Case Law Details
Rama devi memoria society Vs Jcit (ITAT Delhi)
Ld. CIT(A) while denying the exemption of Section 11 to assessee society has held that, since imparting of education is a matter of pure charity, therefore, the educational institution is not permitted to receive or recover the cost of charity from its beneficiary by way of fees, i.e., charging of fees itself would amount uncharitable activity. We are unable to subscribe to this proposition at all, because if fees is not charged from the students then how the activity of imparting education can be carried out. Fees collected from the students itself feeds the charity, unless some other considerations are received for profiteering and personal gains of trustees or members of the society. Strong reliance has been placed by the ld. CIT (A) upon the judgment of Hon’ble Apex Court in the case of ACIT vs. Surat Art Silk Cloth Manufactures Association (supra). In our humble understanding of the said judgment and the principle laid down by the Constitutional Bench of Hon ‘ble Apex Court, nowhere the Hon ‘ble Apex court has held that the charging of fees or some profit for carrying out charitable activity would be reckoned as not charitable. The Hon’ble Apex Court held that if primary or dominant purpose of a trust or institution is charitable, then any other object which by itself is not charitable and is mere ancillary to the dominant purpose then also it is held to be valid charity. The primary test which is to be applied is, whether the main or primary object of the trust is charitable or not. It is an undeniable that under the Income Tax Act, educational activity has been specifically treated as charitable purpose and if the entire activities of the assessee is purely for carrying out education then the test of dominant and main purpose stands fulfilled as laid down by the Hon ‘ble Apex court. Hon ‘ble Apex Court has further held that if any activity for profit is carried out in the course of actual carrying out its purpose, then the activity for profit must be intertwined or wrapped up with or implied in the purpose of the institution or trust, in other words it must be an integral part of such purpose. What is to be looked into whether the activity is propelled by a dominant profit motive and whether the dominant object of the activity is profit making or carrying out a charitable purpose, if it is former then the purpose would not be charitable, but, if it is latter the charitable character of the purpose would not be lost. Thus, in no way the principle laid down by the Hon ‘ble Apex Court can be interpreted or understood in the manner that if certain receipt or income is generated out of an activity which is charitable and such a receipt or income is wholly applied for carrying out charitable purpose, then it cannot be reckoned for non charitable purpose. Here in this case, the charging of fees is a part of receipt during the course of carrying out educational activity which has been completely applied for that activity alone, therefore such a receipt by way of fees has to be seen as an application of income for charitable purpose.
Respectfully following the decision of the Division Bench of the Tribunal in the case of Aadarsh Public School (Supra), it is held that the findings of Ld. CIT(A) are not in accordance with law and his action of denial of benefit of section 11 and 12 is reversed and it is further held that educational activity has been specifically treated as charitable purpose u/s 2(15) and I do not uphold the finding of Ld. CIT(A) that charging of fee would amount to uncharitable activity. It is further held that judgments referred by Ld. CIT(A) have not been interpreted correctly and have been interpreted out of context. Fee charged from the students has been applied for the purpose of carrying out charitable activity. I also reverse the finding of Ld. CIT(A) that income by way of fee cannot be held to be derived from property held under trust. I also do not approve the order of Ld. CIT(A) that the entire receipts are liable to be taxed under the head income from other source in this case and this finding given by CIT(A) is set aside and it is directed that the Ld. A.O. should grant exemption u/s 11 and section 12 to the appellant as per the income & expenditure account submitted by the assessee.
FULL TEXT OF THE ITAT JUDGMENT
The Assessee has filed this Appeal against the Order dated 31.03.2017 of the Ld. CIT(A)-I, Noida relating to assessment year 2010-11 on the following grounds:-
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