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TMI Blog2018 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... -14. 2. The grounds of appeal are as under:- 1. That having regard to the facts and circumstances of the case, Ld. CCIT has erred in law and on facts in cancelling the approval u/s 10(23C)(vi) by making following observations:- ( a) That there is no element of charity and the activities are purely commercial in character. ( b) That the main aim of the assessee seems to be to earn huge surplus every year and invest it in the form of addition to school building and other infrastructure. 2. That in any case and in any view of the matter, action of Ld. CCIT in canceling the approval under section 10(23C)(vi) is bad in law and against the facts and circumstances of the case and is contrary to the principles of natural justice as the impugned order has been passed without granting adequate opportunity of hearing, by recording incorrect facts and findings and without providing the opportunity of cross examination and the appellant ought to have been granted benefit of approval under the law. 3. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (23C)(vi) of the Act. The Ld. AR further submitted that while rejecting the exemption u/s 10(23C)(vi) as claimed by the assessee, the Chief Commissioner placed reliance on the judgment of CIT vs. Queen s Education Society (supra) which is overruled by the Hon ble Apex Court in 372 ITR 699 and therefore, the issue is squarely covered in favour of the assessee. 6. The Ld. DR relied upon the order of the Chief Commissioner but could not refute the judgment of the Hon ble Apex Court (supra). 7. We have heard both the parties and perused all the records placed before us. The Hon ble Uttarakhand High Court decision in case of CIT vs. Queens Education Society was overruled by the Hon ble Supreme Court wherein it is held that: 23. The Punjab and Haryana High Court, by the impugned judgment dated 29th January, 2010 expressed its dissatisfaction with the view taken by the Uttarakhand High Court in the case of Queen s Educational Society as follows: 8.8 We have not been able to persuade ourselves to accept the view expressed by the Division Bench of the Uttrakhand High Court in the case of Queens Educational Society (supra). There are variety of reasons to support our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and Lodging Association (supra). To decide the entitlement of an institution for exemption under Section 10(23C)(vi) of the Act, the test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [See 5-Judges Constitution Bench judgment in the case of Surat Art Silk Cloth Manufacturers Association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble the Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus, on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act. The parameters of earning profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Society (Regd.) v. Commissioner of Income Tax Anr., (2011) 53 DTR (Del) 130. Also in Tolani Education Society v. Deputy Director of Income Tax (Exemption) Ors., (2013) 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows: .. The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance-sheet would indicate towards upgrading the facilities of the college ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act. It is pertinent to note that the main objects of the trust are to encourage backward and discarded people towards education and social development works, helping children by providing education and livelihood to them etc. The same was at no point amended by the assessee. Also the trust runs a college that helps in enhancing the future of students by providing the education and making available the diploma courses in Polytechnic and Engineering which are duly approved by AICTE. Hence all objects are in consideration for granting the approval u/s 10(23C)(vi) of the Act. Therefore, the issue in the present case is squarely covered by the decision of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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