Case Note & Summary
The petitioner, Savikrutha Charitable Trust, filed a writ petition under Articles 226 and 227 of the Constitution of India challenging an order dated 30.07.2009 passed by the Chief Commissioner of Income Tax, Hubli, rejecting its application for approval under Section 10(23C)(vi) of the Income Tax Act, 1961 for the financial year 2007-2008. The trust, represented by its Secretary Smt. Vijaya K. Shetty, is engaged in educational activities. The Chief Commissioner rejected the approval on the ground that the trust was not carrying on activities as per its objectives and was doing for profit, and that the trustees were benefited from the assets of the trust. The High Court heard the learned counsel for the petitioner, Sri Tata Krishna, and the standing counsel for the respondent, Sri Y.V. Raviraj. The court perused the impugned order and found that the reasoning in paragraph 6 of the order was not supported by material on record. The court noted that the trust was running educational institutions and applying its income for educational purposes. There was no evidence to show that the trustees were personally benefited or that the trust was carried on for profit. The court held that the rejection was arbitrary and quashed the impugned order. The matter was remitted to the Chief Commissioner for fresh consideration in accordance with law, after affording an opportunity of hearing to the petitioner. The writ petition was allowed.
Headnote
A) Income Tax - Charitable Trust - Approval under Section 10(23C)(vi) - The Chief Commissioner rejected approval on grounds that trust was not carrying on charitable activities and was doing for profit, and trustees were benefited from trust assets. The High Court held that the trust was carrying on educational activities, income was applied for objects of the trust, and there was no material to show that trustees were personally benefited. The impugned order was quashed and the matter remitted for fresh consideration. (Paras 1-6)
B) Income Tax - Charitable Trust - Application of Income - The court observed that the trust's income was applied for educational purposes, and the mere fact that the trust had surplus or that trustees were related does not indicate profit motive or private benefit. The Commissioner must consider the application of income wholly and exclusively for charitable purposes. (Paras 4-6)
Issue of Consideration
Whether the Chief Commissioner of Income Tax was justified in rejecting the approval under Section 10(23C)(vi) of the Income Tax Act, 1961 to the petitioner-trust on the ground that the trust was not carrying on activities as per its objectives and was doing for profit, and that the trustees were benefited from the assets of the trust.
Final Decision
The writ petition is allowed. The impugned order dated 30.07.2009 passed by the Chief Commissioner of Income Tax, Hubli, is quashed. The matter is remitted to the Chief Commissioner for fresh consideration in accordance with law, after affording an opportunity of hearing to the petitioner.
Law Points
- Charitable trust
- exemption under Section 10(23C)(vi)
- application of income
- profit motive
- private benefit
- educational institution
Case Details
2013 LawText (KAR) (08) 26
Writ Petition No.65306 of 2009 (T-IT)
Sri Tata Krishna for Sri Raghuraman & Sri Chaitanya, Sri Y.V. Raviraj
Savikrutha Charitable Trust (R)
The Chief Commissioner of Income Tax
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Nature of Litigation
Writ petition under Articles 226 and 227 of the Constitution of India challenging an order rejecting approval under Section 10(23C)(vi) of the Income Tax Act, 1961.
Remedy Sought
Quashing of the impugned order dated 30.07.2009 passed by the Chief Commissioner of Income Tax, Hubli, rejecting approval to the petitioner-trust under Section 10(23C)(vi) of the Income Tax Act, 1961 for the financial year 2007-2008.
Filing Reason
The Chief Commissioner rejected the trust's application for approval under Section 10(23C)(vi) on the ground that the trust was not carrying on activities as per its objectives and was doing for profit, and that the trustees were benefited from the assets of the trust.
Previous Decisions
The Chief Commissioner of Income Tax, Hubli, passed the impugned order dated 30.07.2009 rejecting the approval.
Issues
Whether the Chief Commissioner of Income Tax was justified in rejecting the approval under Section 10(23C)(vi) of the Income Tax Act, 1961 to the petitioner-trust on the ground that the trust was not carrying on activities as per its objectives and was doing for profit, and that the trustees were benefited from the assets of the trust.
Submissions/Arguments
The petitioner argued that the trust was carrying on educational activities and applying its income for charitable purposes, and there was no profit motive or private benefit to trustees.
The respondent supported the impugned order.
Ratio Decidendi
A trust carrying on educational activities and applying its income for charitable purposes is entitled to approval under Section 10(23C)(vi) of the Income Tax Act, 1961, unless there is material to show that the trust is carried on for profit or that the trustees are personally benefited. The mere fact that the trust has surplus or that trustees are related does not indicate profit motive or private benefit.
Judgment Excerpts
This Writ Petition is directed against an order dtd. 30.07.2009 passed by the Chief Commissioner of Income Tax, Hubli, rejecting approval to the petitioner-Trust under Sec.10(23C)(vi) of the Income Tax Act, 1961 for the Financial year 2007-2008.
The reasoning for rejecting the approval is at para 6 of the order which reads as follows : '6. Hence, It is clear from the above facts that the assessee trust is not carrying on any activities as per its objectives and not in the nature of charity but doing for profit. Though the income is applied for the objective of the trust to propagate education, the trustees are benefited from the assets of the trust. Hence, the application of income is not wholly and exclusively towards the objects of the assessee trust.'
Procedural History
The petitioner-trust applied for approval under Section 10(23C)(vi) of the Income Tax Act, 1961 for the financial year 2007-2008. The Chief Commissioner of Income Tax, Hubli, rejected the application by order dated 30.07.2009. The trust filed a writ petition under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka, Circuit Bench at Dharwad, which was heard and allowed on 07.08.2013.
Acts & Sections
- Income Tax Act, 1961: 10(23C)(vi)
- Constitution of India: Articles 226, 227
