Saturday, January 18, 2014

Bal Bharti School, existing solely for profit motive, aims at charging higher fees; no sec. 10(23c) relief to it

a)The assessee, a society registered under the Societies Registration Act, moved an application before the Chief CIT praying for grant of exemption under section 10(23C)(vi). It claimed that it was engaged in the activity of imparting education;
b)The Chief CIT considered the reply of the assessee and rejected the application. Aggrieved by the order of Chief CIT the assessee filed the instant writ.
The High Court dismissed writ with following observations:
1) The Chief CIT was competent to call for such documents including annual accounts or information from the assessee to check the genuineness of the activities;
2)  He has been conferred with powers to ascertain while judging the genuineness of the activities as to whether the assessee applies its income wholly and exclusively to the objects for which it is established;
3)  He recorded his finding that in each year the surplus as shown by the assessee was increasing and was used for activities which were aimed at enhancing the income of the institution. This also suggested that the fees charged from the students was on the higher side as in each year there was an element of profit;
4)  His findings clearly showed that the assessee did not exist solely for educational purposes and its main motive was to make profit. The diversion of fund for personal use had been noted in the impugned order. 
5) Thus, the Chief CIT didn’t commit any error of law or facts to reach the findings that the assessee did not exist solely for educational purposes, as its motive seems to be making profit and it existed for purposes of profit;

6)  The application for grant of exemption under section 10(23C)(vi) was correctly rejected. - Bal Bharti Nursery School v. Chief CIT [2013] 40 301 (Allahabad)