Facts of the case:
1. Assessee society was set up with main object to establish educational institutions. It had been claiming exemption under section 10(22) since assessment year 1977-78.
2. Inview of substitution of section 10(22) with section 10(23C)(vi) with effect from 1-4-1999, assessee applied for approval of exemption under section 10(23C)(vi) for assessment year 2008-09 onwards.
3. Additional Director rejected assessee's application on grounds that assessee had entered into franchise agreements for opening schools and franchisee fee received by it from satellite schools in lieu of its name, logo and motto amounted to a 'business activity' with a profit motive and no separate books of account were maintained by assessee for business activity as required under section 11(4A).
4. High Court by impugned order held that since the assessee had maintained the accounts in compliance to seventh proviso to section 10(23C)(vi) and section 11(4A) which was audited in detail and, further, surpluses accrued in form of franchisee fee from satellite schools were fedback into maintenance and management of assessee schools themselves, assessee had fulfilled requirements to qualify for exemption under section 10(23C)(vi).
5. Later, a special leave petition(SLP) was filed with Supreme Court against the High court ruling.
Judgement : The SLP filed by the Director of Income Tax (Exemptions) has been dismissed and upheld the order of High Court.
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