Recent Judicial Pronouncements

1. Recent Judicial Pronouncements - CA Anil Sathe

2. Synopsis: • Introduction • Recent Supreme Court Rulings • Recent High Court Rulings • Recent Tribunal Rulings • Conclusion.

3. Introduction: • Substantial increase in tax litigation • Judicial trend is to look at substance rather than form • Judiciary alive to the developments in technology and business • Number of reversals of decisions by lower forums seems to be increasing

4. Supreme Court Rulings Cases Considered: • MS Techno Shares & Stocks Ltd v CIT ( Depreciation on Stock Exchange Card) • GE India Technology Centre Pvt Ltd v CIT (Reversing Samsung’s decision – S.195) • M/s Vijaya Bank v CIT ( Bad Debts- Write Off) • CIT v Reliance Petro Products (Penalty u/s 271(1)(c) – incorrect claim)

5. Supreme Court Rulings Cases Considered: • The Totgars’ Cooperative Sale Society Ltd v ITO (Deduction u/s 80-P) • Improvement Trust v Ujagar Singh & Ors. (Condonation of delay)

6. High Court Rulings Cases Considered: • Godrej & Boyce Mfg Co Ltd v DCIT (Mum) (Daga Capital – 14A & rule 8D) • Vodafone International Holdings v UOI (Mum) (Colouable Device – substance over form) • CIT v Vikas Polymers (Del)(Scope of Sec 263) • Vanita Vishram Trust v CCIT (Mum) (Exemption u/s 10(23C) – Other objects in Memorandum & earning of surplus)

7. Tribunal Rulings: Cases Considered: • Bapusaheb N. Dhumal v ACIT (Mum) (Interpretation of Sec40(a)(ia)) • Golden Stables Lifestyle Centre Pvt Ltd v CIT (Mum) (Retrospectivity of Sec 40(a)(ia)) • DCIT v ShreyasMorakhia (Mum –SB) (Bad Debts – Sec36(1)(vii))

8. Tribunal Rulings: Cases Considered: • Ashapura Minichem Ltd v ADIT (Mum) (Territorial Nexus – Scope of Sec 9(1)(vii)) • Kishori Gaitonde v ITO (Mum) (Sec 50C- Tenancy Right)

9. Supreme Court rulings

10. MS Techno Shares & Stocks Ltd v CIT (SC) Facts of the case: • The assessee company filed its Return of income for the Assessment Year 1999-2000 disclosing a loss. Its return was processed u/s 143(1) and the case was reopened u/s 147. The main reason for reopening of assessment under Section 147 was the claim of depreciation by the assessee on BSE membership card amounting to Rs. 23,65,000/-.A.O disallowed the assessee’s claim of depreciation u/s 32(1)(ii). • CIT (A) affirmed the Order of AO, Tribunal However held that BSE Membership card is an intangible asset and hence depreciation is allowable u/s 32(1)(ii). • High Court however reversed the decision of Tribunal.

11. MS Techno Shares & Stocks Ltd v CIT (SC) • SC held that: • It is this right of membership which allows the non-defaulting member to participate in the trading session on the floor of the Exchange. Thus, the said membership right is a “business or commercial right” • By virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a “license” or “franchise” is declared to be an intangible asset. The right of membership, which includes right of nomination, is a “license” or “akin to a license” which is one of the items Section 32(1)(ii). It is this license which enables the member to trade on the floor of the Exchange and to participate in the trading session on the floor of the Exchange.

12. MS Techno Shares & Stocks Ltd v CIT (SC) • Conclusion On the facts and circumstances of these cases the Tribunal was right in holding that depreciation was allowable on the cost of the membership card under Section 32(1)(ii) of the 1961 Act

13. GE India Technology Centre Pvt Ltd v CIT (SC) • Facts of the Case: • Appellant(s) are the distributors of imported pre-packaged shrink wrapped standardized software from Microsoft and other Suppliers outside India. • During the relevant assessment year(s) appellant(s) made payments to the said software Suppliers. The question was whether tax was required to be deducted at source u/s 195. Till Tribunal stage the question was whether payment constitutes purchase price or payment of royalty.

14. GE India Technology Centre Pvt Ltd v CIT (SC) • When the matter came up in appeal before Karnataka High Court, the Department for the first time raised the contention that unless the payer makes an application to the ITO(TDS) under Section 195(2) and has obtained a permission for non-deduction of the TAS, it was not permissible for the payer to contend that the payment made to the non-resident did not give rise to “income” taxable in India and that, therefore, there was no need to deduct any TAS. • This argument of the Department was accepted by the High Court vide the impugned judgment. For reaching this conclusion, the High Court placed strong reliance on the judgment of Supreme Court in Transmission Corporation of A.P. Ltd. Vs. C.I.T. [239 ITR 587(SC)].

15. GE India Technology Centre Pvt Ltd v CIT (SC) • Apex Court held that, • The obligation to deduct Tax At Source arises only when there is a sum chargeable under the Act. Section 195(2) is not merely a provision to provide information to the ITO(TDS). It is a provision requiring tax to be deducted at source to be paid to the Revenue by the payer who makes payment to a non resident. Therefore, Section 195 has to be read in conformity with the charging provisions, i.e., Sections 4, 5 and 9. This reasoning flows from the words “sum chargeable under the provisions of the Act” in Section 195(1) • Further the Court while testing the applicability of Transmission Corporation’s case held that Section 195(2) is based on the “principle of proportionality”.

16. GE India Technology Centre Pvt Ltd v CIT (SC) • Sec 195(2) gets attracted only in cases where the payment made is a composite payment in which a certain proportion of payment has an element of “income” chargeable to tax in India. It is in this context that the Supreme Court stated, “If no such application is filed, income-tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such ‘sum’ to deduct tax thereon before making payment. He has to discharge the obligation to TDS”. • Conclusion: TDS provision u/s 195 applies only when there is income chargeable to tax. Further, Sec 195 (2) has the applicability only when the payment made is a composite payment in which certain proportion of payment has an element of “income” chargeable to tax in India.

17. M/s Vijaya Bank v CIT (SC) • Facts of the case: • The assessing officer disallowed certain sum which the assessee bank had reduced from loans and advances on the ground that the impugned bad debt had not been written off in appropriate manner and the same constitutes a mere provision and cannot be equated with the actual write off of the bad debt as envisaged in Sec 36(1)(vii)of the Income Tax Act as amended by Finance Act 2001 w.r.e.f.1-04-1989. • On Appeal CIT(A) and Tribunal decided in favour of assessee, however High Court decided against the assessee

18. M/s Vijaya Bank v CIT (SC) • What Constitutes actual write off under accounting principles– Apex Court affirmed the decision of Division Bench of Supreme Court in the case of Southern Technologies Ltd vs. JCIT [2010]320 ITR 577 . • Debit to P/L & Credit to Debtors – Write off • Debit to P/L & Credit to Current liabilities & Provisions – Provision • in the present case, besides debiting the Profit and Loss Account and creating a provision for bad and doubtful debt, the assessee-Bank had correspondingly/ simultaneously obliterated the said provision from it's accounts by reducing the corresponding amount from Loans and Advances/ debtors on the asset side of the Balance Sheet. Consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the Balance Sheet was shown as net of the provision “for impugned bad debt”.

19. M/s Vijaya Bank v CIT (SC) • Whether it is imperative for the assessee-Bank to close the individual account of each debtor in it's Books or a mere reduction in the “Loans and Advances Account” or Debtors to the extent of the provision for bad and doubtful debt is sufficient Apex Court held as under: • The Order of the Assessing Officer is based on an apprehension that, if the assessee fails to close each and every individual account of it's debtor, it may result in assessee claiming deduction twice over. We cannot decide the matter on the basis of apprehensions/desirability. It is always open to the Assessing Officer to call for details of individual debtor's account if the Assessing Officer has reasonable grounds to believe that assessee has claimed deduction, twice over. there is no merit in the contention that, if the assessee succeeds, then it would result in escapement of income from assessment

20. M/s Vijaya Bank v CIT (SC) • Conclusion: In order to constitute a write off , debit to Profit & Loss A/c and credit to asset a/c are pre-condition. However, it is not necessary to credit every individual a/c which is written off. Thus reduction of loans & advances or debtors on ‘global’ basis will not disqualify the assessee benefit of Sec 36(1)(vii)

21. CIT v Reliance Petro Products (SC) • Facts of the case: The Assessment u/s 143(3) was finalized and addition to the returned income was made on account of disallowance of interest expenditure in respect of loans incurred by the assessee from which assessee purchased some IPL shares by way of its business policy. The assessee did not earn any income by way of dividend on those shares. However, company in its return of income claimed disallowance by applying provisions of Sec 14A. AO on the other hand disallowed entire interest expenditure being not for business purpose and penalty proceeding u/s 271(1)(c)was initiated on account of concealment of income / furnishing of inaccurate particulars of income.

22. CIT v Reliance Petro Products (SC) • whether making an incorrect claim in the return of income amounts to furnishing of inaccurate particulars as construed by Sec 271(1)(C) • The Court relied upon the decision in the case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 329]where Hon’ble SC explained the terms "concealment of income" and "furnishing inaccurate particulars". • The word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. • In Webster's Dictionary, the word "inaccurate" has been defined as:- "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript". Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous..

23. CIT v Reliance Petro Products (SC) • A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee • The Court categorically pointed out that in Union of India Vs. Dharamendra Textile Processors no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr, where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff’s case to the effect that mensrea was an essential ingredient for the penalty under Section 271(1)(c) was overruled in Dharmendra Textiles.

24. CIT v Reliance Petro Products (SC) • Conclusion: “A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee”

25. Totgars’ Co-op Sale Society Ltd v ITO (SC) • Facts of the case: • Assessee(s) is a cooperative credit society. providing credit facilities to its members and also markets the agricultural produce of its members. • During the relevant assessment years in question, it had surplus funds which the assessee(s) invested in short-term deposits with the Banks and in Government securities. It claimed deuction u/s 80P in respect of the profits. • The Assessing Officer held, on the facts and circumstances of these cases, that the interest income which the assessee(s) had disclosed under the Head “Income from business' was liable to be taxed under the Head “Income from other sources”.

26. Totgars’ Co-op Sale Society Ltd v ITO (SC) • Whether interest on such deposits/securities made/ purchased out of surplus fund of the assessee, which strictly speaking accrues to the members' account, could be taxed as business income under Section 28 of the Act? Apex Court Held, • “In the present case, as stated above, assessee-Society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression “profits and gains of business”. • Further, as stated above, assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this “retained amount” which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities.

27. Totgars’ Co-op Sale Society Ltd v ITO (SC) • Conclusion: • Interest earned from deposits/ securities made/purchased out of surplus fund with the assessee engaged in the business of providing credit facility to its members and marketing agricultural produce of its members is chargeable to tax as income from other sources u/s 56 of the Income tax Act and not under profits and gains of business and profession u/s 28. • Source of income is relevant for the purpose of deciding applicability of deduction u/s 80P of the Act.

28. Improvement Trust v Ujagar Singh & Ors. (SC) • Facts of the case are as under: • Petitioner acquired property but failed to deposit compensation to transferor • Petitioner’s Property was attached and sold to the respondent. Objections raised by petitioner were dismissed by Executing Court for non-apperance. • Order for Confirmation of Sale was passed. Petitioner failed to appear before Executing Court. • Miscellaneous Appeal was passed before District judge challenging propriety of orders passed by Executing Court. • The said miscellaneous appeal was delayed by 2 months and few days and hence application for condonation of delay was filed which was dismissed by First Appellant Court stating therein that no good and sufficient grounds were shown for condonation of delay

29. Improvement Trust v Ujagar Singh & Ors. (SC) • The appellant then filed second appeal before High Court which dismissed the appeal/revision of the appellant and decided in favour of respondent • The appellant also filed a review petition to the High Court which was also dismissed against which appeal was made to Supreme Court. • Supreme Court held as under • Considering that appellant had taken all possible steps to prosecute the matter within time, the delay in filing the first appeal for setting aside the sale has not been so huge warranting its dismissal on such hypertechnical ground.

30. Improvement Trust v Ujagar Singh & Ors. (SC) • While considering the application for condonation of delay no strait jacket formula is prescribed to come to the conclusion if sufficient and good grounds have been made out or not. Each case has to be weighed from its facts and the circumstances in which the party acts and behaves • From the conduct behaviour and attitude of the appellant it cannot be said that it had been absolutely callous and negligent in prosecuting the matter, The Court mentioned that, justice can be done only when the matter is fought on merits and in accordance with law rather than to dispose it of on such technicalities and that too at the threshold

31. High courtrulings

32. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • Facts of the case • For Assessment Year 200203, the assessee claimed a dividend of Rs. 34.34 crores as being exempt from the total taxable income. • The assessee contended that it had not incurred any expenditure for earning the dividend income and that no disallowance was warranted. • The Assessing Officer made a disallowance of Rs. 6.92 crores towards expenses attributed to the earning of the dividend income. • The Tribunal following its decision in the case of Daga Capital Management Private Limited, that subsections (2) and (3) of Section 14A are procedural in nature and have retrospective effect.

33. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • Questions: • Whether dividend income from shares & Mutual fund on which tax is paid u/s 115-o can be said to be exempt for the purpose of applicability of sec 14-A - yes • Whether Provisions of sub-sec (2) &(3) of Sec 14A and of Rule 8D are not retrospective - yes • Whether provisions of Sub-Sec (2) & (3) of Sec14-A are arbitrary and violative of Art.14 and the provisions of Rule 8D are ultra vires and even otherwise arbitrary and violative of Art.14 - No

34. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • High Court held as under: • The principle of law which emerged from these cases was that in the case of a composite and individual business which earned both taxable and non-taxable income, expenditure incurred towards non-taxable income could not be isolated by apportionment and a disallowance could not be made. However, apportionment of expenditure was permissible when the non-taxable income arose from a separate business or under a different head of income. • Sec 14A has been enacted to overcome pronouncements of the Apex court in the case of Maharashtra Sugar & Rajasthan State Warehousing Corporation. The insertion of Section 14A was curative and declaratory of the intent of the Parliament.. The principle of apportionment of expenses is widened by Section 14A to include even the apportionment of expenditure between taxable and non-taxable income of an indivisible business

35. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • The tax which is paid by the Company on profits declared, distributed or paid by way of dividend is not a tax which is paid on behalf of the shareholder. The charge under subsection (1) of Section 115O is on the profits of the Company; more specifically on that part of the profits which is declared, distributed. In the hands of the recipient shareholder dividend does not form part of the total income u/s10(33). Consequently, it is impossible to accede to the submission that Section 14A should be confined only to those categories of income, such as agricultural income, where the income is exempt in the hands of any person. • The expression “expenditure incurred” in Section 14A refers to expenditure on rent, taxes, salaries, interest etc. in respect of which allowances are provided for

36. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • Subsections (2) and (3) of Section 14A are intended to enforce and implement the provisions of Subsection (1). The object of subsection(2) is to provide a uniformity of method where the Assessing Officer is, on the basis of the accounts of the assessee, not satisfied with the correctness of the claim of the assessee. • Sub section(2) of Section 14A does not enable the Assessing Officer to apply the method prescribed by Rule 8D without determining in the first instance the correctness of the claim of the assessee • The satisfaction envisaged by Subsection (2) of Section 14A is an objective satisfaction.

37. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • The safeguard introduced by Subsection (2) of Section 14A are for a fair and reasonable exercise of power by the Assessing Officer. • The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and fair procedure under Article 14 must be observed by the Assessing Officer when he arrives at his satisfaction under sub section (2) of Section 14A

38. Godrej & Boyce Mfg Co Ltd v DCIT (Mum) • In order to determine the quantum of the disallowance, there must be a proximate relationship between the expenditure and the income which does not form part of the total income. Once such a proximate relationship exists, the disallowance has to be effected. A ‘proximate cause’ connotes a relationship between the expense and the exempt income. • Cases of individual hardship are not a valid ground for striking down constitutional validity. The justification that has been offered in support of the rationale for Rule 8D cannot be regarded as being capricious, perverse or arbitrary. There is certainly no ‘madness in the method’ • Rule 8D, inserted w.e.f 24.3.2008 cannot be regarded as retrospective because it enacts an artificial method of estimating expenditure relatable to tax-free income. It applies w.e.f AY 2008-09

39. Vodafone Int’l Holdings v UOI (Mum) • Facts of the case are as under: • A Cayman Island Co. called CGP Investments held 52% of the share capital of Hutchison Essar Ltd, an Indian Co. engaged in the mobile telecom business in India. • The shares of CGP Investments were in turn held by another Cayman Island company called Hutchison Telecommunications. • The assessee, a Dutch company, acquired from the second Cayman Islands company, the shares in CGP Investments for a total consideration of US $ 11.08 billion • The AO issued a show-cause notice u/s 201 in which he took the view that as the ultimate asset acquired by the assessee were shares in an Indian company, the assessee ought to have deducted tax at source u/s 195 while making payment to the vendor

40. Vodafone Int’l Holdings v UOI (Mum) • The notice to show cause suggested that the transaction was sham and colourable. • This notice was challenged by a Writ Petition but was dismissed by the Bombay High Court. In appeal, the Supreme Court remanded the matter to the AO to first pass a preliminary order of jurisdiction which the AO did. • The impugned order proceeds on the basis that, though holding companies are permissible and the transaction was not by itself a sham, the holding companies had no commercial operations. • This order was challenged by the assessee by a Writ Petition on the ground that as one non-resident had acquired shares of a foreign company from another non-resident, s. 195 had no application

41. Vodafone Int’l Holdings v UOI (Mum) • Further for the purpose of taxation the corporate veil can be lifted only where a tax fraud is being perpetrated. • Further it was also contended that A person who has no residential nexus whatsoever either temporary or permanent does not incur an obligation under Section 195 A foreign entity which has no presence in India, not even a branch office, cannot be subjected to the obligation to deduct and pay tax

42. Vodafone Int’l Holdings v UOI (Mum) • Principles laid down by the High Court held are as under: • The Court after discussing various cases like Azadi Bachao 263 ITR 706 (SC), CIT vs B.M.Kharwar 72 ITR 603, Walfort 2010 (6) SCALE 471 held that The governing principle therefore is that tax planning is legitimate so long as the assessee does not resort to a colourable device or a sham transaction with a view to evade taxes. A genuine transaction within the framework of law will not be impeached. • A share, being a capital asset, comprises of an indivisible set of rights, not capable of being separately transferred at law. A controlling interest does not constitute a distinct capital asset. A controlling interest is an incident of the ownership of the shares in a Company; something which flows out of the holding of shares. Also, the business of a company is not the business of its shareholders and the assets of a company are not the assets of its shareholders

43. Vodafone Int’l Holdings v UOI (Mum) • The jurisdiction of a State to tax non-residents is based on the existence of a nexus connecting the person sought to b taxed with the jurisdiction which seeks to tax. The nexus may arise as a result of the physical presence of the non-resident. • The statutory provision i.e. Sec 9(1)(i) recognizes the principle that income from the transfer of a capital asset arises at the place where the asset is situated. The situs of the capital asset within India is what determines eligibility to tax. • S. 195 creates an obligation to deduct tax where the sum payable to a non-resident is (even partly) chargeable to tax. If the sum payable is not assessable in India, there is no question of TDS being deducted by an assessee. The argument that as the payer is a non-resident, it was not obliged to deduct tax is not acceptable because there is sufficient territorial connection or nexus between the payer and India

44. Vodafone Int’l Holdings v UOI (Mum) • In the given case, it was held that • The object and intent of the parties was to achieve the transfer of control over the Indian company and the transfer of the solitary share of the Cayman Islands company was put into place as a mode of effectuating the goal. • Even the price of US $ 11.01 Billion paid by the assessee factored in diverse rights and entitlements including a control premium, use and rights to the Hutch brand in India, non-compete agreement with the Hutch group etc, that were being transferred to the assessee • As the transaction between the assessee and Hutchison Telecommunications had sufficient nexus with Indian fiscal jurisdiction, the AO did have jurisdiction to initiate proceedings against the assessee

45. CIT v Vikas Polymers (Del) • Facts of the case: • The Commissioner of Income-tax served a notice on the assessee, stating therein that while completing the assessment the Income-tax Officer did not inquire into the genuineness of the capital investments of the two partners and unsecured loans and that no examination of accounts in respect of manufacturing account was done by the ITO. • The assessee furnished reply to the aforesaid show-cause notice vide its detailed communication dated 21st March, 1987 justifying the order passed by the Income-tax Officer and challenging the initiation of proceedings under Section 263 of the Act itself • Notwithstanding, the Commissioner of Income-Tax held that the assessment order passed by the ITO was erroneous and prejudicial to the interest of the revenue and that the same was set aside

46. CIT v Vikas Polymers (Del) • High Court held that • Twin conditions viz. (i) erroneous order & (ii) prejudicial to the interest of the revenue are cumulative. • The term ‘erroneous’ means not in accordance with law. Thus order passed by AO in accordance with law cannot be set aside simply because Commissioner wants the same to be done in a particular manner. • Revisional jurisdiction of the Commissioner can not be based on whims or caprice. • The assessee must be called, his explanation sought for and examined by the Commissioner, and thereafter if the Commissioner still feels that the order is erroneous and prejudicial to the interest of the revenue, the Commissioner may pass revisional orders.

47. CIT v Vikas Polymers (Del) • if a query is raised during the course of scrutiny by the assessing officer, which was answered to the satisfaction of the assessing officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the assessing officer called for interference and revision

48. VanitaVishram Trust v CCIT (Mum) • The Brief facts of the case are: • The Petitioner is a public charitable trust conducting primary and secondary schools and colleges in Arts, Science and Commerce and for Technical Courses in Mumbai and Surat • The main object for which the Petitioner has been constituted is stated to be the education of women. However MOA also contained other objects. • Petitioner’s application for approval u.s 10(23C) was rejected on the ground that the Trust existed for objects of a varied in nature and did not fulfill the condition that it existed solely for the purpose of education. • The Trust had earned a surplus of over twelve percent from its activities and hence the trust is said to exist for profit.

49. VanitaVishram Trust v CCIT (Mum) • High Court held that, • it is not in dispute before the Court that the Petitioner has been conducting primary and secondary schools and colleges for Arts, Science, Commerce and Technical courses in Mumbai since 1929 and in Surat since 1940. Nor is there any dispute before the Court that save and except for conducting these educational institutions, the Petitioner has not carried on any other activities right since 1929. • The Court relied on the judgement of Division Bench in assessee’s own case where Division Bench observed that merely because a certain surplus arose from the operations of the Trust, it could not be held that the institution was run for the purpose of profit, so long as no person or individual was entitled to any portion of the profit and the profit was utilized for the purpose of promoting the objects of the institution

50. VanitaVishram Trust v CCIT (Mum) • The Court affirm the decision of Apex Court in the case of Aditanar Educational Institution that incidental surplus arising form activities of trust after meeting its expenses would not cease the Institution to be existing solely for educational purpose since the object is notto make profit. • The Court also held that by virtue of third proviso to Sec 10(23c) Parliament did not regard the accumulation of income by a University or educational institution governed by sub clause (vi) as a disabling factor, so long as the purpose of accumulation is the application of the income wholly andexclusively to the objects for which the institution has been established.