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2015 (9) TMI 1306 - DELHI HIGH COURT

2015 (9) TMI 1306 - DELHI HIGH COURT - TMI - Grant of exemption u/s 10(23C) (vi) and (via) rejected - educational institute - profit motive - Held that:- The inquiry conducted by the Director General with regard to the application of funds and generation of profit is to be conducted post the grant of approval. If the above conditions are satisfied, in the first instance, the Competent Authority is to grant approval. The Competent Authority is empowered to impose conditions while granting such ap .....

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nt of approval for considering whether approval can be granted in the first instance or not.

It is an admitted fact in the present case that the only activity of the petitioner is that of running of a school and the petitioner is not indulging in any activity for the purposes of profit and these are the only requirements for grant of approval and, therefore, in the same manner as in the case of Digambar Jain Society (2009 (10) TMI 61 - DELHI HIGH COURT), we issue a writ of mandamus di .....

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5/2012 & CM No.9795/2012 - Dated:- 24-9-2015 - Badar Durrez Ahmed And Sanjeev Sachdeva, JJ. For the Petitioner: Mr C.S. Aggarwal, Sr Advocate with Mr Prakash Kumar and Ms Pushpa Sharma, Advocates For the Respondents: Mr Rohit Madan with Mr Akash Vajpai, Advocates JUDGMENT Sanjeev Sachdeva, J 1. This writ petition is directed against the order dated 28.06.2012 passed by the Director General of Income Tax (Exemptions) on an application for grant of exemption under Section 10(23C) (vi) and (via) of .....

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ool in the name of Delhi Public School at New Town, Kolkata. 3. With regard to the application filed by the petitioner seeking exemption under Section 10(23C)(via) of the Act, the application has been rejected on the ground that the said provisions relate to hospitals and medical relief and since the petitioner is running a school, the petitioner is not eligible to apply in the said category. 4. With regard to the claim of exemption under Section 10(23C)(vi), the application has been rejected on .....

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Trust various activities are mentioned, the petitioners are not eligible for grant of exemption. The Director General has further held that from the documents submitted by the petitioner it was apparent that the school was meant for students whose parents belong to Higher Income Group and there was generation of surplus during the various years, which showed that the school was being run as a business. It is held that the Trust has been founded by a prominent businessman in the hotel industry an .....

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ured loan and, consequently, reducing the burden on the students. It has thus been held that the school is being run as a business and not as a charity. It has further been held that the trust in no way can be said to be existing solely for educational purposes and not for the purposes of profit. 6. The learned counsel for the petitioner has contended that for considering an application for grant of exemption under section 10(23C)(vi), what is relevant to be considered is the activity that the t .....

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result in withdrawal of approval. 7. It is contended that there is a distinction in grant of an approval and in compliance with the conditions for approval. It is submitted that for the purposes of grant of an approval, the Competent Authority has to only examine whether there is in existence an educational institution and, secondly, whether an application in the standardized form in terms of the first proviso to Section 10(23C) (vi) and (via) has been moved by the petitioner or not. It is subm .....

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n relied upon by another Division Bench of this Court in Digambar Jain Society for Child Welfare vs. Director General of Income Tax (Exemptions): 456 Delhi 329 ITR where it has been held that by virtue of the Supreme Court‟s decision in American Hotel & Lodging Association (supra), it has been clarified that the amended provisions of Section 10(23C) (vi) are analogous to Section 10(22). It has also been laid down by the Division Bench that when an application for exemption is moved by .....

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‟s decision in American Hotel & Lodging Association (supra) that insofar as the third proviso is concerned, the same relates to application of funds and that would be a matter which would arise for consideration at a later stage. In other words, the third proviso prescribes monitoring conditions rather than a condition for grant of or rejection of approval. It was clarified that only in the event that the conditions stipulated in the third proviso are not fulfilled, after grant of exem .....

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ation primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. (2) The predominant object test must be applied - the purpose of education should not be submerged by a profit making motive. (3) A distinction must be drawn between the making of a surplus and an institution being carried on for profit . No inference arises that merely because .....

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that the petitioner is indulging in is education namely running of a school and no other activity. 11. The requirements of Section 10(23C) (vi) as laid down by the Supreme Court are: (i) existence of an educational institution and (ii) approval of the prescribed authority for the purposes of grant of exemption for which an application in the prescribed form has been filed. In the present case, the petitioner satisfies both the tests. There is admittedly an educational institution in existence a .....

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