THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITIN No.26980 OF 2010 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) This Writ Petition is filed questioning the order of the 1st respondent dated 29.10.2009 whereby the petitioner’s application dated 14.10.2008, seeking approval under Section 10(23C)(vi) of the Income Tax Act, (hereinafter referred to as the “Act”), in so far as it related to the assessment years 2004-05 to 2008-09, was rejected. The petitioner, a society registered under the Andhra Pradesh (Telangana area) Public Societies Registration Act, 1350 Fasli with registration No.1915 of 1987 dated 24.08.1987 had the following objects: i. To open, run and continue an institution for providing Higher, Technical and Medical Education and Training to the student community of Kannada students, to promote Literacy and Eradicate Unemployment. ii. To open, run and continue the Hostels for the poor Kannada Students Community. iii. To organize seminars, workshops, debates, camps and forums etc., iv. To encourage social, educational and literary activities among the Kannada students. v. To open run and continue primary, secondary and High Schools for Kannada students. vi. To conduct cultural programmes, help for poor people of community for their study, and vii. To develop Telugu, Kannada linguistic relations in the Society. The aforesaid objects were amended by the petitioner society in its meeting held on 13.08.2009, and they were registered with the Registrar of Societies on 19.10.2009. The amended objects read as under: a. To open, run and continue an institution for providing Higher, Technical and Medical Education and Training to the student community, to promote Literacy and Eradicate Unemployment, and b. To open, run and continue primary, secondary and high schools for students. The petitioner claims to be running various educational institutions such as PG colleges, Engineering colleges, etc. It is their case that they have been filing income tax returns, claiming exemption under Section 10(23C)(vi) of the Act, as they are an educational institution existing solely for educational purposes, and not for profit. Pursuant to an application made by them the Director General of Income Tax (Exemption), by order dated 23.03.2006, granted exemption for the assessment year 2002-03. Thereafter the petitioner claims to have submitted an application dated 03.12.2005 in Form 56-D for the assessment years 2004-05 onwards, along with all necessary enclosures, to the Director of Income Tax (Exemption) on 05.12.2005. On the ground that they did not receive any response thereto, the petitioner claims to have filed another application in Form 56-D on 27.11.2007, along with necessary enclosures, for grant of exemption from 2004-05 onwards on the oral request of the Director of Income Tax (Exemption). They filed another application in Form 56-D on 14.10.2008 along with the enclosures thereto. The 1st respondent issued notices dated 12.10.2009 and 21.10.2009 seeking clarification on the petitioner’s objects, and directed them to submit a copy of their memorandum of association. The petitioner claims to have filed a copy thereof on 27.10.2009. The 1st respondent, by order dated 29.10.2009, granted approval from the assessment year 2009-10 onwards. On the same day the 1st respondent, by another order dated 29.10.2009, rejected the petitioner’s application for the assessment years 2004-05 to 2008- 09 on the ground that it was filed beyond the time stipulated in the fourteenth proviso to Section 10(23C) of the Act. It is the petitioner’s case that, as they had filed applications previously on 05.12.2005 and 27.11.2007, their application is not belated; their subsequent application dated 14.10.2008 was at the request of the 2nd and 3rd respondents; 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 his notice that they had filed their first application as long back as on 05.12.2005; and the amendment, which placed a limitation for making an application under Section 10(23C), came into force only with effect from 01.06.2006, while the petitioner had submitted their first application much prior thereto on 05.12.2005. In her order dated 29.10.2009, the 1st respondent held that, in view of the fourteenth proviso to Section 10(23C) of the Act, the application made on 14.12.2008 seeking approval under Section 10(23C)(vi) of the Income Tax Act, in so far as it related to the assessment year 2004-05 to 2008-09, was beyond time and was invalid. 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. While the petitioner would assert that they had submitted an application to the Director of Income Tax (Exemption) on 05.12.2005 and later on, on 27.11.2007 the impugned order makes no reference thereto. The burden lies heavily on the petitioner- applicant to establish that such an application was indeed filed. The fact that the petitioner kept quiet for nearly two years from 05.12.2005 to 27.11.2007 and again for nearly a year from 27.11.2007 to 14.10.2008, without making any representation regarding non-consideration of their applications, casts a doubt over their claim of having filed such applications earlier. 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 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. (Surat Art Silk Cloth Manufacturers Association8; American Hotel7; Pinegrove International Charitable Trust v. UOI[9]) . 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 Association8). 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[10]). 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 Trust9; 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 Trust9). The objects of the petitioner, as it originally stood, include “to eradicate unemployment” and “to develop Telugu, Kannada linguistic relations in the society”. 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 Trust10). 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). Even if the petitioner’s contention that the fourteenth proviso to Section 23C is not attracted, since they made an application prior to its coming into force on 01.06.2006, is to be accepted the aforesaid objects of the petitioner society, as they stood prior to its amendment, include non-educational objects also, and they would, therefore, not be entitled to grant of exemption under Section 10(23C)(vi) of the Act. The amended objects of the petitioner society are said to have been registered with the Registrar of Societies only on 19.10.2009. 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. A conjoint reading of Sections 8(3) and (4) make it clear that it is only from the date the Registrar certifies the alteration that the amendment of the objects of the petitioner society come into force. Even if the petitioner’s contention, that the amended objects were registered on 19.10.2009, is to be accepted, it is only from that date that the amended objects come into force, and not prior thereto. As such it is only the pre-amended objects which will continue to remain in force upto the assessment year 2009-10. In any event the amended objects also include “eradicating unemployment”. This object is also not educational in nature. The petitioner would, however, contend that this is not a ground on which the 1st petitioner has rejected their application. 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[11]). 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[12]). Since the objects, both prior and after its amendment, ex facie show that they are not solely educational in nature, we see no reason to exercise discretion under Article 226 of the Constitution of India to entertain this writ petition. 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 MRKR [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] (2010)327 ITR 73 (P &H [10] (1975) 101 ITR 234( SC [11] 2004(5) ALD 180 (DB) [12] AIR 1955 S.C.425