IMPORTANT POINT
The generation of surplus from year to year cannot be a basis for rejection of the exemption application under Section 10 (23C) (vi) of the Income Tax Act, 1961, if used for educational purposes.

JUDGMENT :

1. This writ petition under Articles 226 & 227 of the Constitution of India has been preferred claiming the following reliefs:

“It is, therefore, humbly prayed that the Writ Petition may kindly be allowed and by an appropriate, order or direction:-

(i) the impugned Order dated 26/11/2023 (Annexure 13) passed by Respondent No.1, Chief Commissioner of Income Tax, Jodhpur may be quashed and set-aside.

(ii) respondent may be directed to issue Registration Certificate to the Petitioner Trust.

(iii) Any other order or direction which this Hon’ble Court deems just and proper may kindly be passed.”

2. The petitioner is a Charitable Trust, registered with the Sub-Registrar, Hanumangarh on 28.11.2023 and with Devasthan Department, Bikaner on 22.12.2009. The petitioner is also registered as a Society under Section 12(A) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act of 1961’). Owing to such dual nomenclature of the petitioner i.e. Trust as well as Society, it shall be henceforth referred in the present judgment as ‘the petitioner’ only.

2.1. Thereafter the petitioner had filed an application on 28.09.2012 seeking exemption under Section 10 (23C) (vi) of the Act of 1961 in the prescribed Form No. 56D for the year 2011-12 before the Office of Commissioner of Income Tax, Bikaner, Range Bikaner, and the said application was forwarded to the officer of the respondent-Chief Commissioner. Thereafter, due to certain defects/discrepancies in the application, the petitioner filed a fresh application and the same was considered, while also keeping into consideration the aspect of limitation.

2.2. Subsequently, during the proceedings, the respondent no.3 issued a communication dated 28.01.2013, the petitioner was asked to furnish certain documents in relation to the application in question, and was further asked information regarding the educational institution. The petitioner submitted a reply to the said communication. Thereafter, the respondents issued a communication and asked the petitioner to appear in person alongwith certain documents, pursuant to which the petitioner has put in his appearance, and furnished the required information. The respondents also issued another communication dated 14.08.2013 to the petitioner, and again called upon him to furnish certain information, as mentioned in the said communication.

2.3 Thereafter, the respondents vide the impugned order dated 26.11.2013 rejected the petitioner’s application for granting the exemption under Section 10 (23C) (vi) of the Act of 1961.

3. Learned counsel for the petitioner submitted that the petitioner is engaged solely in the educational purposes, and therefore, the petitioner falls under Section 10 (23C) (vi) of the Act of 1961.

3.1. It was further submitted that the respondents issued various query letters to the petitioner and the petitioner acted upon each and every such letter and provided the requisite information, to the satisfaction of the respondents, to the effect that the petitioner is engaged exclusively in imparting of education and no other purpose is being carried out by the petitioner, and therefore, the impugned order is not justified in law.

3.2. It was also submitted that in the impugned order, a finding was recorded regarding the figures of surplus of income over and above the expenditure to infer that the petitioner is being run for the purpose of profits, but even for carrying on an education institution for charity, some surplus is bound to follow for various reasons, and therefore, the impunged action of the respondents in not extending the exemption to the petitioner is arbitrary and illegal, and thus, the impugned order deserves to be quashed and set aside.

3.3. In support of such submissions, learned counsel relied upon the following judgments :

(a) Queen’s Educational Society Vs Commissioner of Income Tax (2015) 8 SCC 47;

(b) Delhi Bureau of Text Books Vs Director of Income Tax (E) (ITA 807, 810, 811/2015 decided on 03.05.2017) by the Hon’b