Running schools by collecting huge amounts of fees with five star facilities cannot be treated as a charitable activity only on the ground that the business carried on by such institutions is the business of education

M/s. Rajah Sir Annamalai Chettiar Foundation

Vs. The Director of Income Tax (Exemptions)

Decided by – ITAT Chennai

I.T.A.No. 1817/Mds/2010

Decided on- 20^th day of June, 2011

O R D E R

PER Dr. O.K. NARAYANAN, VICE-PRESIDENT

This appeal is filed by the assessee. The appeal is directed against the order of the Director of Income-tax (Exemptions) at Chennai dated 30.08.2010 in which the application put in by the assessee seeking registration under sec.12AA has been rejected.

2. The assessee is a trust registered before the District Registrar, Chennai pursuant to the deed of declaration of trust executed on 11.2.2009. The object of the assessee trust is to run educational institutions with modern methods to improve the education.

3. But the application was rejected by the Director of Income-tax (Exemptions) on the ground that the probable fees to be collected from the students is having a component for the future expansion of the institutions and this component is in the nature of profit and therefore, the objects of the trust will also include profit motive, as found in clause 11 of the trust deed. The assessing authority has also observed that the assessee-trust wants to establish 100 schools before 2014 and fees for primary level education is not governed by any regulations and therefore, the fees could be fixed at the interest of the assessee-trust which also postulates a motive for profit.