TMI Blog2013 (11) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner applies its income wholly and exclusively to the objects for which it is constituted/established – Decided against the Assessee. - Writ Tax No. - 1520 of 2009 - - - Dated:- 7-11-2013 - Hon'ble Sunil Ambwani And Hon'ble Surya Prakash Kesarwani,JJ. For the Petitioner : R. S. Agrawal, Ravi Kant For the Respondent : C. S. C. (Income Tax), A. N. Mahajan,B. Agarwal ORDER (Delivered by Hon'ble Surya Prakash Kesarwani,J.) 1. In this writ petition the petitioner has prayed for a writ, order or direction in the nature of certiorari to quash the order dated 25.3.2009 (Annexure No.8) passed by the first respondent i.e. the Chief Commissioner of Income Tax, Allahabad for assessment years 2007-08, 2008-09 and 2009-10 under Section10 (23 C)(vi) of the Income Tax Act 1961 (hereinafter referred as the Act). 2. Briefly stated the facts of the present case are that the petitioner is a society registered under the Societies Registration Act having registration No. 2358/83-84 renewed up to 14.12.2010 vide renewal order dated 21.2.2006 (Annexure No.1). It moved an application dated 25.3.2008 (Annexure No. 3) for approval of the institution for exemption of Income under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibilities that the society's appeal will be decided shortly and the controversy arising from the order of ITAT for AY:1989-90 will be decided, hopefully in favour of the society. 5. During the years for which approval has been applied the coaching activity is run by a private limited company in which none of the members of the society is participating. The company is assessed to tax separately and liable to pay taxes on its income. The observation of the learned CIT on this point is without any basis. 6. The object of the society is to impart education and it is running an educational institution. It is existing solely for educational purposes and its object is not to make profit. It is meeting all the conditions and requirements of Section 10(23C)(vi) of the Income-Tax Act, 1961. It has already been granted exemption of income u/s 10(22) of the Act for several earlier assessment years. The provisions of Section 10(23C)(vi) is analogous to the provisions of Section 10(22) of the Act. The educational objects of the society and the activity of giving education has neither been questioned nor challenged by any authority, so far. The utilization and application of income being subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted company namely, M/s. Career Coaching Institute Pvt. Ltd. in which son of the Secretary of the petitioner Society is the Managing Director and non-charging of rent by the petitioner society from the said company. He further submits that the petitioner society is not the owner of the building in which the institution is housed. The building belongs to Smt. Ruqquia Begum, the mother of the Secretary of the petitioner society and thus rent has not been charged. The petitioner society cannot be faulted for the same. The refusal of Registration on another ground that the funds of the society have been diverted for personal purpose of Sri HRA Bakht and his family members is illegal and arbitrary as it has invested huge amount in repair and maintenance of building over the years. He further submits that these issues are wholly irrelevant for the purpose of disposal of application by the respondent under Section 10(23C) (vi) of the Act. He submits that the judgment of Hon'ble Supreme Court in the case of Americal Hotels (supra) even though cited before the respondent; was not considered by him while passing the impugned order. Submission on behalf of respondent 6. Sri Shambhu Chopra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prescribed form and manner to the prescribed authority for the purpose of grant of the exemption, or continuance thereof, under sub-clause(iv) or sub-clause (v) [or sub-clause (via)]: Second Proviso :- Provided further that the prescribed authority, before approving any fund or trust or institution or any hospital or other medical institution, under sub-clause (iv) or sub-clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:] Fourteenth Proviso :- [Provided also that in case the fund or trust or institution or any university or other educational institution or any h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , vide the Finance Act, 1998. Section 10(23C)(vi) is analogous to Section 10(22). To that extent, the judgments of this Court as applicable to Section 10(22) would equally apply to Section 10(23C)(vi). The problem arises with the insertion of the provisos to Section 10(23C)(vi). With the insertion of the provisos to Section 10(23C)(vi) the applicant who seeks approval has not only to show that it is an institution existing solely for educational purposes [which was also the requirement under Section 10 (22)] but it has now to obtain initial approval from the prescribed authority, 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 prescribed authority 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 the exemption provision. With the insertion of the first proviso, the prescribed authority is required to vet the application. This vetting process is stipulated by the second proviso. It is important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32.Having analysed the provisos to Section 10(23C)(vi) one finds that there is a difference between stipulation of conditions and compliance therewith. The threshold conditions are actual, existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application in the standardized form in terms of the first proviso. It is only if the pre-requisite condition of actual existence of the educational institution is fulfilled that the question of compliance with requirements in the provisos would arise. We find merit in the contention advanced on behalf of the appellant that the third proviso contains monitoring conditions/requirements like application, accumulation, deployment of income in specified assets whose compliance depends on events that have not taken place on the date of the application for initial approval." (Emphasis supplied by us) 12. In the impugned order after considering the report of the CIT Allahabad, reply of the petitioner and evidences on record the Chief Commissioner of Income Tax Allahabad has recorded the findings of fact in Paragraphs 8, 9, 10, 11, 12, 13, 17 and 18 as under : "8. The facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d absolute powers to manage the affairs of the society at this own sweet will. (ii) The property at Lucknow belongs to Sri Bakht and this proves that the funds of the society are being used for personal benefit of the Secretary. (iii) Expenditure has been incurred by the society on repairs and maintenance of the building which is not belonging to the society, and since there is no lease deed entrusting this responsibility to the society, there is no obligation on the part of the society to incur this expenditure. (iv) Instalments are being paid by the society on the vehicle in the name of Sri Bakht without any evidence to show that the vehicles were used by the society for achieving the objects of the society. 11.On perusal of the Balance Sheet as on 31.3.2008, it is found that during the year 2007-08 the applicant society has made an addition of Rs. 11,98,258/- under the head 'Building under Construction'. Further, on perusal of Income and Expenditure a/c for the F.Y.2007-08, it is found that the applicant society has incurred expenses under the head 'Repair and Maintenance' of Rs. 39,39,516/- 'Conveyance Travelling expenses' of Rs. 5,19,155/- and 'Publicity Expenses' of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to call for such document including annual accounts or information from the petitioner to check the genuineness of the activities of the petitioner institution which power was earlier not there with the prescribed authority under Section 10(22) of the Act. He has been conferred powers to ascertain while judging the genuineness of the activities of the petitioner institution as to whether the petitioner applies its income wholly and exclusively to the objects for which it is constituted/established. 14. The findings of fact recorded by the respondent authority in the impugned order clearly shows that the petitioner institution is existing and its main motive is to make profit. It is not existing solely for educational purpose. The diversion of fund for personal use has been noted in the impugned order based on documentary evidences. 15. In view of the discussions made above, we are of the view that the respondent has not committed any error of law or facts to reach on the findings that the petitioner Society is not existing solely for educational purposes as its motive seems to be making profit and it is existing for purposes of profit. The application for grant of exemption u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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