THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITIN No.23853 OF 2010 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The relief sought for in this Writ Petition is to declare the order of the 1st respondent dated 24.09.2009 as arbitrary, illegal, and consequently direct the 1st respondent to grant approval in terms of Section 10(23C)(vi) of the Income Tax Act, 1961 (hereinafter called the “Act”). The objects of the petitioner, a society registered under the Andhra Pradesh (Telangana areas) Public Societies Registration Act, 1350 Fasli with registration No.5733 of 1993 dated 30.12.1993, are as under: i. To open, run and continue an instrument for providing Higher, Technical and Medical Education and Training to the student community of students to promote Literacy and Eradicate Unemployment. ii. To open, run and continue the Hostels for the poor Students Community. iii. To organize seminars, workshops, debates, camps and forums etc., for poor student community. iv. To encourage social, educational and literary activities among the students. v. To open run and continue primary, secondary and High Schools for students. vi. To conduct cultural programmes, help for poor people of community for their study, and vii. To develop Telugu relations in the Society. These objects are said to have been amended in a meeting of the society held on 10.09.2009, and to have been registered with the Registrar of Societies on 29.09.2009. The objects, after amendment, are said to be as under: i. To open, run continue an institution for providing Higher, Technical and Medical Education and Training to the student community of students to promote Literacy and Eradicate Unemployment. ii. To open and run Hostels for the poor Students Community. iii. To organize seminars, workshops, debates camps and forums etc., for poor students. iv. To encourage social, educational and literary activities among the students. v. To open run and continue primary, secondary and High Schools for students. The petitioner claims to be running various educational institutions, including PG colleges, Engineering colleges etc., after obtaining necessary approval from the appropriate authorities, and to be providing quality education. It is their case that they have been filing income tax returns claiming exemption under the Act on the ground that they exist solely for educational purposes, and not for profit. The petitioner claims to have submitted an application, in Form No.56D on 08.01.2006, seeking exemption from the assessment years 2004-2005 onwards, along with necessary enclosures. The said application is stated to have been submitted before the Director of Income Tax (Exemption) on 09.01.2006. The petitioner filed an application in Form 56D on 15.09.2008, along with necessary enclosures. The 1st respondent, after verification, passed orders dated 24.09.2009 according approval under Section 10(23)(vi) of the Act from the assessment year 2009-2010 onwards. The 1st respondent passed another order dated 24.09.2009 rejecting approval for the assessment years 2004-2005 to 2008-2009 on the ground that it was beyond time, and was invalid as per the fourteenth proviso to Section 10(23C) of the Act. The petitioner would contend that, since they had submitted an application as long back as on 09.01.2006 seeking approval under Section 10(23C) from the assessment year 2004-2005 onwards, their application cannot be said to be belated; the second application dated 15.09.2008 was filed at the request of the 2nd/3rd respondent on the ground that the earlier application filed by the petitioner was misplaced; the 1st respondent ought to have given them an opportunity of being heard before passing the impugned order, which would have enabled them to bring to her notice that they had filed their first application as early as on 09.01.2006; and the 1st respondent failed to notice that the amendment, prescribing limitation for the purposes of making an application under Section 10(23C), came into force with effect from 01.06.2006 after they had submitted their first application on 09.01.2006. In his counter affidavit, the 2nd respondent-Director of Income Tax (Exemption) would state that the Inward Register of their office for the relevant period could not be readily traced. In the counter affidavit filed on behalf of the 1st respondent, the Deputy Commission of Income tax would state that the application dated 09.01.2006 is not borne on the records; the 1st respondent granted exemption for the assessment year 2009-2010 and for the subsequent years since the application was filed in time, and the objects in the memorandum of the society were appropriately amended in the meeting held on 13.08.2009, a copy of which was filed by the department on 22.09.2009; and as the application was filed belatedly, and their objects were not “solely” for educational purposes, exemption was denied for the earlier assessment years. They would deny the allegation that the petitioner had filed their application on 15.09.2008 at the request of the department. It is also stated that the petitioner was given an opportunity of hearing vide letters dated 21.08.2009 and 09.09.2009; the petitioner had appeared through their authorized representatives on 18.09.2009 and 22.09.2009, and had also furnished their written submissions; in their letter dated 22.09.2009, filed before the 1st respondent, the petitioner had requested that their case be considered on merits, and approval under Section 10(23C) be granted atleast from the date of their latest application; and, accordingly, approval under Section 10(23C)(vi) was granted, vide letter dated 24.09.2009, from the assessment year 2009-2010. In her order dated 24.09.2009, the 1st respondent informed the petitioner that, in view of the fourteenth proviso to Section 10(23C) of the Act, the application made on 15.09.2008, seeking approval under Section 10(23C)(vi) of the Act, in so far as it related to the assessment year 2004-2005 to 2008-2009 was beyond time, and was invalid as per the fourteenth proviso to Section 10(23-C) of the Act. By a separate order dated 24.09.2009, the petitioner was granted approval under Section 10(23C)(vi) for the assessment years 2009-2010 onwards subject to the conditions mentioned in the order. Under the first proviso to Section 10(23C)(vi) of the Act, educational institutions are required to make an application, in the prescribed form and manner, to the prescribed authority for the purpose of grant of exemption or continuance thereof. The second proviso enables the prescribed authority, before approving any educational institution under sub-clause (vi), to call for such documents including audited annual accounts or information from the educational institution, as it thinks necessary, in order to satisfy itself about the genuineness of the activities of such educational institution. The second proviso also enables the prescribed authority to make such enquiries as it deems necessary. The fourteenth proviso to Section 10(23C) of the Act, in its entirety, was inserted by the Finance Act 2006 with effect from 1.6.2006 and, prior to its amendment by Finance Act, 2009, required an educational institution which makes an application, on or after the first day of June, 2006, for the purpose of grant of exemption or continuance thereof to make an application at any time during the financial year immediately preceding the assessment year. After its amendment by Finance Act, 2009, with retrospective effect from 1.4.2009, the fourteenth proviso to Section 10(23C) stipulates that where an educational institution, referred to in the first proviso, makes an application, on or after the first day of June, 2006, for the purpose of grant of exemption or continuance thereof, such application shall be made on or before the 30th day of September of the relevant assessment year for which the exemption is sought. The burden of establishing that an application in Form 56-D was filed, as early as on 9.1.2006, lies heavily on the petitioner. The copy of the application placed before this Court does contain the seal of the office of the Director of Exemptions. However, in the light of the averment in the additional counter affidavit, that the said application dated 9.1.2006 is not borne out by the records, the conduct of the petitioner must also be noted. Having filed the application on 9.1.2006, it defies reason that the petitioner would not follow up the matter with the 1st respondent and would wait for nearly two years to make the subsequent application dated 15.9.2008. We are therefore, unable to brush aside the submission of Sri J.V.Prasad, Learned Standing Counsel, that the application said to have been filed on 9.1.2006 is created only to get over the amendment to the fourteenth proviso which came into force with effect from 1.6.2006. The petitioner’s application dated 15.9.2008 can only be applicable for the assessment years 2009- 10 and beyond, and not for the assessment years prior thereto. Even otherwise the petitioner’s objects, as it originally stood, included “to eradicate unemployment”; “to help poor people of the community for their study” and “to develop Telugu relations in the society” are not solely educational in nature. In order to be eligible for exemption, under Section 10(23C) (vi) of the Act, it is necessary that there must exist an educational institution. Secondly, such institution must exist solely for educational purposes and, thirdly, the institution should not exist for the purpose of profit. (Commissioner of Income Tax v. Sorabji Nusserwanji Parekh[1]). In deciding the character of the recipient of the income, it is necessary to consider the nature of the activities undertaken. If the activity has no co-relation to education, exemption has to be denied. The recipient of the income must have the character of an educational institution to be ascertained from its objects. (Aditanar Educational Society v. ACIT[2]). The emphasis in Section 10(23C)(vi) is on the word "solely". "Solely' means exclusively and not primarily. (Commissioner of Income-tax, Hyderabad v. Gurukul Ghatkeswar of Hyderabad[3]; Commissioner of Income Tax v. Maharaja Sawai Mansinghji Museum Trust[4]). In using the expression, “solely”, the legislature has made it clear that it intends to exempt the income of the institutions established solely for educational purposes, and not for commercial activities. (Oxford University Press v. CIT[5]). This requirement would militate against an institution pursuing objects other than education. (Vanita Vishram Trust v. Commissioner of Income- tax[6]). Even if one of the objects enables the institution to undertake commercial activities, it would not be entitled for approval under Section 10(23-C)(vi) of the Act. (American Hotel & Lodging Association Educational Institute v. CBDT[7]). It is only if the objects reveal that the very being of the assessee- society, as an educational institution, is exclusively for educational purposes and not for profit, would the assessee be entitled for exemption under Section 10(23-C)(vi) of the Act. (Gurukul Ghatkeswar of Hyderabad3). In case of a dispute, whether the claim of the assessee to be exempted from tax is admissible or not, it is necessary for the assessee to establish that it is part of an institution which is engaged solely for educational purposes and not for the purposes of profit, and the income in respect of which exemption is claimed is a part of the income of the institution. (Oxford University Press5). The activities of the institution, its objects, its source of income and its utilization, must be analysed by the prescribed authority to ascertain whether it exists solely for education and not for profit, and it is his duty to ascertain whether the income is applied wholly and exclusively for the educational objects for which purpose the applicant is established. (ACIT v. Surat Art Silk Manufacturers Association[8]; American Hotel7). The test of predominant object of the activity is to be seen, whether it exists solely for education, and not to earn profit. (Addl. Commissioner of Income Tax v. Surat Art Silk Cloth Manufacturers Association[9]; American Hotel7; Pinegrove International Charitable Trust v. UOI[10]). The decisive test is whether, on an overall view of the matter, the object is to carry on educational activities or to make profit. (Aditanar Educational Institution2). If there are several objects of a society some of which relate to “education” and others which do not, and the trustees or the managers in their discretion are entitled to apply the income or property to any of those objects, the institution would not be liable to be regarded as one existing solely for educational purposes, and no part of its income would be exempt from tax. In other words, where the main or primary objects are distributive, each and everyone of the objects must relate to “education” in order that the institution may be held entitled for the benefits under Section 10(23-C)(vi) of the Act. If the primary or dominant purpose of an institution is “educational”, another object which is merely ancillary or incidental to the primary or dominant purpose would not disentitle the institution from the benefit. The test which has, therefore, to be applied is whether the object, which is said to be non-educational, is the main or primary object of the institution or it is ancillary or incidental to the dominant or primary object which is “educational”. (Surat Art Silk Cloth Manufacturers Association9). The test is the genuineness of the purpose tested by the obligation created to spend the money exclusively on "education". If that obligation is there, the income becomes entitled to exemption. (Sole Trustee, Loka Shikshana Trust v. C.I.T[11]). Under the third proviso to Section 10(23-C)(vi) the prescribed authority has to ascertain, while examining the genuineness of the activities of the institution, whether the applicant applies its income wholly and exclusively to the objects for which it is established. The applicant has not only to impart, but must also apply its income exclusively for the purposes of, education. (American Hotel7). The words 'not for the purposes of profit' accompanying the words 'existing solely for educational purposes' has to be read and interpreted keeping in view the third proviso to Section 10(23C)(vi) which prescribes the methodology for utilization and accumulation of income at the hands of the educational institution. As a result 85% of the income has to be applied by the educational society for the purpose of education. The third proviso requires the applicant society to apply its income, or accumulate it for application, wholly and exclusively, to the objects for which it is established. The word 'wholly' refers to the quantum of expenditure and the word 'exclusively' refers to the motive, object or the purpose of expenditure. (Pinegrove International Charitable Trust10; Vanita Vishram Trust6). The threshold conditions are aimed at discovering the actual existence of an educational institution and approval of the prescribed authority for which an application in the standardized form, in terms of the first proviso, has to be given by every applicant. If the educational institution actually exists for educational purposes alone should the prescribed authority permit it to operate. (American Hotel7; Pinegrove International Charitable Trust10). The aforesaid objects do not relate to education. The sense in which the word "education" has been used, in Section 2(15) of the Income Tax Act, is the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education", in Section 2(15), has not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education. What education connotes, in that clause, is the process of training and developing the knowledge, skill, mind and character of students by formal schooling. (Sole Trustee, Loka Shikshana Trust11). This definition of ‘education’ is wide enough to cover the case of an "educational institution" as, under Section 10(23-C)(vi), the "educational institution" must exist "solely" for educational purposes. (Maharaja Sawai Mansinghji Museum Trust4) . The element of imparting education to students, or the element of normal schooling where there are teachers and taught, must be present so as to fall within the sweep of Section 10(23-C)(vi) of the Act. Such an institution may, incidentally, take up other activities for the benefit of students or in furtherance of their education. It may invest its funds or it may provide scholarships or other financial assistance which may be helpful to the students in pursuing their studies. Such incidental activities alone, in the absence of the actual activity of imparting education by normal schooling or normal conduct of classes, would not be sufficient for the purpose of qualifying the institution for the benefit of Section 10(23-C)(vi). (Sorabji Nusserwanji Parekh1). Section 2(15) is wider in terms than Section 10(23-C) (vi) of the Act. If the assessee's case does not fall within Section 2(15), it is difficult to put it in Section 10(23-C) (vi) of the Act. (Maharaja Sawai Mansinghji Museum Trust4). The aforesaid objects can neither said to be integrally connected with, nor as being ancillary to the object of “education” and, since the existence of an educational institution solely for the purpose of education is the sine qua non for granting approval under Section 10(23C)(vi) of the Act, the petitioner would not be entitled for exemption under Section 10(23C)(vi) of the Act. The objects of the petitioner society are said to have been amended on 10.9.2009, and to have been registered with the Registrar of Societies on 29.9.2009. The order of rejection, in issue herein, is for the assessment years 2004-05 to 2008-09 and, since the amended objects came into force after the aforementioned assessment years, the amended objects have no application to the facts of the present case. The A.P. Societies Registration Act, 2001 (AP Act 35 of 2001) repealed the Societies Registration Act in its application to the Andhra Area of the State of Andhra Pradesh, and the A.P. (Telangana Area) Public Societies Registration Act, 1350 fasli. Section 8 of A.P. Act 35 of 2001 relates to amendment of the memorandum and bye-laws of a society. Under sub-section (1) thereof a society, by a special resolution, may alter the provisions of the memorandum with respect to a change of its objects. Under sub-section (3) any alteration of the memorandum of the society shall not be valid unless such alteration is registered under the Act. Under Section 8(4) if any alteration of the memorandum is filed, and if they are not contrary to the provisions of the Act, the Registrar shall register the same, and certify registration of such alteration within thirty days from the date of receipt of the resolution. This certificate is conclusive evidence that all the requirements of the Act, with respect to the alteration and the certification thereof, have been complied with and, henceforth, the memorandum, as so altered, shall be the memorandum of the society. On a conjoint reading of sub-sections (3) and (4) of Section 8, it is only when the amendment to the objects of the society is intimated to the Registrar and the Registrar, on being satisfied that the amendment is not contrary to the provisions of the Act, registers and certifies such an alteration would it be a valid alteration under the Act. It is only from the date the Registrar certifies the alteration that the amendment, to the objects of the society, comes into force. Even otherwise the amended objects also include “eradication of unemployment”, which cannot be said to be solely for the purpose of education. It is also neither ancillary to or integrally connected with the object of education. It is, however, submitted that the application was rejected only on the ground that the application was filed belatedly, and not on the basis of the objects of the society, this Court ought to set aside the order since the application was filed on time; and the 1st respondent must be directed to examine the objects and pass orders afresh in accordance with law. The jurisdiction exercised by this Court under Article 226 of the Constitution of India is discretionary, and a Writ is not issued as a matter of course. A writ of mandamus is not a writ of course or a writ of right but is, as a rule, discretionary. (C.R. Reddy Law College Employees’ Association, Eluru, W.G.District Vs. Bar Council of India, New Delhi)[12]. One of the limitations imposed by this Court, on itself, is that it would not exercise jurisdiction unless substantial injustice has ensued or is likely to ensue. It would not allow itself to be turned into a court of appeal to set right mere errors of law which do not occasion injustice. (Sangram Singh Vs. Election Tribunal, Kotah)[13]. Ex-facie the objects, both prior to and after its amendment, are not “solely” for the purpose of education and we see no useful purpose, therefore, in setting aside the order and remanding the matter back to the Chief Commissioner only to enable him to pass an order afresh rejecting the petitioner’s application on this ground. The writ petition fails and is, accordingly, dismissed. However, in the circumstances, without costs. _____________ V.V.S.RAO, J ___________________________ RAMESH RANGANATHAN, J 23.11.2010 ASP [1] (1993) 201 ITR 939 [2] (1997) 224 ITR 310 [3] Judgment of APHC DB in R.C. No.35 of 1996 dated 29.09.2010 [4] (1988) 169 ITR 379 (RAJ) [5] (2001) 247 ITR 658 (SC) [6] (2010) 327 ITR 121 (Bombay) [7] (2008) 301 ITR 86 SC [8] (1980) 121 ITR 1 (SC) [9] (1980) 121 ITR 1(SC [10] (2010)327 ITR 73 (P &H [11] (1975) 101 ITR 234( SC [12] 2004(5) ALD 180 (DB) [13] AIR 1955 S.C.425