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2015 (7) TMI 695 - PUNJAB & HARYANA HIGH COURT

2015 (7) TMI 695 - PUNJAB & HARYANA HIGH COURT - TMI - Exemption under Section 10(23C) denied - Held that:- The matter is squarely covered against the Revenue. There is no denying the fact that exemption had already been granted to the petitioner earlier, vide order dated 26.03.2008, for a period of 3 years till the year 2009-10. The application was made on 29.03.2010, for continuation and in pursuance of the same, a show cause notice was issued to the applicant on 13.01.2011 to substantiate its .....

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by the Apex Court in Queen's Educational Society Vs. CIT (2015 (3) TMI 619 - SUPREME COURT ) wherein it has been specifically noticed that in view of the 13th Proviso, after giving reasonable opportunity, the earlier approval could be withdrawn if the activities are found not to be genuine and not according to the conditions and the approval could be subject to monitoring. - Decided in favour of assessee. - CWP No. 16248 of 2012(O&M) - Dated:- 30-6-2015 - S. J. Vazifdar, ACJ And G. S. Sandhawal .....

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on for rectification claiming depreciation was also rejected vide order dated 01.06.2011 (Annexure P7). 2. The pleaded case of the petitioner is that it is duly registered with the Registrar of Firms & Societies, Haryana and running a educational institution, solely for the purpose of imparting education and not for the purpose of earning profit. Vide order dated 26.03.2008 (Annexure P1), approval was granted under Sub-clause (vi) of Clause (23C) of Section 10 of the Act, for the assessment .....

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to how the petitioner-Society was eligible for exemption and in reply, the application had been duly filed on 15.02.2011, explaining the queries. 3. Respondent No.2 rejected the application vide order dated 25.03.2011 (Annexure P5) by placing reliance upon the judgment of the Apex Court in P.A.Inamdar & others Vs. State of Maharashtra & others (2005) 6 SCC 537. Thereafter, an application had been filed under Section 154 of the Act that an addition had been made to the income and expendit .....

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came into effect on 01.12.2006 and it is submitted that once the approval had been granted, it could be withdrawn only on the ground provided. Reliance has been placed upon the Division Bench judgment of the Allahabad High Court in Sunbeam Academy Educational Society Vs. Chief Commissioner of Income Tax & others (2014) 365 ITR 0378 wherein a similar view has been taken that there was no requirement to apply afresh after 13.07.2006 and the original order of approval would continue to remain .....

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ontinuation and in pursuance of the same, a show cause notice was issued to the applicant on 13.01.2011 to substantiate its claim. In view of the circular No.7 dated 27.10.2010 (Annexure P8), the petitioner was not required to file an application for extension, as has been held in the case of Sunbeam Academy Educational Society (supra). Relevant observations read as under: "9. The aforesaid proviso was in relation to clause (iv) and (v) of Section 10 (23C) of the Act. The CBDT by its circul .....

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2009-10 and 2010-11 was a redundant application, inasmuch as, there was no requirement to apply for extension of the approval inasmuch as the approval in the case of the petitioner was granted after 1.12.2006 on 20.12.2007. The approval so granted by the Chief Commissioner of Income Tax, by an order dated 20.12.2007, was a one time affair, which was to continue till it was withdrawn under the proviso as extracted above. Consequently, the impugned order dated 17.3.2009 was otiose having no effect .....

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tinues to remain in force till it is withdrawn under the proviso as extracted aforesaid. Similar view was held by a Division Bench of the Lucknow Bench of this High Court in State Innovations in Family Planning Services Project Agency vs. Union of India and others, Writ Petition No.6715 (M/B) of 2013, decided on 4.9.2013. 12. In the light of the aforesaid, the impugned order passed by the Chief Commissioner of Income Tax is quashed. The writ petition is allowed. 13. It is hereby clarified, that .....

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3th Proviso, after giving reasonable opportunity, the earlier approval could be withdrawn if the activities are found not to be genuine and not according to the conditions and the approval could be subject to monitoring. Relevant observation reads as under: "25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief CIT's orders cancelling exemption which were set aside by t .....

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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 activiti .....

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Act. xxxx xxxx xxxx xxxx 33. Having analysed the provisos to Section 10(23-C)(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 standardised form in terms of the first proviso. It is only if the prerequisite condition of actual existence of the educational institution is .....

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conditions in the third proviso like application/utilisation 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 s .....

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and Agreement with Government of India/National Council. In this case, broadly the activities undertaken by the appellant are - conducting classical education by providing course materials, designing courses, conducting exams, granting diplomas, supervising exams, all under the terms of an Agreement entered into with Institutions of the Government of India. Similarly, the PA may grant approvals on such terms and conditions as it deems fit in case where the Institute applies for initial approval .....

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hat circumstances mentioned in the thirteenth proviso exists then the PA can withdraw the approval earlier given by following the procedure mentioned in that proviso. The view we have taken, namely, that the PA can stipulate conditions subject to which approval may be granted finds support from sub- clause (ii)(B) in the thirteenth proviso." 7. Another aspect from which we find that the impugned order was not justified is that respondent No.2 has placed reliance upon the observations of the .....

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