By TIOL News Service

ALLAHABAD, JAN 12, 2017: THE ISSUE IS - Whether renewal of certificate u/s 80G(5) can be denied to an educational society, merely because the society has earned surpluses while imparting education, when the term 'education' u/s 2(15) itself provides for wider interpretation. NO IS THE VERDICT.

Facts of the case:

The assessee is an educational society. During the subject year, the CIT refused to renew the approval granted to assessee u/s 80G(5) on account of the fact that for previous three years, the assessee had shown surpluses and therefore, the activities of assessee were in the nature of commercial enterprises as no charitable activity whatsoever was being pursued. On appeal, the ITAT came to the conclusion that the assessee was entitled for the renewal u/s 80G as there was no violation of the provisions of Section 13. The ITAT while examining the matter, recorded findings that there was no doubt with regard to the facts that the assessee was running an educational institution. It has further been recorded that as per the provisions of Section 11(1), 15% of the income could have been accumulated and the income for the running year could be accumulated up to 85% for a period of five years and if such income was applied for the objects of the institution within the next five years, it could not be said that institution was earning profit even if there were surpluses.

On appeal, the HC held that,

++ from the reading of Section 2(15), it is abundantly clear that the word education utilised in the section stands independently on its own and to suggest that the word may be confined either to the rich or poor or any other strata of the society is not acceptable. The word education has been used in its widest term. It cannot be confined to any section, indeed education is something which is the birth right of every individual. To confine it to a certain group would not be fair in view of the definition as given u/s 2(15) of I-T Act and in view of the provisions of Section 10(23C). It is abundantly clear that the assessee was clearly entitled to be granted exemption u/s 80G (5) for the current year as it has been done in the previous year in view of the law and in view of the findings recorded.

(See 2017-TIOL-71-HC-ALL-IT)