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TMI Blog2014 (8) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Section 10(23C)(vi) of the Act, the gross receipts for the assessment year 1998-99 till assessment year 2002-03, being less than Rs. 1 crore, the petitioner did not apply for approval. Since its gross receipts exceeded Rs. 1 crore in the assessment year 2003-04, the petitioner applied for approval of exemption before the Commissioner of Income Tax, Agra by moving an application in the prescribed form 56-D under Rule 2CA on 22nd March, 2003 praying for exemption under Section 10(23C)(vi) of the Act for the assessment year 2003-04 and 2004-05. Another application was filed on 31st May, 2006 before the Director General of Income Tax (Investigation), Lucknow for the assessment year 2004-05, 2005-06, 2006-07. This application was filed before the Director General of Income Tax (Investigation), Lucknow on the ground that the jurisdiction of the petitioner was centralized in the year 2004 in the wake of search and seizure action under Section 132(1) of the Act. Another application before the same authority was filed on 27th March, 2007 for the assessment year 2007-08. Another application was filed on 31st March, 2009 before the Chief Commissioner of Income Tax for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was rightly rejected and other applications for the assessment year 2003-04 to 2009-10 was filed before the authorities other than the prescribed authority and, Consequently, no orders were passed on these applications. Having heard Sri V.B. Upadhya, the learned Senior Counsel assisted by Sri R.P. Shukla and Sri Dinesh Tiwari, the learned counsel for the petitioner and Sri Sambhoo Chopra, the learned counsel for the Department, we find that the impugned order has been passed on irrelevant consideration without considering the case law on the subject. In order to appreciate the submission of the learned counsel for the parties and the findings given in the impugned order, it would be relevant to peruse the relevant provision section 10(23C)(vi) of the Act, which is extracted hereunder: " 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 - ** ** ** (23C)(vi):- Any income received any any person on behalf of - (i) to (v)** ** ** (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r other educational institution or any hospital or other medical institution has not - (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution - (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may at at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C)(vi) the applicant who seeks approval has not only to show that it is an institution existing solely for educational purposes [which was also the requirement under Section 10 (22)] but it has now to obtain initial approval from the prescribed authority, in terms of Section 10(23C)(vi) by making an application in the standardized form as mentioned in the first proviso to that section. That condition of obtaining approval from the prescribed authority came to be inserted because Section 10(22) was abused by some educational institutions/universities. This proviso was inserted along with other provisos because there was no monitoring mechanism to check abuse of exemption provision. With the insertion of the first proviso, the prescribed authority is required to vet the application. This vetting process is stipulated by the second proviso. It is important to note that 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 genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is running not for the purpose of making profit and is not in relation to the objects of the society. In American Hotel & Lodging Association (supra) the authority is required to consider the nature and genuineness of the activities. The third proviso only sets out the conditions, which must be adhered to by the institution and compliance therewith is not to be tested at the stage of approval since they require considerations of facts and findings, which takes place in future. The requirement mentioned in the third proviso can only be tested after the end of the previous year when income is ascertained and thereafter applied. Further, the Supreme Court held that the authority is only required to examine that the petitioner's institution comes within the phrase "exists solely for the educational purpose and not for profit". Other conditions like application of income is not to be examined at this stage. The authority is only required to examine the nature, activities and genuineness of the institution. The mere existence that there is some profit does not disqualify the petitioner if the sole purpose of existence was not profit making but educational activities. The auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided that the application filed under the first proviso shall be approved or an order rejecting the application shall be passed within the period of 12 months from the end of the month in which such application was received. It was contended by the learned Senior Counsel that since the application was not rejected within a period of 12 months from the end of the month in which such application was received, it would be deemed to have been granted. In support of his submission, the learned Senior Counsel has placed reliance upon a decision of this Court in Society for Promotion of Education Adventure Sport & Conservation of Environment Vs. Commissioner of Income Tax & others, (2008) 216 CTR (All) 167 wherein the Division Bench held that the application for registration under Section 12AA(2) of the Act not being considered within the stipulated period would mean that there was deemed grant of registration. On the other hand, the learned counsel for the department submitted that another Division Bench of this Court in Commissioner of Income Tax Vs. Muzaffar Nagar Development Authority in Income Tax Appeal No.348 of 2008 has disagreed with the decision in Society for Promotion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt through proper channel, which were duly processed but for some reasons best known to the department was not forwarded to the prescribed authority. We are of the opinion that necessary orders on these applications are required to be passed by the prescribed authority. Consequently, the impugned order passed by the Director General of Income Tax (Investigation), Lucknow is quashed. The writ petition is allowed. The matter is remitted to the prescribed authority to pass a fresh order on the application of the petitioner dated 24th March, 2010 for the assessment year 2010-11 in accordance with law and in the light of the observation made above within four months from the date of production of a certified copy of this order after hearing all the parties concerned. The prescribed authority will also summon the applications of the petitioner dated 22nd March, 2003, 31st May, 2006, 27th March, 2007, 31st March, 2009 for exemption under Section 10(23C)(vi) of the Act for the assessment year 2003-04 to 2009-10 and will pass appropriate orders within the same period after giving opportunity of hearing to the petitioner. It would be open to the petitioner to contend before the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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