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TMI Blog2019 (12) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessee while granting approval for the purpose of subclause (vi) of clause (23C) of section 10 of the Act." 3. The brief facts of the case are that both the assessees had filed application seeking continuance of approval U/s. 10(23C)(vi) of the Act in the prescribed form No. 56D. The Ld. CIT (E) rejected the application of both the assessees because of the following reasons:- In the case of M/s. Joginapally B.R. Educational Society: (i) During the course of search conducted in 2009-10 certain findings were adverse and incriminating evidences were found due to which registration U/s. 12AA of the Act granted to the Trust was cancelled and further the approval granted U/s. 10(23C)(vi) of the Act in 2008 was also cancelled by the DGIT (Inv.) Hyderabad vide order dated 16/12/2011. (ii) The appeal against the aforestated order of the Hon'ble DGIT (Inv.), Hyderabad is still pending in the Hon'ble High Court. In the case of M/s. J.B. Educational Society: (i) In the Writ Petition filed by the assessee the Hon'ble High Court observed that if the appeals of the assessee with respect to the assessments are allowed then the fresh registration may be considered by the Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame it is seen that the expenditure incurred by the assessee is relevant to the achievement of aims and objects of the assessee society". Further, in both those cases, the income was assessed as NIL. It was therefore pleaded that since the objects of the assessee societies are the same when they were originally granted approval U/s. 10(23C)(vi) of the Act and since there is no violations to the conditions stipulated while granting the approval earlier as on date, the relevant application may be treated as a fresh application and the approval may be granted. It was further pleaded that the assessees societies are charitable societies imparting education and if such relief is not granted it will adversely affect the public at large. Ld DR on the other hand vehemently argued in support of the orders of the Ld. CIT (E) and requested for dismissing the appeals of the assessee. 5. We have heard the rival submissions and carefully perused the materials on record. At the outset, considering the facts and circumstances of the case, we find that the decision relied by the Ld. CIT is not applicable in the relevant case before us. Moreover, it is pertinent to mention that the approval U/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed authority is satisfied about fulfilment of this criteria i.e. the threshold pre-condition of actual existence of an educational institution under section 10(23C)(vi), it would not be justifiable, in denying approval on other grounds, especially where the compliance depends on events that have not taken place on the date on which the application for grant of approval has been made. 1.3 However, the prescribed authority is eligible to grant approval u/s 10(23C)(vi), subject to such terms and conditions as deemed necessary including those falling within the framework of various Provisos to the said clause of section 10. It has also been clarified in the said judgment that the compliance of prescribed conditions can be gauged while monitoring the case and in case of any breach thereof, the approval can be withdrawn. It is, therefore, clarified that the principle laid down by the Apex Court in American Hotels case (supra) must be followed while considering the applications filed seeking approval for exemption u/s 10(23C)(vi)." 6. From the above it is clear that at the time of granting approval U/s. 10(23C)(vi) of the Act the relevant Revenue Authority is to be satisfied that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us to construe that the generation of surpluses had in any manner negated or diluted the object of the organization. New Doc 2019-12-10 11.44.38he assessee had been existing solely for educational purposes. Generation of profit and its distribution was not the object of the assessee. The fact that surpluses had been generated in order to build the infrastructure for modernising rather than diluting them. The conclusion of the prescribed authority that the increase in the fees for generating surplus would by itself exclude the assessee from the ambit of section 10(23C)(vi) was clearly erroneous. Generation of profit or surplus by an organization is generation of profit / surplus, as long as the surpluses generated are accumulated / utilised only for educational purposes. The same would not disable the assessee from claiming exemption under section 10(23C)(vi). Thus, the conclusion of the prescribed authority that the assessee was not entitled to exemption U/s. 10(23C)(vi) since it had generated a surplus was not available. Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC), Aditanar Educational Institution vs. Add. CIT [1997] 224 ITR 310 (SC) and Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been deployed for purposes other than for its objects. The words "wholly and exclusively to the object for which it has been established" must be read to mean that the income should not be applied for any purpose other than the object for which the institution has been established. Thus, the application of funds must be for carrying on the purpose for which the assessee has been established and not for any other purpose. The assessee entered into the contract with R for development, implementation and maintenance of an e-enabled system for managing registration of schools / students, examination of answer sheets, collating of results, etc. R had, undisputedly, developed and maintained a website of the assessee, developed software for assisting in the authorities carried on by the assessee. The results of ISCE and ISC for the year 2009 was collated and disseminated by use of the e-enabled services developed and implemented by R. The Registration of schools / students was carried out, during the relevant period, through the system developed and implemented by R. However, in view of the complaints received, the contract with R was terminated and the amount payable to it for the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 7. Since during the relevant period the assessee societies has neither violated any of the provisions of section 10(23C)(vi) of the Act nor conducted itself detrimental to the conditions stipulated by the Ld. CIT while granting approval U/s. 10(23C)(vi) of the Act on the earlier instance, and further placing reliance on the Circular of the CBDT No.14/2015 dated 17/08/2015 (cited supra) and the decision of the Hon'ble Delhi High Court (cited supra) we are of the considered view that the decision of the Ld. CIT (E) to reject the application filed by the assessees U/s. 10(23C)(vi) is not justified. Therefore, we hereby direct the Ld. CIT to grant approval U/s. 10(23C)(vi) of the Act to both the assessees from the relevant assessment year onwards. Needless to mention that if the assessee violates the provisions of section 10(23C)(vi) of the Act or the conditions stipulated by the Revenue while granting approval U/s. 10(23C)(vi) of the Act in the relevant assessment year 2016-07 or in any subsequent assessment years, the Revenue is at liberty to withdraw the approval granted U/s. 10(23C)(vi) of the Act in the year in which the assessee societies has indulge in such violation. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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