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2017 (6) TMI 434 - AT - Income TaxRejecting the assessee s application u/s. 10(23C)(vi) - assessee is a college of girls engaged in imparting education - whether CIT (E) has wrongly disregarded the Board s Circular No. 14/2015, dated 17.08.2015? - Held that - So far as regards the present applicant, its existence for over the last 100 years as an educational institution has not been questioned. Its affiliation with GNDU remains undisputed. The factum of its being an aided college is patent. It s past history of having been granted exemption under different provisions of the Act is irrefuted. The position that it exists solely for educational purposes and not for any profit motive, stands accepted by the Department while granting exemption u/s. 10(23C)(iiiab). The only aid to the volte face challenged before us comes from the provisos to section 10(23C), recourse to which has expressly been barred by American Hotel & Lodging Association Educational Institute (2008 (5) TMI 17 - SUPREME COURT OF INDIA), which mandate of the Hon ble Supreme Court has been conveyed by the CBDT by way of its Circular. Further, as noted above, the mandate of section 119(1) comes with a rider, i.e., that no order, instruction or directions of the Board shall be as to interfere with the discretion of the Appellate Authority in exercise of his appellate functions. In the case at hand, however, the order under appeal nowhere states that the issuance of Circular No. 14/2015, dated 17.08.2015 interferes with his appellate functions in any manner, whatsoever. Thus, evidently, the ld. CIT (E) is not correct in holding that the CBDT Circulars are merely guidelines to be normally followed . We are sanguine that the authorities and officers employed in the execution of the Act, shall follow the mandate contained in section 119(1) of the Act in letter and spirit. Considering the above undisputed facts, the ld. CIT (E) is also found to have erred in observing in para 12, i.e., the concluding para of his order, that the application filed u/s. 10(23C)(vi) was, at best infructuous . In view of the preceding observations, it, obviously, is not so. For the foregoing discussion, the grievance of the assessee is found to be justified. It is accepted as such. The order under appeal is reversed. Approval u/s. 10(23C)(vi) of the Act is directed to be granted to the assessee forthwith. - Decided in favour of assessee.
Issues Involved:
1. Rejection of the application for approval under section 10(23C)(vi) of the Income Tax Act. 2. Examination of the twin criteria: existence solely for educational purposes and not for profit. 3. Validity of the CIT (E)’s enquiry and reliance on CBDT Circular No. 14/2015. 4. Previous rejections and their impact on the current application. Detailed Analysis: 1. Rejection of the application for approval under section 10(23C)(vi) of the Income Tax Act: The assessee, a college for girls, appealed against the CIT (E)'s order dated 31.08.2016, which rejected its application for approval under section 10(23C)(vi). The CIT (E) had previously granted exemptions under sections 10(22) and 10(23C)(iiiab) but declined the application for section 10(23C)(vi) approval. 2. Examination of the twin criteria: The CIT (E) held that the applicant must satisfy two conditions for approval under section 10(23C)(vi): it must exist solely for educational purposes and not for profit. The CIT (E) argued that these criteria must be tested when aggregate receipts exceed one crore, irrespective of previous exemptions under section 10(23C)(iiiad). The CIT (E) further noted that the applicant failed to provide necessary details, including bank statements and fee structure approvals, which raised doubts about the genuineness of its activities and compliance with government guidelines for teacher salaries. 3. Validity of the CIT (E)’s enquiry and reliance on CBDT Circular No. 14/2015: The CIT (E) conducted an enquiry under the second proviso to section 10(23C) to verify the genuineness of the applicant's activities. The assessee contended that the CIT (E) exceeded the scope of enquiry envisaged under section 10(23C)(vi) and disregarded CBDT Circular No. 14/2015, which was binding. The Circular, issued following the Supreme Court's judgment in "American Hotel & Lodging Association Educational Institute v. CBDT," clarifies that once the prescribed authority is satisfied about the actual existence of an educational institution, approval should not be denied on other grounds. The Tribunal emphasized that CBDT Circulars issued under section 119 of the Income-tax Act are binding on the authorities and must be followed. 4. Previous rejections and their impact on the current application: The CIT (E) noted that the application had been previously rejected by the CCIT on 30.09.2010, and the appeal against this rejection was pending. However, the assessee informed the Tribunal that the writ petitions were withdrawn after being granted exemption under section 10(23C)(iiiab) by the Tribunal, which was accepted by the department. The Tribunal found that the CIT (E) erred in considering the application infructuous due to the pending appeal, as the circumstances had changed with the issuance of CBDT Circular No. 14/2015 and the Tribunal's previous orders. Conclusion: The Tribunal concluded that the CIT (E) was not justified in rejecting the application for approval under section 10(23C)(vi). The CIT (E) failed to adhere to the binding CBDT Circular and the Supreme Court's judgment in "American Hotel & Lodging Association Educational Institute." The Tribunal directed that approval under section 10(23C)(vi) be granted to the assessee forthwith. The decision applied mutatis mutandis to all four appeals, and all were allowed.
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