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TMI Blog2013 (7) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 143 (1) of the Act. 3. By this writ petition the petitioner has prayed for quashing the order dated 27.5.2011 passed by the Chief Commissioner of Income Tax, Ghaziabad rejecting the petitioner-society's application for exemption under Section 10 (23C) (vi) of the Act, and for a direction to the Chief Commissioner of Income Tax, Ghaziabad to issue the approval under Section 10 (23C) (vi) to the petitioner in terms of its application dated 5.5.2010. 4. We have heard Shri Navin Sinha, Sr. Advocate assisted by Shri Rahul Agarwal, learned counsel for the petitioner. Shri Dhananjay Awasthi appears for the income tax department. 5. The necessity of approval of the prescribed authority arose as in the assessment year the income of the petitioner society exceeded Rs.1 crore. The petitioner society applied claiming that the society is existing solely for educational purposes and not for profit. The society is running the institution in the name of C.P. Vidya Niketan Inter College at Kaimganj, Distt. Farrukhabad. A notice was issued to the society on 13.5.2011. It was heard on 19.5.2011 on which date it was required to produce audit report along with other relevant details, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministry; to establish and run centres for environment development, plantation of trees, pollution control, inoculation, population control, pulse polio, AIDS control, leprosy centres; to provide copies, books, uniforms free of cost to the poor children of Scheduled Castes, Scheduled Tribes and other marginalised sections; to organize social cultural programmes and to provide help to the people suffering from natural calamities; to prepare the students including the girl students for examination and comprehensions; to establish orphanage and old age homes etc. are incidental to the main objects of the society. Shri Sinha submits that the bylaws have been amended on 10.7.2006. He field certified copy of the amended bylaws dated 24.7.2012 along with supplementary affidavit. 8. It is submitted by Shri Sinha that the Commissioner of Income Tax started the hearing on the same day, when the petitioner was required to produce audit report under Rule 16CC (Form10BB). The petitioner sought time to produce the report and was orally directed to furnish the same within next three days. In view of the fact that hearing took place on 27.5.2011, which was Friday, the report could be produced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for e3xemption, to go into the validity of the registration of the society, the Chief Commissioner has thus directed to grant approval under Section 10 (23C) (vi). 11. In Digember Jain Society for Child Welfare v. Director General of Income Tax (Exemption) (Supra) the Delhi High Court relied upon the judgment of the Supreme Court in American Hotel and Lodging Association Educational Institute v. Central Board of Direct Taxes & Ors., 301 ITR 86 and held that the petitioner society was formed mainly with the object of carrying out educational activities. There was no purpose of profit. Its activity as on the day was only for education namely running various schools and no other activity. There was no allegation that the petitioner had deviated from the object. The society was granted exemption upto assessment year 2001-02 and the assessment upto the year 2007-08 were pending. The respondents had denied exemption merely on the suspicion that it may deviate from the object in future. The society was assessed to income for the previous assessment years for the total income at Nil and in the circumstances the order rejecting the application under Section 10 (23C) (vi) was quashed. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon; to publish books, periodicals and pamphlets and deliver lectures and to give pecuniary or other help to poor Gujarati Hindu women and girls (studying in the institution). The Bombay High Court held in paragraphs 9 and 10 as follows:- "9. Section 10(23-C) defines certain categories of income which shall not be included in computing the total income of any person for a previous year. Clause (vi) deals with income received by any person on behalf of any University or other educational institution existing solely for educational purposes and not for purposes of profit (other than those mentioned in sub-clause (iiiab) or (iiiad)) and which may be approved by the prescribed authority. Sub-clause (iiiab) speaks of a University or other educational institution existing solely for educational purposes and not for purposes of profit and which are wholly or substantially financed by the Government. Sub- clause (iiiad) speaks of a University or educational institution existing solely for educational purposes and not for profit if the aggregate annual receipts do not exceed an amount prescribed. Where the aggregate receipts exceed the amount prescribed, then the approval of the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. In this background, it would be necessary to advert to the objects set out in the Memorandum of Association. Clause III(b) spells out as the object, amelioration of the condition of Gujarati Hindu women of the then Bombay Presidency and other places and alleviation of their social status by educating to them in subjects tending to their material, moral and spiritual advancement, opening out for them proper and suitable fields of work, lawfulness and influence in Hindu society. From this object, it is abundantly clear that the amelioration of the condition of Gujarati speaking Hindu women was sought to be improved, when the Trust was founded in March 1928, by providing for the education of this class of women. The means by which this object is sought to be achieved is by conducting Ashrams or homes for women and girls, particularly for widows and orphaned girls either as free or as paying inmates and by conducting schools for imparting religious, secular and industrial education and training in fine arts. A number of ancillary objects have been adverted therein including provision of libraries and gymnasiums, publication of books and by means of pecuniary and other help to studen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of compliance of requirements in the provisos would arise. We find merit in the contention advanced on behalf of the appellant that the third proviso contains monitoring conditions/requirements like application, accumulation, deployment of income in specified assets whose compliance depends on events that have not taken place on the date of the application for initial approval. 33. To make the section with the proviso workable we are of the view that the monitoring conditions in the third proviso like application/utilization of income, pattern of investments to be made etc. could be stipulated as conditions by the PA subject to which approval could be granted. For example, in marginal cases like the present case, where appellant-Institute was given exemption up to financial year ending 31.3.1998 (assessment year 1998-99) and where an application is made on 7.4.1999, within seven days of the new dispensation coming into force, the PA can grant approval subject to such terms and conditions as it deems fit provided they are not in conflict with the provisions of the 1961 Act (including the abovementioned monitoring conditions). While imposing stipulations subject to which approval i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments. The availability of audit report with the petitioner thus appears to be a mere afterthought, as during the whole proceedings the petitioner has not submitted audit report under Rule 16CC (Form 10BB). 16. Shri Dhananjay Awasthi has relied upon the judgment in Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-Tax, Mysore, 1975 (101) ITR 234 (SC) and Rajasthan High Court in CIT v. Maharaja Sawai Mansinghji Museum Trust, 1988 (169) ITR 379. He submits that in both the cases the meaning of ''education' under Section 10 (23C) (vi) is explained, wherein it is mentioned that approval of the exemption under Section 10 (23C) (vi) is available to only those institutions, which exist solely for education. He submits that solely means exclusively and not primarily. 17. We have considered the respective submissions; the opinions of the different High Courts and the Supreme Court, both on the grounds as to whether in view of the objects, and without taking into account the amendment made to the object clause of the petitioner society, it can be said to exist solely for the purposes of education as provided under Section 10 (23C) and whether the petitioner society was given ade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation Educational Institute (Supra) put a note of caution on this process and observed that it is important to note that the Second Proviso also indicates the powers and duties of the Prescribed Authority. The Prescribed Authority is empowered to be given the approval to call for such document enclosing annual accounts or information from the applicant to check the genuineness of the activities of the applicant institution and under the Third Proviso the Prescribed Authority has to ascertain while judging the genuineness of the activities of the applicant institution, as to whether the applicant applies its income wholly or exclusively to the object for which it is constituted / established. The Supreme Court further observed that under the 12th Proviso, the Prescribed Authority is required to examine the case where an applicant does not apply its income during the year of receipt and accumulates it but makes payment there from to any trust or institution registered under Section 12AA or to any fund or trust or institution or University or other educational institution and to that extent the proviso states that such payment shall not be treated as application of income to the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y activity other than running and maintaining educational institutions. The other objects and purposes in the 'Smriti Patra' may, if such objects are undertaken, may constitute such purpose, to be other than educational purpose, but at present it cannot be said nor there is any allegation or material either brought before the Chief Commissioner of Income Tax, Ghaziabad or referred to in the counter affidavit, which may be other than education. There are adequate safeguards, that if the activities other than educational activities are undertaken, the exemption may be withdrawn, but in the absence of any such allegation it cannot be said merely on the enumeration of the activities, which are all primarily connected with education and charity that the society does not exist solely for the purpose of imparting education. The case in hand is quite similar to that of Vanita Vishram Trust v. Chief Commissioner of Income Tax & Anr. (Supra), and satisfies the tests laid down in American Hotel and Lodging Association Educational Institute (Supra) as well as the view taken by this Court in Ewing Christian College Society (Supra) in which it was held that where it is not disputed that the soci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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