THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN W.P.Nos.12076, 26976, 27599, 27600, 27601 and 27602 OF 2010 COMMON ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The orders, impugned in this batch of writ petitions, are those passed by the Chief Commissioner of Income Tax, Hyderabad rejecting the petitioners’ application, for grant of approval under Section 10(23-C)(vi) of the Income Tax Act, 1961, primarily on the ground that their objects are not solely for the purposes of education. It would suffice for the disposal of these writ petitions if the objects of the petitioners – societies in each of the writ petitions are noted. In W.P.No.12076 of 2010 the objects of the petitioner – society include “to install and establish and run gymnasiums, impart physical education, develop sports of all kinds, construct a stadium of modern type and to maintain the same”; in W.P.No.26976 of 2010 the objects of the petitioner – society include to “encourage social, educational and literary activities among Marathi students; to conduct cultural programmes, help for poor people of the Marathi people for their study”; in W.P.No.27559 of 2010 the objects of the petitioner – society include “to organize seminars/workshops on academic topics for promoting democratic values and to co-operate and associate with organizations having similar objectives”; in W.P.No.27600 of 2010 the objects of the petitioner – society include “to work for eradication of illiteracy among other economically weaker communities of India”; in W.P.27601 of 2010, the objects of the petitioner – society include “to maintain unity among the members, to conduct games and sports, to maintain all members meetings and to develop in the locality”; and in W.P.No.27602 of 2010 the objects of the petitioner – society include “to organize study circles, discussion groups, library branches of society anywhere in the State of Andhra Pradesh”. In all the aforesaid cases the application was also rejected on the ground that the petitioner – societies did not register themselves under A.P. Act 30 of 1987. In M/s. New Noble Educational Society v. The Chief Commissioner of Income-tax[1], this court held that failure to register under A.P. Act 30 of 1987 is not a condition precedent for grant of approval, and the Chief Commissioner of Income-Tax could prescribe registration under A.P. Act 30 of 1987 as a condition subject to which approval could be granted. The 1st respondent was, for this reason, directed to consider the matter afresh, and pass orders in accordance with law. It is only if this Court were to be satisfied that the 1st respondent had erred in rejecting the petitioners’ application, on the ground that their objects included those not solely for the purposes of education, would the question of directing the 1st respondent to consider imposing the condition of registration under A.P. Act 30 of 1987, subject to which approval may be granted, arise. If, on the other hand, the order of the 1st respondent is required to be upheld, on the ground that the objects aforementioned are not solely for the purposes of education, rejection of the petitioners’ applications would be valid, and no useful purpose would be served in directing the 1st respondent to consider the matter afresh regarding registration of the petitioners’ societies under A.P. Act 30 of 1987. 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[2]). 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[3]). 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[4]; Commissioner of Income Tax v. Maharaja Sawai Mansinghji Museum Trust[5]). 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[6]). This requirement would militate against an institution pursuing objects other than education. (Vanita Vishram Trust v. Commissioner of Income- tax[7]). 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[8]). 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 Hyderabad4). 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 Press6). 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. (Addl. Commissioner of Income Tax v. Surat Art Silk Manufacturers Association[9]; American Hotel8). 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 Association9; American Hotel8; 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 Institution3). 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 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]). 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 to Section 10(23-C)(vi) of the Act, 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 Hotel8; Pinegrove International Charitable Trust v. UOI10). As noted hereinabove the objects of the petitioner-societies include “to install and establish and run gymnasiums, impart physical education, develop sports of all kinds, construct a stadium of modern type and to maintain the same”; “to encourage social, educational and literary activities among Marathi students, to conduct cultural programmes, help for poor people of the Marathi community for their study”; “to organize seminars/workshops on academic topics for promoting democratic values and to co-operate and associate with organizations having similar objectives”; “to work for eradication of illiteracy among other economically weaker communities of India”; “to maintain unity among the members, to conduct games and sports, to maintain all members meetings and to develop in the locality”; and “to organize study circles, discussion groups, library, branches of society anywhere in the state of Andhra Pradesh”. These 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 Trust5) . 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 Parekh2). 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 Trust5). The submission that the entire surplus income of the educational institution has been spent only for educational activities and nothing else, is of no consequence in as much as the petitioners- societies’ non-educational objects would enable them, at their discretion, to apply the funds of the society for such non-educational objects also. Since the basic requirement of Section 10(23-C)(vi) of the Act is that the educational institution must exist solely for the purpose of education, and not for the purpose of profit, inclusion of non-educational objects in the memorandum of association/bye-laws of the society would disentitle them from claiming the benefit of exemption under Section 10(23-C)(vi) of the Act. The aforestated objects cannot be characterized as ancillary or incidental to, or to be integrally connected with, the object of imparting education. Since the petitioners also have non-educational objects, as part of their objects, the Chief Commissioner of Income Tax cannot be faulted for refusing to grant exemption under Section 10(23-C)(vi) of the Act. The reasons assigned by the Chief Commissioner in this regard are well founded, and do not call for interference. All the writ petitions fail and, are, accordingly, dismissed. However, in the circumstances, without costs. ______________ V.V.S.RAO, J ____________________________ RAMESH RANGANATHAN,J Date: 16.11.2010 ASP [1] Judgment in W.P.No.21248 of 2010 and batch dated 11.11.2010 [2] (1993) 201 ITR 939 [3] (1997) 224 ITR 310 [4] Judgment of APHC DB in R.C. No.35 of 1996 dated 29.09.2010 [5] (1988) 169 ITR 379 (RAJ) [6] (2001) 247 ITR 658 (SC) [7] (2010) 327 ITR 121 (Bombay) [8] (2008) 301 ITR 86 SC [9] (1980) 121 ITR 1 (SC) [10] (2010)327 ITR 73 (P &H [11] (1975) 101 ITR 234( SC