Indian Kanoon - Search engine for Indian Law

The petitioner is aggrieved against the order dated 28.03.2018 passed by the first respondent in rejecting the revision filed under Section 264 of the Income Tax Act, 1961.

2.The case of the petitioner is as follows:

a) The petitioner is a Trust established predominantly with an object of providing school education to all sections of society. The only activity of the petitioner Trust is running of an educational institution called Sri Sathya Sai Balagurukulam Matriculation School in Hosur. For the assessment year 2014-15, the petitioner filed its return of income declaring income under other sources as Rs.18,80,804/-. This comprised of Tuition fees - Rs.16,66,950 + Special fees - Rs.10,130 + Transport fee - Rs.1,14,569 + Uniform fee - Rs.61,455 and Contributions - Rs.27,700. Against these gross receipts, the petitioner had debited total amount of Rs.15,85,422/- spent under various heads for running of the school. Added to this, the amount of Rs.2,95,383/- spent in prior years was considered towards expenditure of current year. The entire amounts spent on running the school was considered as applied for charitable objects and claimed as exempt under Section 11 of the Act. This return was processed under Section 143(1) and by intimation dated 28.2.16, the CPC, Bangalore determined the taxable income at Rs.18,80,804/- and a tax liability of Rs.8,17,675/- was computed towards tax and interest. Later, on 06.05.16, a revised return was filed revising the income to Rs.20,22,000/-. This included the income originally returned and Rs.1,41,196/- received as donations in the Trust account. The petitioner filed two letters before the second respondent on 27.06.16 and 05.07.16 stating that there was mistake in the order of the CPC, Bangalore by taxing the amount that has been spent towards the charitable objects of the Trust and sought to rectify the same under Section 154 of the Act. Even otherwise, it was submitted that the petitioner was granted registration under Section 12AA with effect from 01.04.2015 and hence the charitable nature of the petitioner's activity had been given approval by the authority. In another letter dated 19.07.2016, submitted to the second respondent, it was stated that, alternatively the petitioner satisfied all the conditions for exemption under Section 10(23C)(iiiad) of the Act. The second respondent vide order dated 05.10.2016, rejected the petition for rectification filed by the assessee. Thereafter, the petitioner approached the first respondent by way of filing a petition under Section 264 of the Act, seeking to revise the order of the second respondent dated 05.10.16 and provide the benefit of exemption under Section 11 of the Act or in the alternative to grant the benefit of exemption under Section 10(23C)(iiiad).

b) The petitioner, thus referring to the amended provisions of the Act and also the intention of legislature as is evident from the Board Circular, submitted before the first respondent that the first proviso to Section 12A(2) was brought in the statute with a view not to affect charitable trusts and societies carrying on genuine charitable objects in the earlier years and also satisfy the conditions for exemption as per Section 11. Thus, it was submitted that the benefit of registration granted in subsequent year has to be made applicable in the earlier assessment years for which assessment proceedings are pending and prayed for grant of the benefit of exemption under Section 11 for the assessment year 2014-15.

16. On the other hand, it is submitted by the revenue that the petitioner has not satisfied the mandatory requirement that it should exist solely for educational purposes, as other activities of the trust do not relate to educational purpose. Therefore, it is contended that the income brought to tax is just and proper.

17. There is no dispute to the fact that the petitioner trust is running an educational institution by name "Sri Sathya Sai Balagurukulam Matriculation School" in Hosur for providing elementary school education without distinction of caste and creed, from 1997. Though the Trust Deed refers few other charitable activities such as providing medical relief to the poor, relief to orphans, etc., the pre dominant object of the trust is evidently seen as administering, establishing and maintaining schools and other educational institutions to impart education to poor students without any restriction as to caste, community or religion. This noble object of the petitioner trust cannot be looked into with magnifying glass to find out as to whether any meagre expenditure spent by them on any allied charitable purpose, so as to project, as though by doing such activity, the petitioner trust is not existing solely for educational purposes. In this case, the objection of the revenue relates to a sum of Rs.54,300/- spent by the petitioner for providing sarees to mothers and grandmothers of the children studying in the school. This free distribution of clothes to the mothers and grandmothers of the children is considered by the revenue as the one not related to educational purposes.