TMI Blog2012 (2) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 2-2-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V.EASWAR, JJ. For Appellant: Mr.Kanan Kapur, Advocate For Respondent : Mr.Abhishek Maratha Sr.Standing Counsel with Mr.Anshul Sharma, Advocate. SANJIV KHANNA, J: (ORAL) 1. Anand Education Society has filed the present writ petition impugning the order dated 29.04.2010 passed by the Director General of Income Tax (Exemption) respondent No.1 rejecting the application filed by the petitioner in Form No.56D for grant of registration u/s 10(23C) (vi) of the Income Tax Act, 1961 (Act for short) for the assessment year 2008-09 onwards. 2. The petitioner society was set up vide certificate of registration dated 4.11.1982. It has been managing and running a school in Delhi since 1988. The petitioner was registered u/s 12A of the Act on 04.04.2005. 3. The impugned order dated 29.04.2010 refers to the balance sheet/profit loss account of the petitioner society for the assessment year 2006-07 to 2009-10. The respondent No.1 in the impugned order has pointed out discrepancies with regard to sale of buses, vehicles maintenance, maintenance of furniture and sale of furniture/fixed assets. It appears that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval from the PA, in terms of Section 10(23C)(vi) by making an application in the standardized form as mentioned in the first proviso to that section. That condition of obtaining approval from the PA came to be inserted because Section 10(22) was abused by some educational institutions/universities. This proviso was inserted along with other provisos because there was no monitoring mechanism to check abuse of exemption provision. With the insertion of the first proviso, the PA is required to vet the application. This vetting process is stipulated by the second proviso. It is important to note that the second proviso also indicates the powers and duties of the PA. While considering the approval application in the second proviso, the PA is empowered before giving approval to call for such documents including annual accounts or information from the applicant to check the genuineness of the activities of the applicant institution. Earlier that power was not there with the PA. Under the third proviso, the PA has to ascertain while judging the genuineness of the activities of the applicant institution as to whether the applicant applies its income wholly and exclusively to the objects fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance depends on events that have not taken place on the date of the application for initial approval. 34. To make the section with the proviso workable we are of the view that the Monitoring Conditions in the third proviso like application/utilization of income, pattern of investments to be made etc. could be stipulated as conditions by the PA subject to which approval could be granted. For example, in marginal cases like the present case, where appellant-Institute was given exemption up to financial year ending 31.3.1998 (assessment year 1998-99) and where an application is made on 7.4.1999, within seven days of the new dispensation coming into force, the PA can grant approval subject to such terms and conditions as it deems fit provided they are not in conflict with the provisions of the 1961 Act (including the abovementioned monitoring conditions). While imposing stipulations subject to which approval is granted, the PA may insist on certain percentage of accounting Income to be utilized/applied for imparting education in India. While making such stipulations, the PA has to examine the activities in India which the applicant has undertaken in its Constitution, MoUs. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for impartation of education in India. Therefore, in our view, it is always open to the PA to impose such terms and conditions as it deems fit. The interpretation we have given is based on harmonious construction of the provisos inserted in Section 10(23C)(vi) by the Finance Act, 1998. Lastly, we may reiterate that there is a difference between stipulation by the PA of such terms and conditions, as it deems fit under the provisos, and the compliance of those conditions by the appellant. The compliance of the terms and conditions stipulated by the PA would be a matter of decision at the time of assessment as availability of exemption has to be evaluated every year in order to find out whether the institution existed during the relevant year solely for educational purposes and not for profit. 5. We have already quoted above the operative portion of the impugned order passed by the respondent No.1. We have also referred briefly to reasons given by the respondent No.1 for rejecting the application for registration under Section 10(23C)(vi) of the Act. It is clear that the respondent No.1 has not taken consideration of the ratio and observations of the Supreme Court in American Hot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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