TMI Blog2010 (12) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... der article 226 of the Constitution of India to interfere with the order impugned in this writ petition - The writ petition fails and is, accordingly, dismissed - 25069 of 2009 - - - Dated:- 22-12-2010 - RAO V. V. S., RAMESH RANGANATHAN, JJ. JUDGMENT Ramesh Ranganathan J.- The relief sought for in this writ petition is to declare the order of the first respondent dated March 31, 2009, rejecting the petitioner's application for grant of approval under section 10(23C)(vi)) of the Income-tax Act, 1961 (hereinafter called the Act), arbitrary and illegal, and consequently to direct the first respondent to consider the petitioner's application for exemption under section 10(23C)(vi) of the Act. 2. The petitioner is a society registered under the Societies Registration Act vide Registration No. 1041 of 1990. They claim to be running a high school, and intermediate and degree colleges. They submitted an application to the first respondent on March 26, 2008, claiming exemption under section 10(23C)(vi) of the Act for the assessment year 2008-09. The petitioner was afforded a personal hearing on March 26, 2009, whereat they were informed that, against column No. 10 of For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risen in reporting the income of the current year against columns 10, 11 and 12 in the form ; hence particulars of the preceding two years were given ; on March 30, 2009 the petitioner had informed the first respondent that, since the financial year 2007-08 had ended, their accounts were finalized ; and they had enclosed copies of the audited accounts for perusal of the authorities which would clearly show that they had fulfilled the conditions stipulated in the other monitoring provisos under section 10(23C), and they were eligible for exemption ; the petitioner was maintaining regular books of accounts, and was also getting its accounts duly audited by a chartered accountant ; their existence was solely for educational purposes ; the surplus income, if any, and all their funds stood invested in acquisition of assets, and in the modes and forms specified in section 11(5), for the assessment year 2008-09, i.e., the year for which approval was sought ; the legal infirmity, on the basis of which exemption was denied to the society in the past assessment years, was because of its contribution to a chit fund scheme which was considered by the Assessing Officer as a contravention of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the accounts, and in the annual reports with special reference to the appropriation of income towards the objects of the educational institution. Column 13(i) requires the applicant to furnish details of the modes in which the funds of the educational institution are invested or deposited showing the nature, value and income from the investment. Column 13(ii) requires the applicant to furnish details of funds not invested in the modes specified in section 11(5) of the Act. Among the specified enclosures, to the application in Form 56D, are the true copies of the assessment orders passed for the last three years, if any. It is evident from Form 56D that the audited annual accounts, balance-sheets, and annual reports for the previous three years are to be enclosed to the application, along with copies of the assessment orders for the said three years. The applicant is also required to submit a note on the examination of accounts, on the activities as reflected in the accounts, and in the reports, with special reference to the appropriation of income towards the objects of the educational institution. Form 56D is a statutory form prescribed by rule 2CA(2) of the Income-tax Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of exclusion of such income from the total income of the previous year of the said person. Even in cases where approval was granted earlier under section 10(23C)(vi) of the Act, failure of the society (educational agency) to invest in the modes and forms specified in section 11(5) of the Act would disentitle them from claiming the benefit of exclusion of the income, received on behalf of an educational institution, from their total income for the previous year. In cases where initial approval, or extension of the approval granted earlier, is sought, the prescribed authority would be entitled to examine the annual accounts of the applicant-society for the previous three years to ascertain whether investment/deposits made in any of the previous three years are in the forms and modes other than those specified in section 11(5) of the Act. It is only if the prescribed authority is satisfied that the applicant has applied its income exclusively for the purpose of education, and has adhered to the modes specified in section 11(5) of the Act, that he would grant approval, or renew the approval granted earlier, under section 10(23C)(vi) of the Act. 9. Accepting the submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a construction would also defeat the very object of ensuring that the existence of the educational agency, and the application of its income, is solely for the purpose of education and no other. The first respondent is, there-fore, justified in rejecting the petitioner's application for grant of exemption on the ground that they had deposited/invested money in a chit fund in the assessment year 2007-08, though it is not one of the modes or forms specified in section 11(5) of the Act. 11. The submission of the learned counsel that, as the application was made by the petitioner on March 26, 2008, seeking exemption under section 10(23C)(vi) of the Act for the assessment year 2008-09, they could not have filed the annual accounts and balance-sheet for the financial year 2007-08 since the financial year had not even ended by then, merits acceptance. Prior to its amendment by the Finance Act, 2009, the fourteenth proviso to section 10(23C) required an application, seeking exemption under section 10(23C)(vi) of the Act for any assessment year, to be made at any time during the financial year immediately preceding the said assessment year. As such, for the assessment year 2008-09, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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