properly filled up. The learned counsel further referred to the decision of New Life in Christ Evangelistic Association v. CIT, 246 ITR 532 (MAD), in which following the decision of Fifth Generation Education Society v. CIT (supra), the same view was laid down about the powers of the CIT at the stage of grant of certificate under Section 12A of the Act.
13. Another case of Shantagauri Ramniklal Trust and Ors. v. CIT and Anr., 239 ITR 528 was referred to, in which it was laid down by the Lordships that while considering the application for registration of Trust, the CIT must also make clear distinction between requirement of registration and requirement for claiming tax benefit. The learned counsel had, also referred to the decision of the I.T.A.T Delhi Bench in the case of Ashutosh Dawar Trust v. Director of Income Tax (Exemption), 82 ITD 593 and that of Malli Ram Charitable Trust v. CIT, 260 ITR (AT) 118-ASR, which are also on the same line. The learned counsel submitted that advancement of education by itself is a charitable purpose and for that learned counsel has referred to the decision of the Commissioner v. University College of North Wales, 5 Tax Cases 408 and that of Municipal Corporation of Delhi v. Children Book Trust, (1992) 3 SCC 390.
14. The learned counsel also argued that in case there was excess of surplus, then the same fact was not found sufficient to deny the exemption as laid down in the case of CIT v. Gayathri Women Welfare Association, 203 ITR 389 (KAR) and Birla Vidya Vihar Trust v. CIT, 136 ITR 445 (CAL).
15. On the basis of above submissions, the ld.counsel for the assessee submitted that the view taken by the CIT-I based on the decision of the Apex Court in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) is misplaced and not sustainable in the eye of law while the decision of the Jurisdictional High Court as well as other cases referred to above are fully applicable to the facts of the case and assessee was entitled for getting the registration.
16. So far as the ld. D.R. is concerned, the order of CIT-I was read at length and the same was relied and no other argument was placed on the ground that order of the CIT-I is already exhaustive and he had dealt with all the pleas of the assessee and rightly rejected the same.
17. We have considered the rival submissions advanced by the respective representatives of the parties, perused the record carefully and gone through the case laws cited by the ld.counsel for the assessee and by the CIT-I.
18. So far as factual position is concerned, we have already discussed in detail that Assessee Society is a registered Society and as evident form the objects of the Assessee Society, the main object is that of imparting education to person in India or any part thereof irrespective of caste, creed, religion or community. In order to achieve this object, the Assessee Society admittedly is running one college in the name and style of St. John Bosco College at Gomti Nagar, Lucknow and one school in the name and style of St. John's School at Indira Nagar, Lucknow. The students' strength is more than 1500 since 1997 and strength of staff is near about 50 numbers. It is also admitted to the Department that Assessee Society was getting exemption under Section 10(22) of the Act upto assessment year 1996-97 and also under Section 10(23)(c)(iiiad) of the Act upto assessment year 2001-02. A perusal of Section 10(22)/10(23)(c)(iiiad) shall reveal that this exemption was available to those institution who was found/existing solely for educational purposes and not for purposes of profit. It means upto assessment year 2001-02, the Assessee Society was running college and school and not earning any profit that is why its income was held exempted under these two Sections 10(22) and 10(23)(c)(iiiad) of the Act by the Department. Admittedly the receipt in the year under consideration has been crossed Rs. 1 crore and assessee was supposed to move application under Section 12A of the Act which was to be processed under Section 12AA of the Act.
19. Initially Section 12A of the Act was on statute which provides conditions to registration of Trust, etc. which are going to claim benefit under Section 11 and 12 of the Act and they were supposed to move an applicati6n for registration of the Trust or Institution in the prescribed form and in the prescribed manner to the Commissioner before the date fixed as given under Section 12A(a) of the Act and Section 12AA of the Act was inserted from 1.4.1997 which provides procedure for registration and gives out scope of powers of the CIT while considering the application for registration moved by any Trust or Institution. We are reproducing the same as the same will give out the actual words used by the Legislator from which it can be gathered as to what is the scope of powers of the CIT while processing the application:-
"[Procedure for registration.
12AA. (1) The [***] Commissioner, on receipt of an application for registration of a trust or institution made under Clause (a) of Section 12A, shall--
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he--
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or (sic) institution, and a copy of such order shall be sent to the applicant :
Provided that no order under Sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard."
20. A perusal of the portion underlined by us shall show that the CIT is to satisfy himself about the genuineness of the transaction of the Trust or Institution and in that action he can make enquiries, if it is necessary. The words "satisfy himself about the genuineness of the activities about Trust or Institution" are significant. A perusal of this shall show that the CIT is empowered to examine the genuineness of the activities. The other requirement which is laid down Under Section 12AA (i)(b) of the Act is that CIT is to satisfy about the object of the Trust or Institution and the genuineness of its activities, then he will passe the order. The sum and substance is that CIT is required to satisfy himself about the object of the Trust and about the genuineness of the activities of the Trust or Institution.
21. We have to examine the order of the CIT-I in the above context and a perusal of the order of the CIT-I, which is in appeal before us, does not show that CIT-I has given out any finding that activities of the Assessee Society are not genuine. The case of the assessee was very much specific that Assessee Society was found running a college and school and CIT-I had also looked into the accounts of college and school. The number of students of college and school as well as number of staff, which were found working in both the Institutions had not been doubted. The existence of college and school is also established. In view of this admitted fact, the scope of enquiry ends as and when finding is recorded to that fact that Assessee Society was found running a college and school in which substantial number of students as well as staff was there. The second stage will be of claim of benefit from tax of Assessee Society and that will be given power to the A.O. to examine as to whether assessee who is claiming benefit under Section 11/13 of the Act is fulfilling the requirement to claim that benefit or not. The exercise done by the CIT-I may be relevant at that stage, but fact remain that provisions of Section 12AA of the Act restrict the power of the CIT to examine as to whether assessee who has moved an application for registration under Section 12A of the Act is actually carrying on the activities which are genuine or not. The second requirement is whether the object of the Assessee Society/Institution is in consonance with the requirement of Section 11/13 of the Act. No other enquiry is contemplated by this section of the Act. We have to abide by the words used by the Legislature. The Legislatures are wise enough and they must be fully aware about the applications of using words "genuineness of the activities of the Trust or Institution" If they were going to give more powers, the Legislatures must have used the other words clothing the CIT that other powers to verify as to whether assessee Trust or Institution is carrying on such activities which may prima-facie indicate that he is entitled to get benefit under Section 11/13 of the Act. Unless Legislatures have not used those words, it is not within the competence of the authorities to add or delete any words or infer any implied words in any provisions of the Act. It is well settled proposition of law that fiscal statute are to be examined, as the same stand. The authorities concerned when interpreting the same are not permitted to add/alter any word here and there, but they are supposed to read it as it stand and to use the general meaning of the words used by this Legislatures. Here the scope of the powers of the CIT is confined to examine the genuineness of the activities of the Trust or Institution and to examine the object of the Trust or Institution. Once the CIT has not doubted on the genuineness of the activities of the Assessee Society nor doubted the object, his powers ends and he cannot be allowed to travel beyond it and to enter into the scope to find out as to whether assessee is a charitable institution or not or whether assessee is carrying on any activity which is covered under the definition of Section 2(15) of the Act. It is A.O. who will be having exclusive jurisdiction to examine this aspect of the matter when assessee will claim any tax benefit and then the observation of the CIT-I in the impugned order before us may be relevant, but not at this stage.
22. Further the reliance of the ld.counsel for the assessee in the decision of the Jurisdictional High Court in the case of Fifth Generation Education Society v. CIT (supra), New Life in Christ Evangelistic Association v. CIT (supra), Ashutosh Dawar Trust v. Director of Income Tax (Exemption) (supra) and Malli Ram Charitable Trust v. CIT (supra) are misplaced. At the very beginning, it is to be pointed out that decision of Jurisdictional High Court which was subsequently followed in the case of New Life in Christ Evangelistic Association v. CIT (supra) was in relation to provisions of Section 12A and the Lordships in the case of Fifth Generation Education Society v. CIT (supra) have laid down that the Commissioner was not to examine the application of income, but he may examine as to whether application is made in accordance with the requirement of Section 12A read with Rule 17A and whether form No. 10A have been properly filled in or not. It was on the basis of interpretation of provisions of Section 12A. The decision of Amritsar Bench of I.T.A.T in the case of Malli Ram Charitable Trust v. CIT (supra), no doubt followed this, but that application before that Bench was not under the provisions of Section 12AA and not under Section 12A of the Act. The provisions of Section 12A and 12AA are materially different, as Section 12AA had conferred powers of making enquiry on the CIT to find out the genuineness of the activities of the Trust/Institution and about the object. The said Bench has not discussed this aspect of the matter and followed the decision of Fifth Generation Education Society v. CIT (supra). The result is that all the case law referred to by the ld.counsel for the assessee in respect of provisions of Section 12A is not relevant for deciding this appeal of the assessee.
23. So far as reliance by the CIT-I on the observations of the Apex Court in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) is concerned, we may refer that the Apex Court in the case of Sun Engineering Works (P) Ltd. (supra) has observed as under:-
"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision."
24. The same type of word of caution was given in the case of Padma Sundra Rao (supra). The fact remains that we have to examine the facts of each case and then to see as to whether facts of the case cited before any authority are identical to the facts in hand and if so, then ratio is invariably applicable, but in case facts are different, then the same will not be found applicable. No doubt observations of their Lordships in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) as noted by the CIT-I are very much there, but fact remains that the Hon'ble Supreme Court of India was seized with the issues relating to imposition of general tax by Delhi Municipal Corporation and the provisions of Section 15(4)(a) of the Act was before their Lordships in the case of Safdarjung Enclave Education Society v. Municipal Corporation of Delhi (supra) and the same is as under:-
"(4) Save as otherwise provided in this Act, the general tax shall be levied in respect of all lands and buildings in Delhi except-
(a) lands and buildings or portions of lands and buildings exclusive occupied and used for public worship or by a society or body for a charitable purpose:
Provided that such society or body is supported wholly or in part by voluntary contributions, applies its profits, if any, or other income in promoting its objects and does not pay any dividend or bonus to its members.
Explanation - 'Charitable purpose' includes relief of the poor, education and medical relief but does not include a purpose which relates exclusively to religious teaching."
25. Their Lordships have formulated the following question for disposal of the issue before the Court and the same are as under:-
"56. In the Explanation as to what is charitable purpose is stated in an inclusive manner, relief of the poor, education and medical relief. In the present case, the questions which arise for our determination are:
(i) Whether the society or body is occupying and using the land and building for a charitable purpose within the meaning of Sub-section (4)?
(ii) What is the meaning of the expression "supported wholly or in part by voluntary contribution"?
(iii) Whether any trade or business is carried on in the premises within the meaning of Sub-section (5)?"
26. Their Lordships proceeded to examine the concept of charity so far as education is concerned and we have already reproduced para 65 to 68 of the above referred to judgment while discussing the order of the CIT-I. Their Lordships have given conclusion in paras 76 to 78 which are as under:-
"76. In view of the above rulings, it would be clear that where the predominant object is to subserve charitable purpose and not to earn profit it would be a charitable purpose. However, the argument of the appellant is as per the Delhi School Education Act and the rules framed thereunder, if the society cannot utilize the fund and the school cannot be run for private gain in the absence of any profit, it would be a charitable purpose.
77. We have already seen that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object. Today, education has acquired a wider meaning. If education is imparted with a profit motive, to hold, in such a case, as charitable purpose, will not be correct. We are inclined to agree with Mr B Sen, learned counsel for the Delhi Municipal Corporation in this regard. Therefore, it would necessarily involve public benefit.
78. The rulings arising out of Income Tax Act may not be of great help because in the Income Tax Act "charitable purpose" includes the relief of the poor, education, medical relief and the advancement of any other object of general public utility. The advancement of any other object of general public utility is not found under the Delhi Municipal Corporation Act. In other words, the definition is narrower in scope. This is our answer to question No. 1."
27. No doubt, the observations of their Lordships in para 77 are that if education is imparted with the profit motive, it will not be fulfilling the requirement of "charitable purposes". This observation of their Lordships is binding on all the authorities/ Courts/ Tribunals. However, it is to be noted that Assessee Society was getting benefit under Section 10(22) of the Act upto assessment year 1997-98 as noted by the CIT-I and upto assessment year 2001-2002 Assessee Society got the benefit under Section 10(23)(c)(iiiad) and requirement of both the sections is that exemption can only be extended to those institutions who are not found working for profit. The claim of the Assessee Society was found covered under Section 10(22)/10(23)(c)(iiiad) of the Act upto the just preceding year i.e. assessment year 2001-2002, then it can easily be inferred that Assessee Society was not found working for profit. What transpired in the year under consideration, on which Assessee Society can be said to have indulged in profit earning, have not come on record nor there is any finding of the CIT-I that Assessee Society was found engaged in the business activities for any profit. Unless that finding is not specifically recorded on record, then the ratio of their Lordships laid down in para 77 referred to above cannot be applied even though we have already concluded that powers of the CIT under Section 12AA of the Act does not warrant that the CIT should go beyond the powers which are given under Section 12AA of the Act to enquire about the objects and genuineness of the activities of the Trust/Institution. In the absence of any such finding, the observation of the CIT-I placing reliance on the decision of the Apex Court and to observe that Assessee Society was found engaged in running the educational institution on commercial line will not serve the purpose. Mere charging of high fees is also no ground unless specific finding is recorded that Assessee Society was earning profit and no such finding is on record.
28. On the basis of the above, the inevitable conclusion is that Assessee Society is entitled to get registration under Section 12AA of the Act as the CIT-I had not doubted on the objects and genuineness of the activities of the Assessee Society. Therefore, we direct the learned CIT-I to grant the registration. However, this order may not come in the way of the A.O. who is free to examine the case of the Assessee Society for exemption under Section 11/13 of the Act, for which purpose each year is to be considered as independent year and the Departmental Authorities can examine the claim of the Assessee Society.
29. The appeal is allowed accordingly and CIT-I is directed to grant Registration.