Delhi High Court

Jaypee Institute Of Information ... vs Director General Of Income Tax ... on 21 August, 2009

Author: A.K.Sikri

                           UNREPORTABLE
*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            WP (C) No. 5581 of 2008

%                                               Reserved on : July 30, 2009
                                            Pronounced on : August 21, 2009

Jaypee Institute of Information
Technology Society                                           . . . Petitioner

                   through :                Mr. Amol Sinha with
                                            Mr. Praveen Chauhan, Advocates

              VERSUS

Director General of Income Tax
(Exemptions), Delhi                                          . . . Respondent

                   through :                Ms. Prem Lata Bansal with
                                            Ms. Anshul Sharma and
                                            Mr. Paras Chaudhary, Advocates

CORAM :-
    THE HON‟BLE MR. JUSTICE A.K. SIKRI
    THE HON‟BLE MR. JUSTICE NEERAJ KISHAN KAUL

       1.     Whether Reporters of Local newspapers may be allowed
              to see the Judgment?
       2.     To be referred to the Reporter or not?
       3.     Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J.

1. The petitioner is a registered society under the Societies Registration

Act, 1860. It is running an institute known as "Jaypee Institute of

Information Technology" (hereinafter referred to as the „Institute‟).

According to the petitioner, the object with which the petitioner

Institute was registered is to impart formal education and the

institution exists only for the said educational purpose and there is no

element of profit involved, as envisaged under the Income Tax Act,

1961 (hereinafter referred to as the „Act‟). It is also declared as a

„Deemed University‟ by the University Grants Commission (UGC)

vide Notification dated 1.11.2004 issued under Section 3 of the

University Grants Commission Act, 1956. It is registered under

Section 12A as well as Section 80G of the Act. However, its

application for registration under Section 10(23C)(vi) of the Act has

been rejected by the respondent vide its order dated 26.3.2008. The

main reason given by the respondent is that education is not the only

objective of the petitioner Institute inasmuch as the objective clause

in the Memorandum of Association (for short, „MOA) of the

petitioner Institute mentions that the institute is also established for

"undertaking extra mural studies, extension programmes and field

outreach activities to contribute to the development of society".

This order is challenged by way of the present writ petition.

2. The core question which falls for consideration is as to whether

aforesaid activities stipulated in the object clause is educational

activity or it would be termed as an activity other than for

educational purpose. In order to decide this question, it would be

necessary to give the factual matrix of the case and also the

contentions advanced by counsel for either side.

3. The petitioner Institute was registered on 5.5.2004 under the

Societies Registration Act, 1860. It is not in dispute that it is

imparting formal education by running the aforesaid Institute,

namely, Jaypee Institute of Information and Technology from Plot

No. A-10 & A-12, Sector-62, Noida (UP). According to the

petitioner, the institute actually exists for the purpose of education

only and there is no element of profit. When it applied to the UGC

for declaration as „Deemed University‟, request of the institute was

accepted by the UGC and Notification dated 1.11.2004 was issued,

which reads as under :-

"NOTIFICATION

In exercise of the powers conferred by Section 3 of the University Grants Commission Act, 1956, the Central Government, on the advice of the University Grants Commission, hereby declare the Jaypee Institute of Information Technology (JIIT), Noida (Uttar Pradesh) as Deemed to be University under De-novo category for the purpose of the aforesaid Act with immediate effect subject to review after three years.

The grant of de-novo Deemed to be University status to Jaypee Institute of Information Technology, Noida is subject to the conditions that (i) JIIT, Noida will revise/amend its MOA/ Rules as per UGC Model MOA/Rules for deemed Universities;

(ii) JIIT, Noida will get its land transferred in the name of JIIT Society; and (iii) It will adhere to the guidelines/instructions issued by UGC and AICTE from time to time as applicable to the Deemed Universities."

Sd/-

(Ravi Mathur) Joint Secretary to the Government of India"

4. This status of „Deemed University‟ was conferred upon the Institute

subject to the condition that the institute revises/amends its

MOA/Rules as per the UGC model. UGC has issued guidelines for

considering proposals for declaring an institute as a „Deemed

University‟ under Section 3 of the UGC Act. These guidelines are

annexed with the writ petition as Annexure-A. Para 3 of these

guidelines provides that to qualify for recognition of status as a

University, the institution should have, among its primary objectives,

post-graduate instruction and training in such branches of learning as

it may deem fit, and research for the advancement and dissemination

of knowledge. Para 4(a)(i), which is relevant for this case, stipulates

as under :-

"4(a) For the purpose of recognition as a university as institution should generally be:

(i) Engaged in teaching programmes and research in chosen fields of specialization which are innovative and of very high academic standards at the Master‟s (or equivalent) and/or research levels. It should also have a greater interface with society through extra mural, extension and field action related programmes."

It, thus, specifically provides that in order to get recognition as

a University, an institute should have a greater interface with society

through extra mural, extension and field action related programmes.

Along with these guidelines, model constitution of MOA/Rules which

has to be adopted by all such institutions applying for „Deemed

University‟ status is prescribed. It mentions that every such institution

has to be registered as a „Society‟ under the Societies Registration Act,

1860 or as a Trust with trustees being appointed and vested with

legal powers and duties and has to frame the MOA/Trust Deed, Rules

and Bye-laws. The draft outline of the MOA is also provided, which

specifically points out as to what would be the objectives mentioned

in the MOA. It reads as under :-

"3. Objectives

The objectives for which the Institute is established are :

(i) to provide for instruction and training in such branches of learning as it may deem fit.

(ii) to provide for research and for the advancement of and dissemination of knowledge.

(iii) to undertake extra mural studies, extension programmes and filed outreach activities to contribute to the development of society.

(iv) to do all such other acts and things as may be necessary or desirable to further the objects of the Institute.

The objectives should be well-defined and well known to the students, teachers and non-teaching staff of the proposed deemed to be university."

Para 8 of the model constitution of the MOA mandates that

income and property of the institute is to be applied for its objectives

only as set forth in the MOA. Para 9 further clarifies that income and

property of the institute is not to be paid or transferred by way of

profits.

5. It is clear from the aforesaid that before an institute can apply to the

UGC for declaration as „Deemed University‟ under Section 3 of the

UGC Act, it has to be registered either as a Society or as a Trust.

Further, it has to have MOA on the lines of model constitution

provided by the UGC which specifically stipulates the objectives

which are to be mentioned in the MOA of the institute. Undertaking

extra mural status, extension programmes and field outreach

activities to contribute to the development of the society is

specifically stipulated as one of the objectives which each such

institution is bound to satisfy. This is so mentioned even in the

guideline No. 4(a)(i). Therefore, inclusion of this objective is

imperative, without which the UGC would not accord the status of

„Deemed University‟ to the applicant Institute.

6. It was because of the aforesaid guidelines that the petitioner Institute

was obliged to have its MOA in the said form. However,

notwithstanding this, the respondent has rejected the application for

grant of exemption under Section 10(23C)(vi) of the Act for the

assessment year 2007-08 holding that the Institute does not exist

solely for educational purposes as the purpose/objective of "greater

interface with society through extra mural, extension and field action

related programmes" is also stipulated in the MOA. According to the

respondent, the aforesaid objective does not relate to formal

education. The Institute is having model objectives, of which

education is only one of them. Each objective is independent of the

other and, therefore, it cannot be said that one of them is the

primary objective and the others are ancillary to it. The mental

process of the respondent can be gazed in the following discussion

contained in the impugned order :-

"9. I have considered the case of the applicant in the light of the above provisions of the Act, and the judgments of the Hon‟ble Supreme Court and the High Court of Gujarat. The sub-clause (iii) of clause 3 of the MOA of the applicant society does not relate to formal education as defined by the Hon‟ble Supreme Court and High Court of Gujarat in the cases cited above. The Society is having multiple objectives of which education is only one of them. Each object is independent of the other and it cannot be said that one of them is the primary object and the others are ancillary to it. It can also not be said that the main object is education and the others are related to it. Each object exists for a specific purpose for which it has been laid down. Due to the amendments brought about in the Income Tax Act and Income Tax Rules, approval u/s 10(23C)(vi) is no longer limited to periodical approval of three years. The approval is now given from a particular assessment year onwards and it is a one time approval till it is withdrawn. Hence, it has to be ensured at the time of giving approval u/s 10(23C)(vi) that a Society by virtue of its objects exists only for the purpose for which it is claiming approval. By leaving the non-educational object loose ended, the applicant will always be at liberty to apply its income towards these objects. This is

not what is envisaged in Section 10(23C)(vi). The applicant must exist solely for education. The word solely as defined, in „The Law Lexicon" by P. Ramanatha Aiyer means "alone", "single", "used in contradistinction to joint". Further, solely means "exclusive". This shows that the objects, primary or ancillary must be solely for education and not for any other charitable purpose."

7. After hearing the learned counsel for the parties, we are of the

opinion that a very narrow, pedantic and orthodox approach has

been adopted by the respondent in turning down the application of

the petitioner.

8. No doubt, as per Section 10(23C)(vi) of the Act, the requirement is

that a University or educational institution, in order to get exemption

under the aforesaid provision, is to exist solely for educational

purposes. This provision reads as under :-

"Any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority."

9. In what manner the „education‟ is to be imparted is explained by the

Supreme Court in the case of Sole Trustee Loka Shikshana Trust v.

Commissioner of Income Tax, (1975) 101 ITR 234 (SC). The Court

refined the expression „Education‟ as appearing in Section 2(15) of

the Act, which is extracted by the respondent as well in the

impugned order. It reads as under :-

"The sense in which the word "education" has been used in Section 2(15) 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" 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 normal schooling."

10. We also take note of the judgment of the Gujarat High Court in the

case of Saurashtra Education Foundation v. Commissioner of Income

Tax, (2005) 273 ITR 139 (GUJ), which has been relied upon by the

respondent in the impugned order wherein the Gujarat High Court

discussed the term "other educational institutions" as appearing in

Section 10(22) of the Act in the following manner :-

"...white a trust holding property for the charitable purpose of education, as defined in Section 2(15) of the Income Tax Act, 1961, may also be an education institution existing solely for the purpose of education, the two institutions cannot be treated as belonging to the same class. An institution may be carrying on educational activities as are being carried on by the assessee herein without imparting formal education and without being affiliated to or accountable to any authority. Such a trust can certainly be considered as qualifying for exemption u/s 11(1)(a) read with section 2(15), it is the activities which are in focus whereas, in section 10(22) both the institution and the activities are in focus. An educational institution u/s 10(22) is, therefore, more than a body carrying on charitable activities in the field of education as contemplated by section 2(15). The expression other educational institutions in the section would mean an institution imparting formal education in an organized and systematic training where the institution would be accountable to some authority and where there would be teachers and taught, the former having some degree of control over the later. Although the expression "other educational institution" may not be confined to school or colleges, the expression does contemplate an institution imparting formal educational or training."

11. No doubt, the aforesaid parameters are to be kept in mind. In fact,

these are satisfied in the present case, inasmuch as, the petitioner is

running an educational institute imparting education in a systematic

manner. The very fact that it is granted the status of „Deemed

University‟ by the UGC, for which notification under Section 3 of the

UGC Act has been issued, would be a clinching factor insofar as

institutionalized education conducted by the petitioner is concerned.

It is imparting education in an organized and systematic manner and

is accountable to UGC even for maintaining the standards of

education. It is not in dispute that in the petitioner Institute teachers

are employed and students enrolled are taught by these teachers

under their control and they remain under their control and

supervision.

12. On the contrary, the Supreme Court has given wider meaning to the

expression "any educational institution" occurring in Section

10(23C)(vi) of the Act. Under this phrase, even those institutions

would be covered which may or may not have to do anything with

the university. The courts have expressed the opinion, by catena of

judgments, that categories provided in the aforesaid provision are so

different that the university cannot be the genus and "other

educational institution" the species thereof. Once a college is

established by an institution, that would come within the expression

"other educational institution". {See - Addl. Commissioner of

Income Tax v. Aditanar Educational Institution, 224 ITR 310 (SC);

Addl. CIT v. M/s. Hamdard Dawakhana (Wakf), 157 ITR 639 (Del);

CIT v. M/s. Venkatasubbiah Reddiar (K.S.), 221 ITR 18 (Mad)}.

In the present case, as mentioned above, the activity would

clearly fall within the expression „University‟ itself as the petitioner is

a „Deemed University‟ and, thus, has got the status of a university.

13. We have to remind ourselves that the main reason given by the

respondent in rejecting the application of the petitioners was that the

petitioner Institute is having multiple objectives, of which education

is only one of them. In coming to this conclusion, the respondent

has been swayed by the so-called other objectives, namely "greater

interface with society through extra mural, extension and field action

related programmes" stipulated in the MOA. What is perceived by

the respondent is that these objectives are independent of each other

and it cannot be said that the main object is education and others are

related to it. It is here where the authority faltered in its approach.

It is where the respondent faltered. The first aspect which was totally

ignored was that this object is included at the instance of UGC,

without which the UGC would not have entertained the application

of the petitioner Institute for grant of status of „Deemed University‟.

Obviously, the UGC would not insist on including an objective which

is unrelated to „education‟. There is a clear purpose behind it. The

aforesaid activity/objective is stated by the UGC as part of education.

Even in Sole Trustee Loka Shikshana Trust (supra), the Supreme Court

clearly observed that "what education connotes in that clause is the

process of training and developing the knowledge, skill, mind and

character of students by normal schooling". Normal schooling is

provided by the petitioner institution. What is emphasized by the

UGC by necessitating incorporation of the aforesaid objective is that

imparting of education is not limited to seeking knowledge through

text books alone. The UGC also wants students to have greater

interface with the society. That is necessary because of the modern

concept of education which needs to be imparted at schools and

universities level.

14. If pure learning, which is one of the purposes of the universities, is to

survive, it will have to be brought into relation with the life of the

community as a whole, not only with the refined delights of a few

gentlemen of leisure. Real education is one which makes a student

socially relevant. For this purpose, his greater interface with the

society is required. UGC perceives that this can be achieved through

extra mural, extension and field action related programmes. These

programmes may include NSS and NCC activities, other social service

programmes and projects. It is with this purpose in mind that the

aforesaid objective is introduced so that students in the petitioner

Institution are able to get „real‟ education. The main purpose,

therefore, remains „Education‟ which is imparted in a formal way by

the petitioner Institute with status of „Deemed University‟ through

the help of teachers. The aforesaid activities would only develop the

knowledge, skill or character of the students further by achieving

education in true sense.

15. The central task of „education‟ is to implant a will and facility of

learning; it should produce „not learned‟ but „learning people‟. Any

Rand highlights the following purpose of education :-

"The only purpose of education is to teach a student how to live his life by developing his mind and equipping him to deal with reality. The training he needs is theoretical, i.e. conceptual. He has to be taught to think, to understand, to integrate, to prove. He has to be taught the essentials of the

knowledge discovered in the past and he has to be equipped to acquire further knowledge by his own effort."

Webster defines „education‟ as the process of educating or

teaching. Educate is further defined as "to develop the knowledge,

sill or character of...". Thus, from these definitions, we might assume

that the purpose of education is to develop the knowledge, skill or

character of students. Unfortunately, this definition offers little unless

we further define words such as develop, knowledge and character.

Similar purpose is emphasized by Bill Beattie.

Therefore, formal education through schooling/university even

would be incomplete if student is not taught how to think, to

understand, to integrate and to prove.

16. The petitioner Institute, admittedly, fulfils the requirement of

imparting formal education by a systematic instruction, as noted