Deepak Gupta | Dec 16, 2018 |
Exemption u/s 10(23C)(vi) available even if DPS made profits from its joint venture; SC
Supreme Court in the case of DIT(E) v. Delhi Public Schools Society in SLP(C) Diary No. 38347 of 2018
Delhi Public Schools Society was set up with main object to establish educational institutions.
Assessee had been enjoying exemption u/s 10(22) since A.Y. 1977-78 and in view of substitution of section 10(22) with section 10(23C)(vi) with effect from 01.04.1999, assessee applied for approval of exemption u/s 10(23C)(vi) for A.Y. 2008-09 onwards.
Department rejected assessee’s application on grounds that the franchisee fee received by it from the satellite schools in lieu of its name, logo and motto amounts to a business activity with a profit motive and certain clauses of the assessees Memorandum of Association were not in conformity with its objectives. Also no separate books of accounts were maintained by the assessee for this business activity as required under section 11(4A) of the Act.
High Court held that assessee had fulfilled requirements to qualify for exemption u/s 10(23C)(vi) on following grounds:
| Sl.No. | CONDITIONS | COMPLIANCE |
| I | The assessee will apply its income or accumulate for application wholly and exclusively to the objects for which it is established. | The society as in the past has applied its income wholly and exclusively to the object for which it was established. Never in the past has there been violationin respect of application of income by the society. |
| II | The assessee will not invest or deposit its funds (other than voluntary contributions received and maintained in the form of jewellery, furniture etc.) for any period during the previous years relevant to the assessment years mentioned above otherwise than in any one or more of the forms or modes specified in subsection(5) of section 11. | Complied with |
| III | This order will not apply in relation to any income being profits and gains of business unless the business is incidental to the attainment of objectives of the assessee and separate books of accounts are maintained in respect of such business. | The society has not carried on or engaged itself in any business. It was only in furtherance of this object that the society had been and is assisting the other schools to set up their institutions to be run on the model of the schools run by the society. Imparting of education is not the business of the society. What the society receives is towards reimbursement of its expenses from such schools to whom the assistance has been given. This does not remotely amount to profit motive of the society. No members of the society get any monetary benefitfrom the society. |
| IV | The assesse will regularly file its Return of Income before the Income Tax Authority in accordance with the provisions ofthe Income Tax Act, 1961. | The society had been filing its return of income regularly since inception and continues to file its return and has filed its returns upto and including A. Y. 2007-08. |
| V | That in the event of dissolution, its surplus and the assets will be given to charitable organization with similar objective and no part of the same will to any of the trusts of The Delhi Public School Society, DPS Staff Flats, F Block, East of Kailash, New Delhi. | Though there is no possibility of the dissolution of the society, however, in the event of dissolution, the funds will be given to charitable organization(s) with similar objective and no part of the same will be distributed to any of the trustees. |
Considering the findings given by High Court, SLP filed by Department was dismissed by the Supreme Court.
Click here to Download the relevant Orders :
Order of Supreme Court
Order of Delhi High Court – 1
Order of Delhi High Court – 2
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