The main legal point established in the judgment is that for an institution to qualify for exemption under Section 10 (23C) (vi) of the Income Tax Act, its income must be solely from educational activities and not commercial, emphasizing the non-profit nature of the institution's activities.

JUDGMENT :

S. MURALIDHAR, J.

1. The Orissa Trust of Technical Education and Training has filed this petition challenging an order dated 5th October, 2012 passed by the Chief Commissioner of Income Tax (CCIT), Orissa, Bhubaneswar (Opposite Party No. 1) declining to grant exemption to the Petitioner-Assessee under Section 10 (23C) (vi) of the Income Tax Act, 1961 (Act) for the financial year (FY) 2008-09.

2. This is a second round of litigation at the instance of the Petitioner seeking a similar relief. Earlier the Petitioner had filed W.P. (C) No. 2444 of 2011 questioning an order dated 30th September, 2010 passed by the CCIT. While setting aside the said order by a judgment dated 31st July, 2012 disposing of the above writ petition. This Court remanded the matter to the CCIT to reexamine the case of the Petitioner in light of the observations of the said judgment.

3. The background facts are that the Petitioner is a Trust registered by virtue of a trust deed dated 3rd July, 1993 subsequently rectified on 23rd August, 1993 and finally on 7th May, 1998. The object of the Trust is to impart scientific and technical education and research facilities. It is stated that pursuant thereto, the Petitioner established two educational institutions with the intention of providing higher education and without any profit motive. One is the Bhubaneswar Institute of Management and Information Technology and the other one is Indian Institute of Science and Information Technology (IISIT). An application in Form 56-D was made by the Petitioner for the FY 2008-09 for grant of exemption under Section 10 (23C) (vi) of the Act on 23rd September, 2009. While adjudicating the said claim, the CCIT required the Commissioner of Income Tax, Bhubaneswar (CIT) (Opposite Party No. 2) to make an enquiry and submit a report on the activities of the Petitioner. The CIT then visited the two institutions, examined the records and submitted an enquiry report.

4. The Petitioner states that it received a notice from CCIT calling upon it to produce the following documents:

“(i) The manner of receipt of fees and head of receipt from the student and the Books of Account.

(ii) The copy of the notification of the Government of Orissa Industry department prescribing the fees structure.

(iii) The copy of the audit report showing the details of expenditure made for imparting education to the students.

(iv) The copy of the letters of approval of the said two Institutions of the petitioner granted by the A.I.C.T.E.”

5. According to the Petitioner, after production of the documents for verification by the CCIT, the Petitioner also explained how the two institutions were working and that the receipt of fees by them was in accordance with the Government rules and norms. According to the Petitioner, the fees collected for ‘Placement and Training’ are part and parcel of the educational activities for which the fees structure has also been prescribed by the AICTE and Industry Department of the Government of Odisha.

6. On 30th September 2010 the CCIT rejected the prayer of the Petitioner on the ground that the Petitioner-Trust did not exist solely for educational purposes; it had been created with other aims and objectives which were clearly in the nature of business. Further, according to the CCIT, on verification of the audited income and expenditure statements for the FY's 2008-09 and 2007-08, it was seen that the Petitioner was engaged in non-educational activities like horticulture and was generating income from such activity. According to the CCIT, the Petitioner had collected fees under the head ‘Placement and Training’ from the students which was not in conformity with the fees prescribed. The CCIT concluded, after referring to the judgment of the Supreme Court of India in Islamic Academy of Education vs. State of Karnataka, (2003) 6 SCC 697 that any amount, which was charged other than the fee prescribed by the Committee on any head would amount to capitation fees.

7. When the above or