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2015 (7) TMI 695 - HC - Income TaxExemption under Section 10(23C) denied - Held that - The matter is squarely covered against the Revenue. There is no denying the fact that exemption had already been granted to the petitioner earlier, vide order dated 26.03.2008, for a period of 3 years till the year 2009-10. The application was made on 29.03.2010, for continuation and in pursuance of the same, a show cause notice was issued to the applicant on 13.01.2011 to substantiate its claim. In view of the circular No.7 dated 27.10.2010 (Annexure P8), the petitioner was not required to file an application for extension, as has been held in the case of Sunbeam Academy Educational Society (2014 (5) TMI 821 - ALLAHABAD HIGH COURT ) We are further fortified by the fact that the judgment of a Division Bench of this Court in Pinegrove International Charitable Trust Vs. Union of India (UOI) & others (2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT ) has been upheld by the Apex Court in Queen s Educational Society Vs. CIT (2015 (3) TMI 619 - SUPREME COURT ) wherein it has been specifically noticed that in view of the 13th Proviso, after giving reasonable opportunity, the earlier approval could be withdrawn if the activities are found not to be genuine and not according to the conditions and the approval could be subject to monitoring. - Decided in favour of assessee.
Issues:
Challenge to order rejecting exemption under Section 10(23C) of the Income Tax Act, 1961 and rectification application for depreciation rejection. Analysis: 1. The petitioner, an educational institution, sought exemption under Section 10(23C) of the Income Tax Act, 1961, for the assessment year 2010-11. The Chief Commissioner of Income Tax rejected the application citing the P.A.Inamdar judgment. The petitioner argued that it was duly registered and running solely for educational purposes, not profit. The approval was initially granted for the years 2007-08 to 2009-10, with subsequent applications for continuation. The Commissioner of Income Tax issued a show cause notice, and the petitioner responded, explaining its eligibility. 2. The rejection was based on the P.A.Inamdar judgment, but the petitioner relied on circular No.7/2010, stating no need for further approval post-initial grant. Reference was made to Rule 2CA and a Division Bench judgment supporting the view that no fresh application was required post-2006 approval. The High Court found in favor of the petitioner, noting the circular's applicability to approvals under Section 10(23C)(vi) and (via), emphasizing that the initial approval continued until withdrawn under specified conditions. 3. The High Court further referenced a Division Bench judgment upholding monitoring conditions for educational institutions. It emphasized the importance of continuous monitoring by authorities to ensure compliance with conditions and genuine activities. The Court highlighted the significance of the 13th Proviso to Section 10(23C) and the authority's power to withdraw approval if conditions are breached. 4. Respondent No.2 relied on the P.A.Inamdar judgment, which the petitioner argued was not applicable to Section 10(23C) provisions. Citing a previous case, the Court held that the P.A.Inamdar judgment did not apply, and the principles in Pinegrove International Charitable Trust were binding. Consequently, the High Court quashed the order rejecting the exemption and directed a reconsideration of the rectification application. 5. In conclusion, the High Court allowed the writ petition, setting aside the orders rejecting exemption and rectification. It emphasized the continuous monitoring of educational institutions for compliance and the authority's power to withdraw approval if conditions are not met. The Court upheld the petitioner's argument regarding the application of circulars and previous judgments, ensuring the continuation of the initial approval until withdrawn under specified conditions.
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