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2015 (3) TMI 619 - SC - Income Tax
Exemption under Section 10(23C) (iiiad) denied - Pine Grove International Charitable Trust v. Union of India - [2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT] judgment challenged - AO observed that it ceases to exist solely for educational purposes and becomes a profit making enterprise - Held that:- We approve the judgments of the Punjab and Haryana in Pine Grove International Charitable Trust v. Union of India, St. Lawrence Educational Society (Regd.) v. Commissioner of Income Tax & Anr., (2011) [2011 (2) TMI 72 - DELHI HIGH COURT] and Tolani Education Society v. Deputy Director of Income Tax (Exemption) & Ors., (2013 (2) TMI 268 - BOMBAY HIGH COURT). The judgment of Uttrakhand High Court rendered in the case of Queens Educational Society (2007 -TMI - 75307 - UTTARAKHAND HIGH COURT) and the connected matters, is not applicable to cases fall within the provisions of Section 10(23C)(vi) of the Act.
Since we have set aside the judgment of the Uttarakhand High Court Queens Educational Society (2007 - TMI - 75307 - UTTARAKHAND HIGH COURT) and since the Chief CIT’s orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue’s appeals from the Punjab and Haryana High Court’s judgment dated 29.1.2010 and the judgments following it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth[1979 (11) TMI 1 - SUPREME Court], Aditanar [1997 (2) TMI 3 - SUPREME Court], and American Hotel and Lodging [2008 (5) TMI 17 - SUPREME COURT OF INDIA], would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance 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. - Decided in favour of assessee.