Cannot apply I-T Act ‘regressively’: HC
Bombay High Court (HC) has said Income-Tax Act cannot be applied "regressively" to deny exemptions to non-profit organisations. It was hearing a petition by Tolani Education Society, which was denied tax exemption.
In an order dated January 31, a division bench of justices D Y Chandrachud and A A Sayed ruled in favour of the society that runs a commerce college in Jogeshwari.
In 2008-09, income-tax authorities denied exemption to the trust saying it did not meet the requirement of a non-profit institution. It said the college collects utility, project work and industrial visit fees from students.
HC, however, noted in 2008, the trust bought electronic data processing equipment and library books.
The judges noted, "The fact that the petitioner has had surplus income for three years cannot by any stretch of logical reasoning lead to the conclusion that it does not exist solely for educational purposes."
They further observed Income-Tax Act does not hold that an exemption be granted only if an organiation maintains status quo with respect to knowledge-based infrastructure.
"Imposing such a condition not contained in the statute would lead to perversion of the basic purpose for which such exemptions have been granted to educational institutions," HC said, adding, "Knowledge in contemporary times is technology-driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education."
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