Parul Arogya Seva Mandal Trust Vs Hon. CIT (ITAT Ahmedabad)
ITAT Ahmedabad held that denial of exemption u/s. 10(23C)(vi) of the Income Tax Act justified as assessee trust having multiple objects doesn’t satisfy the condition of ‘solely for educational purposes’.
Facts- The assessee is a Trust filed an application in Form No. 56D on 26-03-2018 seeking exemption u/s. 10(23C)(vi) of the 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.
CIT(E) 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 Act. So a show cause notice was issued as to why its application for approval u/s. 10(23C)(vi) of the Act should not be rejected, as the trust does not comply the statutory requirements of “existing solely for educational purpose”.
After considering the reply, CIT(E) denied approval u/s. 10(23C)(vi) of the Act. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Held that the assessee Trust having multiple objects cannot be said to be existing “solely for the purpose of education”. It is open to the trust to pursue all or any of the objects of the trust under the garb of education. Therefore in our considered view, the condition of section 10(23C)(vi) i.e the applicant existing “solely for educational purposes” is not fulfilled in the present case. Hence, denial of exemption u/s. 10(23C)(vi) of the Act is justified.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee as against the order dated 08-03-2019 rejecting claim of exemption u/s. 10(23C)(vi) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the Commissioner of Income Tax (Exemptions), Ahmedabad.
2. The brief facts of the case is that the assessee is a Trust filed an application in Form No. 56D on 26-03-2018 seeking exemption u/s. 10(23C)(vi) of the 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. Thus the assessee Trust was running the following colleges:
i) Parul Institute of Engineering of Technology (Diploma Sudies)(PIET-DS)
ii) Parul Institute of Engineering of Technology (Diploma 2nd Shift) (PIET-D 2nd shift)
iii) Parul Plyitechnic Institute (First Shift)(PPI)
iv) Parul Plyitechnic Institute (Second Shift)(PPI)
v) Shanti Sadan Hostel (SSH)
vi) Student Welfare Association) (SWA)
3. The assessee Trust submitted that three Trusts namely (i) Parul Arogya Seva Mandal, Vadodara, (2) Parul Trust, Limda and (3) Hariom Arogya Seva Mandal, Vadodara got merged into the present Trust namely Parul Arogya Seva Mandal Trust which was approved by the Jt. Charity Commissioner, Vadodara vide order dated 31-072014. Thus 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.
4. The Ld. CIT(E) 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 Act. So a show cause notice was issued as to why its application for approval u/s. 10(23C)(vi) of the Act should not be rejected, as the trust does not comply the statutory requirements of “existing solely for educational purpose”.
4.1. In reply, the assessee filed written submission stating that the Trust exists “solely for education purpose”, Medical and other social objects are ancillary and supportive objects to achieve the main educational objects. It is further mentioned that the assessee Trust is a sponsoring body of “Parul University” which is registered under Gujarat Private University Act, 2009 and is a Deemed University status by UGC on a condition that the institute would be having broad objectives having a greater interface with society through extra mural, extension and field action related objects. It is further submitted the Trust has been approved permission for Medical education to start Medical College provided Trust should have medical objects in its Constitution. Without medical object, Trust would not have got the medical college permission; hence incorporation of medical objects is also a part of education objects. Further running hospitals is a pre-requisite for starting any medical institution in the fields of Medicine, Ayurved, Homeopathy, Nursing or Physiotherapy. Such Hospitals are run on charitable basis, as paid patients are not considered by the regulatory bodies for the purpose of medical education. Therefore, there is no element of making any profit out of operations of such hospitals meant for medical education. In support of the same, the assessee relied upon various judgments of High Courts and Tribunals.
4.2. After considering the above reply field by the assessee Trust, the Ld. CIT(E) denied approval u/s. 10(23C)(vi) of the Act observing as follows:
“….9. As per the conditions stipulated in section 10(23C)(vi) of IT. Act it is mandatory that the institution should not run for the purpose of profits. However on going through the Consolidated Income and Expenditure accounts submitted by the assessee it is noticed that it has earned huge profits out of its educational activities. Same are briefly noted here under;
