Education Trust cannot Claim Income Tax Exemption u/s 10(23C)(vi) of Income Tax Act If Activities Include Medical Objectives: ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) denied income tax exemption under Section 10(23C)(vi) of Income Tax Act,1961 for income earned from educational institution to charitable trust involving in various medical objectives.

The assessee Parul Arogya Seva Mandal Trust is a Trust filed an application in Form No. 56D seeking exemption under Section 10(23C)(vi) of Income Tax Act with necessary documents. The assessee Trust is running colleges for imparting higher education on Diploma, Degree and Master (P.G.) courses of Engineering, Pharmacy, Management, Computer Application, Ayurveda, Homeopathic Medical, Physiotherapy, etc.

The objects of the Trust are medical treatment for poor people, undertake general activities related to public health, Organize Family Planning Centres, undertaking activities for education from pre-primary to higher education at university levels,to provide and take forward necessary help/assistance for development of educational activities in different branches/faculties of education.

The Commissioner of Income Tax (Exemption) [CIT (A)]after going through the objects of the Trust, noticed that the assessee Trust has multiple objects in the trust deed, which does not satisfy the conditions of Section 10(23C)(vi) of the Income Tax Act, and show cause notice was issued as to why its application for approval under Section 10(23C)(vi) of Income Tax Act should not be rejected, as the trust does not comply the statutory requirements of “existing solely for educational purpose”.

The CIT (E) considering the reply filed by the assessee Trust, held that the trust does not exist solely for educational purpose as per provisions of Section 10(23)(vi) of the Income Tax Act but for the profit motive. Accordingly, the application of the Trust seeking approval under Section 10(23C)(vi) of Income Tax Act was rejected.

Aggrieved by the order the assessee filed an appeal before the Tribunal. The assessee submitted that having multiple objectives along with educational object cannot be said that the institution/trust does not exist solely for educational purpose.

Further he contended that Appellant trust is existing solely for educational purpose and not for the purpose of profit motive, it has satisfied all the conditions laid down under the provision of Section 10(23C(vi) of the Income Tax Act, application for approval be granted to the applicant trust under Section 10(23C) (vi) of the Income Tax Act.

The Departmental Representative supported the order of CIT(E) and pleaded that the rejection of approval trust under Section 10(23C) (vi) of the Income Tax Act is well within the provisions of law and does not require any interference and the assessee appeal is liable to be dismissed.

The Bench comprising of Smt. Annapurna Gupta, Accountant Member and T.R. Senthil Kumar, Judicial Member observed that the assessee Trust though submitted clarification regarding its medical object but conveniently remained silent on its object of scholarship. The assessee Trust also remain silent regarding its other non-educational objects such to organize Family Planning Centers, undertake activities for upbringing and training for self-reliance to orphan and deserted women and children, etc.

It clearly proves that the assessee Trust having multiple objects cannot be said to be existing “solely for the purpose of education”.

The Tribunal referred to the decision of Supreme court of India in New Noble Educational Society Vs. Chief Commissioner of Income Tax where it was held that the requirement of the charitable institution, society or trust etc., to 'solely engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education.

Thus the Bench confirmed the denial of exemption trust under Section 10(23C) (vi) of the Income Tax Act to the assessee, the appeal filed by the Assessee is hereby dismissed.

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