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2014 (5) TMI 898 - DELHI HIGH COURTRefusal to grant exemption u/s 10(23C)(vi) of the Act - Whether the generation of surplus by the petitioner would indicate that the assessee was also existing for the purposes of profit and whether the lapses on the part of the petitioner in awarding the contract for IT services to RJBAPL would amount to not applying the funds exclusively for the object for which the petitioner was established as contemplated under third proviso to Section 10(23C) of the Act – Held that:- A plain reading of Clause (vi) of Section 10(23C) of the Act indicates that exemption under the clause would be available to any educational institution “existing solely for educational purposes and not for purposes of profit” - Following COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS Versus DIRECTOR GENERAL OF INCOME TAX [2012 (3) TMI 289 - DELHI HIGH COURT] – the assessee is an educational institution for the purposes of Section 10(23C) of the Act - the essential question that arises is whether the assessee exists solely for educational purposes or also for the purposes of profit - the aims and objects, as well as the activities undertaken by the assessee, fall within the definition of “charitable purposes” u/s 2(15) of the Act. Any expenditure incurred by an assessee for computerisation and developing an IT enabled system for carrying on its activities would be application of its resources wholly and exclusively for its purposes - The exemption u/s 10(23C) of the Act is available provided that the income of the assessee is applied “wholly and exclusively to the objects for which it is established” - the contract entered into with the RJB-APL was for furthering the object for which the petitioner was established - the assessee has along with RJB-APL amicably determined the amount payable for the work done and recovered the balance - The reasonableness of the amount spent and the quality of the decisions of the management are not the subject matter in respect of which the satisfaction of the Prescribed Authority is required. The expression used in Section 37 of the Act, “wholly or exclusively for the purposes of business and profession” is similar in its import as the expression “applied wholly and exclusively to the object for which it is established” as occurring in Section 10(23C)(vi) of the Act - the tests as laid down by various decisions for determining whether an amount is expended wholly and exclusively for the purposes of the business would apply equally in determining whether the income is applied by the assessee wholly and exclusively for its objects - Section 10(23)(vi) of the Act was analogous to Section 10(22) and to that extent the law laid down with respect to the eligibility condition u/s 10(22) of the Act would be equally applicable in cases u/s 10(23)(vi) - the assesse would be entitled to the approval u/s 10(23C)(vi) of the Act, if it was found that the funds of the assesse had not been utilized for its objects during the relevant year or had otherwise not complied with the provisos to the Section 10(23C) of the Act, the approval would be revoked at the end of the relevant year - the assessee is entitled to an exemption and it would also be available to the assessee for the subsequent year(s) - denial of exemption u/s 10(23C)(vi) of the Act to an Institution which exists solely for educational purposes and not for profit, on account of noncompliance with the third proviso would be limited to the relevant years during which the proviso has been violated. Even if it is assumed that payment to RJB-APL violated the third proviso for Section 10(23C) of the Act, the exemption u/s 10(23C)(vi) of the Act can be denied only for the for the year(s) during which payments had been made by the petitioner to RJBAPL - the assessee by its nature of activity is otherwise entitled to exemption u/s 10(23C)(vi) of the Act, it is liable to be granted by the respondent for future years subject to conditions as contained in the third proviso to Section 10(23C) of the Act – Decided in favour of Assessee.
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