Vaish Model Primary School Education Society Vs AO (Exemptions) (ITAT Delhi)
Assessee, a long-established educational society in Haryana, applied for approval u/s 10(23C)(vi) for AY 2009-10 onwards. Its application, filed in 2009, faced repeated rejections by CCIT/CIT(E) in 2010, 2012 and 2024, mainly on two grounds:
(i) surplus transferred to the School Development Fund, and
(ii) society allegedly “generating substantial surplus year after year.”
Each rejection was challenged; Punjab & Haryana High Court twice (2011 & 2018) set aside the rejection and directed fresh consideration in line with Pinegrove International Charitable Trust.
In 2024, CIT(E) again rejected the application relying on Baba Banda Singh Bahadur Educational Trust and New Noble Educational Society (SC). Tribunal noted that Supreme Court had held that New Noble operates prospectively, hence it cannot be applied to a 2009-10 application.
ITAT held:
- Surplus generation per se is not a bar if it arises in the course of imparting education.
- Transfer to a development fund does not indicate profit motive when funds are used for educational assets.
- Records showed that the surplus was actually utilized for purchase of land for educational expansion.
- CIT(E) failed to examine whether funds were applied exclusively for educational objects, and rejection was mechanical.
Accordingly, ITAT set aside the rejection order and directed CIT(E) to grant approval after applying correct principles.
