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TMI Blog2013 (11) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... ution for exemption of Income under Section 10 (23 C) (vi) of the Act in prescribed form no. 56 D before the respondent claiming it to be engaged in the activity of imparting education. On the said application, the respondent called for report from the CIT Allahabad. On the submission of the report dated 5.3.2009 (Annexure No.4), the respondent issued a show cause notice dated 6.3.2009 (Annexure No.6) to the petitioner enclosing therewith the copy of the report and certain other documents and required the petitioner to produce the books of account, copies of assessment order and the details of ownership of movable and immovable properties held in the name of society. Certain other queries were also made. The petitioner filed the reply dated 17.3.2009 (Annexure No.7) to the report of CIT Allahabad. The petitioner submitted as under : "1. The applicant society has submitted exhaustive details and documents before the Assessing Officer for the purposes of her report on society's application for approval. This report of the Commissioner of Income tax has been submitted without considering the report of the AO and without providing opportunity to the applicant society. 2. The Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication of income being subject matter of monitoring at the assessment stage as per the proviso to Section 10(23C)(vi) of the Act as held by hon'ble Supreme Court in case of American Hotel & Lodging Association Educational Institution Vs. CBDT and others 301 ITR 86, the compliance and non compliance of the same cannot be considered and gauged at the stage of granting approval by the prescribed authority." 3. The petitioner relied on the judgment of Hon'ble Supreme Court in the case of American Hotel & Lodging Association Educational Institute Vs. Central Board of Direct Taxes and others (2008) 301 ITR 86 SC (Annexure No.7). The respondent considered the reply of the petitioner and passed the impugned order dated 25.3.2009 (Annexure No.8) and rejecting the application for grant of exemption under Section 10 (23 C) (vi) of the Act. Aggrieved with the order, the petitioner has filed the present writ petition. 4. We have heard Sri Ravi Kant, learned Senior Advocte assisted by Sri R.S.Agrawal, learned counsel for the petitioner and Sri Shambhu Chopra, Senior Standing Counsel for the respondent and perused the records. Submission on behalf of the petitioner 5. Sri Ravi Kant submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 6. Sri Shambhu Chopra, learned counsel for the respondent submits as under : (i) The application of the petitioner under Section 10(23C) (vi) of the Act was not maintainable for assessment year 2007-08 in view of the 14th Proviso of Section 10(23C) (vi) of the Act, in as much as the application was moved beyond time. (ii) The petitioner Society is not an educational institution existing solely for educational purpose and not for the purpose of profit. (iii) The evidences discussed by the respondent in the impugned order clearly reveals that the main motive of the petitioner is to make profit. (iv) The funds of Society have been diverted to benefit individuals. (v) The judgment of Hon'ble Supreme Court in the case of American Hotels does not support the case of the petitioner on the facts of the present case. Our Findings 7. Section 10(23C) (vi) of the Act reads as under : Section 10 :- In computing the total income of a previous year of any person, any income falling within any of the following causes shall not be included - ................................................................... .................................................................. (23 C) (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital or other medical institution referred to in the first proviso makes an application on or after the 1st day of Jude, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be [made on or before the 30th day of September of the relevant assessment year] from which the exemption is sought:]" 9. In the impugned order, the respondent has held that application was not maintainable for assessment year 2007-08 in view of the 14th Proviso to Section 10(23C) (vi) of the Act. It is not disputed that the petitioner moved the application under Section 10(23C) (vi) of the Act on 26.3.2008 before the respondent Chief Commissioner of Income Tax Allahabad. As per 14th Proviso quoted above, the application was required to be made or on before 30th day of December of the relevant assessment year for which exemption is sought. Thus, the application was not maintainable for the assessment year 2007-08. In view of the facts, we find no error in the impugned order which holds that the application was not maintainable for the assessment year 2007-08. 10. The scheme of exemption under Section 10(23C) (vi) of the Act relevant for the purposes of the controversy in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the second proviso also indicates the powers and duties of the prescribed authority. While considering the approval application in the second proviso, the prescribed authority is empowered before giving approval to call for such documents including annual accounts or information from the applicant to check the genuineness of the activities of the applicant institution. Earlier that power was not there with the prescribed authority. 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 and exclusively to the objects for which it is constituted/established. Under the twelfth proviso, the prescribed authority is required to examine cases where an applicant does not apply its income during the year of receipt and accumulates it but makes payment therefrom 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 objects for which such trust or fund o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society was incorporated in 1983. Initially, the society was running one School and one Coaching Institute. Thereafter, the coaching activity was taken over by a company and according to the Memorandum of Understanding between the applicant society and the company, the company would run the coaching activity in the premises of the applicant society and the company need not pay any rent for five years and a rent of Rs. 75,000/- p.m. may be paid from 01.04.2009. The Managing Director of M/s. Career Coaching Institute Pvt. Ltd. which runs the coaching activity, is the son of the Secretary of the applicant Society. From these facts, it is clear that the applicant society is running the Coaching activity through back door and there is no valid reason to give the premises of the applicant society without charging any rent. 9.The applicant has annexed the assessment orders for A.Y.2001-02 & 2003-04 along with the written submission filed on 17.3.2009. On perusal of the assessment order for A.Y.2001-02, it is found that in the F.Y.2000-01 the assessee has shown an addition of Rs. 31,98,245/- under the head "building under construction" in the property belonging to Sri H.R.A. Bakht & his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income & Expenditure account filed by the applicant shows debits for each of the three years under the following heads : F.Y.2004-05 Head Amount(Rs.) Repair & Maintenance 17,10,248/- Publicity Expenses 19,16,410/- Bank Charges and interest paid 4,02,048/- Excess of Income over Expenditure 3,14,500/- F.Y.2005-06 Head Amount(Rs.) Repair & Maintenance 18,86,620/- Publicity Expenses 4,43,158/- Bank Charges and interest paid 3,40,488/- Excess of Income over Expenditure 16,61,221/- F.Y.2006-07 Head Amount(Rs.) Repair & Maintenance 32,15,773/- Publicity Expenses 1,41,501/- Bank Charges and interest paid 79,010/- Excess of Income over Expenditure 21,57,364/- 13. Most of these expenses are not for the purspose of education, and it cannot constitute to be an expenditure solely incurred for education. 17. In the instant case there is a surplus income of Rs. 3,14,500/- in the F.Y.2004-05, Rs. 16,61,221/- in the F.Y. 2005-06 & Rs. 21,57,364/- in the F.Y. 2006-07. There is an addition to the Furniture & Fixtures of Rs. 15,000/- in the financial year 2004-05 and of Rs. 27,792/- in the F.Y.2006-07. Thus, in each year the surplus as show ..... X X X X Extracts X X X X X X X X Extracts X X X X
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