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2020 (1) TMI 461 - AT - Income TaxWithdrawal of exemption granted u/s 10(23C)(vi) - thought process and application of mind by the ld. CIT(E) - delegation of power - educational institution - separate and distinct classes - genuiness of activity - Assessee is a self-regulated autonomous statutory body established by an Act of State Legislature, as a society - expenses incurred for hospital building or creating healthcare facility for staff and students - Held that:- The ratio decidendi of the decision [2017 (12) TMI 1475 - ITAT JAIPUR] rendered by the Coordinate Bench is that the 13th proviso to section 10(23C)(vi) confers the power/ jurisdiction to withdraw the approval to the prescribed authority i.e, ld. CIT(E) and therefore, the satisfaction of the ld CIT(E) is a must before issuing the show cause notice for the proposed action of the withdrawal of the approval granted u/s 10(23C)(vi) of the Act. Therefore, what is material and mandatory condition is the satisfaction of the ld CIT(E) and no one else. Further, the language and tenor of the show cause notice must exhibit the thought process and application of mind by the ld. CIT(E) and thus an expression of the satisfaction of ld. CIT(E) even though the same may be signed by the DCIT (Hqr.) or any other subordinate authority. However, where the ld. CIT(E) has delegated his powers to any other authority to issue show cause notice and it is based on the satisfaction of that other authority and not of ld. CIT(E), it won’t satisfy the mandatory condition. The language and tenor of the show cause notice do clearly exhibit the thought process and application of mind by the ld. CIT(E) with inputs from the ITO (Hqr.) and the Assessing officer, and thus an expression of his satisfaction of the proposed action to withdraw the exemption so granted to the assessee university. - The legal proposition so emerging from the said decision in fact supports the case of the Revenue. Genuineness of activities of the institution - Held that:- Similarly, we also note that the cancellation of registration granted to any educational institution under Section 12AA(3) of the Act can happen in two scenarios; one where the activities of the educational institution are not genuine and secondly, where the activities of the educational institution are not being carried out in accordance with the objects for which the educational institution has been established. The legislature has thus envisaged a distinction between an activity not being genuine and an activity which is not in accordance with the stated objects. An activity therefore could be genuine even though the same may not be in accordance with the stated objects. - Therefore, merely because an activity is not in accordance with the stated objects, it will not result in such activity to be classified as nongenuine. On the question of whether the activities of the university of conducting these courses are genuine or not, we do not have to travel too far, as we noticed from perusal of record and pointed out during the course of hearing to both the parties, as the answer is given by the Revenue itself where it has subsequently granted approval to the assessee university as a charitable institution u/s 12AA. Though these are two independent provisions, there are similarities in the sense that at the time of grant of registration/approval, the genuineness of the activities are examined by the ld CIT(E) in both the cases and similarly, at the time of withdrawal, the test of non-genuineness is applied in both the cases, as we have noted earlier. In the instant case, we wonder how the University can be said to be carrying on non-genuine activities by conducting such courses resulting in withdrawal of exemption under section 10(23C)(vi) and conducting the same courses as genuine activities resulting in grant of approval under section 12AA of the Act within a span of less than a year when the same courses are being conducted during this period. It is a medical research and teaching hospital with the sole object of providing teaching and training to the students in medical courses such as Nursing, Paramedical etc. and also taking care of general healthcare and wellness of the students and staff of the assessee University. CIT(E) directed to restore the exemption approval under section 10(23C)(vi) - Decided in favor of assessee.
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