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2019 (12) TMI 1203 - AT - Income TaxContinuance of approval U/s. 10(23C)(vi) in the prescribed form No. 56D - CIT (E) rejected the application - HELD THAT - In the case of the assessees, the Revenue had earlier granted approval U/s. 10(23C)(vi) of the Act by examining the activities mentioned in the deed of the assessees societies. Thereafter, when the assessees societies had violated the conditions stipulated by the Ld. CIT while granting the approval U/s. 10(23C)(vi) of the Act, additions were made and the approval withdrawn for those assessment years. However, it cannot be presumed that the assessees societies is bound to err year after year by violating the provisions of section 10(23C)(vi) of the Act. It will not be appropriate to withdraw the approval or resist from granting approval U/s. 10(23C)(vi) of the Act when the assessees societies are conducting its charitable activities in the subsequent years sincerely and diligently for the benefit of the public at large without violating any of the conditions stipulated. Such action of the Revenue will deprive the beneficiaries of the assessees societies in obtaining the benefits which is detrimental to the larger interest of the public. As it appears from the orders of the Ld. CIT dated 29/09/2017, during the period 1/4/2016 till 29/09/2017, no violation is pointed out. Further, from the assessment order of the assessees for the AY 2015-16 dated 27/12/2017 and 22/12/2017 (cited supra) it is evident that there was no violation. In such circumstances, we fail to understand as to why the assessee societies have to be penalised which will ultimately result in hardships to the public at large Since during the relevant period the assessee societies has neither violated any of the provisions of section 10(23C)(vi) of the Act nor conducted itself detrimental to the conditions stipulated by the Ld. CIT while granting approval U/s. 10(23C)(vi) of the Act on the earlier instance, and further placing reliance on the Circular of the CBDT No.14/2015 dated 17/08/2015 and the decision o COUNCIL FOR THE INDIAN SCHOOL, CERTIFICATE EXAMINATIONS VERSUS DIRECTOR GENERAL OF INCOME TAX 2014 (5) TMI 898 - DELHI HIGH COURT we are of the considered view that the decision of the Ld. CIT (E) to reject the application filed by the assessees U/s. 10(23C)(vi) is not justified. - Decided in favour of assessee.
Issues Involved:
1. Rejection of fresh application for approval under Section 10(23C)(vi) of the Income Tax Act. 2. Previous violations leading to withdrawal of earlier approval. 3. Examination of charitable activities and compliance with conditions for approval. 4. Impact of prior adverse findings on current applications. 5. Applicability of CBDT Circular No. 14/2015 and relevant judicial precedents. Issue-Wise Detailed Analysis: 1. Rejection of Fresh Application for Approval Under Section 10(23C)(vi): The primary issue was whether the Ld. CIT (Exemptions) was justified in rejecting the fresh applications for approval under Section 10(23C)(vi) solely based on violations in earlier years. The Tribunal noted that the Ld. CIT (E) rejected the applications because previous approvals were withdrawn due to violations found during search operations in 2009-10. However, the Tribunal emphasized that the approval should be based on the institution's activities during the relevant assessment year, not past violations. 2. Previous Violations Leading to Withdrawal of Earlier Approval: The Tribunal acknowledged that the earlier approvals under Section 10(23C)(vi) were withdrawn due to adverse findings during search operations. However, it was noted that for subsequent assessment years (2011-12, 2012-13, and 2013-14), the returns were accepted without any additions, indicating compliance with the conditions for approval. The Tribunal emphasized that past violations should not automatically disqualify the assessees from obtaining fresh approval if they comply with the conditions in the relevant assessment year. 3. Examination of Charitable Activities and Compliance with Conditions for Approval: The Tribunal highlighted that the approval under Section 10(23C)(vi) is granted based on the charitable activities mentioned in the institution's deed. The Tribunal found no evidence of violations during the relevant period (1/4/2016 to 29/09/2017) and noted that the assessees' activities were aligned with their charitable objectives. The Tribunal also cited the CBDT Circular No. 14/2015, which clarifies that the prescribed authority should be satisfied that the institution exists solely for educational purposes and not for profit at the time of granting approval. 4. Impact of Prior Adverse Findings on Current Applications: The Tribunal noted that the Ld. CIT (E) relied on past adverse findings and the pending appeal in the Hon'ble High Court to reject the fresh applications. However, the Tribunal emphasized that the relevant authority should focus on the institution's compliance during the current assessment year. The Tribunal cited judicial precedents, including the Hon'ble Delhi High Court's decision in the case of Council for the Indian School Certificate Examinations, which held that past violations should not affect the approval for future years if the institution complies with the conditions. 5. Applicability of CBDT Circular No. 14/2015 and Relevant Judicial Precedents: The Tribunal referred to the CBDT Circular No. 14/2015, which clarifies that the prescribed authority should consider the institution's existence for educational purposes and not for profit at the time of granting approval. The Tribunal also cited the Hon'ble Supreme Court's decision in American Hotel and Lodging Association Educational Institute vs. CBDT, which held that compliance with conditions should be monitored, and approval can be withdrawn if there is a breach. The Tribunal concluded that the Ld. CIT (E) should have granted approval based on the institution's compliance during the relevant assessment year. Conclusion: The Tribunal concluded that the Ld. CIT (E) was not justified in rejecting the fresh applications for approval under Section 10(23C)(vi). The Tribunal directed the Ld. CIT to grant approval to both assessees from the relevant assessment year onwards, with the condition that the approval can be withdrawn if there are violations in subsequent years. The appeals of the assessees were allowed, and the order was pronounced in the open Court on 20th December, 2019.
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