Facts of the Case

M/s Allahabad High School Society, Allahabad, an educational institution engaged in running schools, claimed exemption of its income on the ground that it was a charitable organization devoted to educational purposes. During assessment proceedings, the Assessing Officer examined the society’s income, application of funds, and compliance with statutory requirements for claiming exemption.

The Revenue challenged the claim of exemption, alleging that certain receipts or activities of the society disentitled it from exemption under the Income-tax Act, 1961.

Issues Involved

Whether the assessee-society, engaged in running educational institutions, was entitled to exemption of income as a charitable institution, particularly:

  • Whether education activities qualify as “charitable purpose”
  • Whether income was applied for charitable objects
  • Whether statutory conditions for exemption were satisfied

Petitioner’s (Revenue’s) Arguments

The Revenue contended that the assessee had not fulfilled the conditions necessary for exemption under Sections 11 and 12. It was argued that certain receipts or utilization of funds indicated activities beyond purely charitable purposes or inconsistent with statutory requirements. Therefore, the exemption claimed by the society was not allowable.

Respondent’s (Assessee’s) Arguments

The assessee maintained that it was established solely for educational purposes and was engaged in imparting education through recognized institutions. It submitted that education is expressly included within the definition of charitable purpose under Section 2(15). The society further contended that its income was applied toward educational activities and institutional development, and no part of the income was used for private benefit.

Court Order / Findings (ITAT)

The Tribunal examined the nature of the assessee’s activities, its objects, and the manner of application of income. It reaffirmed the settled legal principle that education constitutes a charitable purpose under the Income-tax Act.

Where an institution exists solely for educational purposes and applies its income toward those objects, exemption under Sections 11 and 12 is ordinarily available, subject to compliance with statutory conditions. The Tribunal evaluated whether the activities were genuine and aligned with the stated charitable objectives.

Based on the material on record, the Tribunal adjudicated the dispute regarding eligibility for exemption in accordance with these principles.

Important Clarification

The ruling underscores that educational societies are entitled to charitable exemption only when they genuinely pursue educational objectives and apply income toward those purposes. Mere status as a school society is insufficient unless statutory conditions are satisfied. Courts consistently recognize education as a charitable activity, but compliance with regulatory provisions remains essential.

Link to download the order –https://itat.gov.in/public/files/upload/1582192127-ALLAHABAD-23&ITA-65.pdf

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