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TMI Blog2015 (11) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment year 2007-08, the petitioner filed its return showing an income of Rs. 86,81,911/-, which was not accepted. The Assessing Officer found that the income of the petitioner was above Rs. 10 crores and, accordingly, disallowed the exemption claimed by the petitioner under Section 10 (23C) (iiiad) of the Act on the ground that the registration was required to be obtained under Section 10(23C) (vi) of the Act. The order of the Assessing Officer was confirmed by the Income Tax Appellate Tribunal. It is contended that an appeal is pending before the High Court, under Section 260A of the Act. 3. Notwithstanding the aforesaid, the petitioner applied for registration under Section 10 (23C)(vi) of the Act for the assessment year 2008-09. The said application was rejected on the ground that the petitioner has several objects and was not running the institute solely for educational purposes. Writ Petition No. 692 of 2010 was filed, which was allowed by judgment dated 17.5.2013 and the matter was remitted to the authority to pass a fresh order in accordance with the observation made therein. Pursuant to the direction of the Court, the Chief Commissioner of Income Tax, Ghaziabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) or sub-clause (via): Second Proviso: - Provided further that the prescribed authority, before approving any fund or trust or institution or any hospital or other medial institution, under sub-clause (iv) or sub-clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf: Third Proviso: - Provided also that the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via). Thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CBDT (2008) 301 ITR 86 (SC) holding that if the petitioner fulfills the threshold conditions of an educational institute under Section 10(23C) (vi) of the Act, the authority, in such an eventuality, could not reject the application. The Supreme Court held : "In American Hotel & Lodging Association, Educational Institute vs. CBDT 2008 (301) ITR 86 SC, the Supreme Court analysed the provision and found that the second proviso lays down the powers and duties of the prescribed authority for vetting an application for approval and that the prescribed authority was empowered to call for the documents including annual accounts or information to check the genuineness of the activities of the institution. Under the third proviso, the prescribed authority, while judging the genuineness of the activities of the applicant was required to ascertain whether the applicant applies its income wholly and exclusively for the objects for which it was constituted or established. The Supreme Court held that there was a difference between stipulation of the conditions and compliance therewith. The threshold conditions are the actual existence of an educational institution and approval of the prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or educational institution is established. The idea underlying the twelfth proviso is to provide guidance to the prescribed authority as to the meaning of the words 'application of income to the objects for which the institution is established'. Therefore, the twelfth proviso is the matter of detail. The most relevant proviso for deciding this appeal is the thirteenth proviso. Under that proviso, the circumstances are given under which the prescribed authority is empowered to withdraw the approval earlier granted. Under that proviso, if the prescribed authority is satisfied that the trust, fund, university or other educational institution etc. has not applied its income in accordance with the third proviso or if it finds that such institution, trust or fund etc. has not invested/deposited its funds in accordance with the third proviso or that the activities o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is neither an "investment" nor a "deposit" and, therefore such loan given does not violate the provisions of Section 13(1) (d) read with section 11(5) of the Act. 11. The Supreme Court in Queen's Educational Society Vs. Commissioner of Income-Tax, (2015) 372 ITR 699 (SC) reiterated the principles enunciated in American Hotel (Supra) and held that the mere fact that an educational institution makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. The Supreme Court held that the predominant object must be applied. 12. It will be noticed that the section has three requirements- (a) the educational institution must exist solely for educational purposes, (b) it should not be for purposes of profit, and (c) the aggregate annual receipts of such institution should not exceed the amount or annual receipts as may be prescribed. Such prescription is to be found in rule 2CA being an amount of Rs. 1 crore. 13. In the light of the aforesaid, a categorical assertion has been made that the petitioner is only running an educational institution and is not carrying on any other activi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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