TMI Blog2016 (9) TMI 1193X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner to point out to the Commissioner upon remand. The last objection of the Commissioner is regarding non-filing of the audit report as required under the 10th Proviso to section 10(23C). This proviso provides that where the total income of the trust or institution referred to in clause (vi) besides others without giving effect to the exemption clauses exceeds the tax exemption limit such trust or the institution shall get its accounts audited and furnish the same alongwith return of income. This requirement obviously would arise at the time of filing of the return and not at the time of filing of application for approval and was therefore, wrongly invoked by the Commissioner for rejecting the application. In case of American Hotel and Lodging Association Educational Institute vs. Central Board of Direct Taxes and others reported in [2008 (5) TMI 17 - SUPREME COURT OF INDIA ] the Supreme Court had occasion to examine these provisions and held that the threshold conditions are actually existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application. Various provisos under section 10(23C) for req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schools. One of the objects of the Trust is to develop the knowledge of science, technology, dental, medical, pharmaceutical, physiotherapy, pharmacy, commerce, management and humanistic, for advancement of mankind. 3. On 27.05.2011, the petitioner filed an application seeking exemption under section 10(23C)(vi) of the Act under the prescribed format. The Chief Commissioner-the competent authority had some prima facie doubt about granting such application. He, therefore, issued a letter dated 30.11.2011 seeking clarification on certain points from the petitioner. He conveyed to the petitioner that the accounts of the University showed profit of extremely high percentage which was 80.35%, 67.37% and 58.91% for assessment years 2008-09, 200-10 and 2010-11 respectively. In section 10 (23C)(vi) of the Act, the emphasis is on the institution existing solely for educational purposes and not for the purposes of profit. This condition was therefore not satisfied. He called upon the petitioner to provide the details of fees charged to the students, and copies of income tax returns for the assessment year 2009-10 to 2011-12. He also confronted the petitioner with the non-filing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as fees. He lastly contended that the requirement of the proviso under section 10(23C) of filing audit report would arise at the stage of filing of the return. The application under section 10(23C) has to be filed well in advance. This requirement, therefore, cannot be attached at the stage of filing of the application. 7. On the other hand, learned counsel for the Revenue opposed the petition contending that the Chief Commissioner has given elaborate reasons for rejecting the application of the petitioner. He had put the petitioner to notice on the tentative grounds on which the application was liable to be rejected. After considering such representation of the petitioner, he passed the impugned order which calls for no interference. He further submitted that the further requirements under the third proviso to section 10(23C) could not be verified since the petitioner did not supply necessary information in this regard. Counsel relied on the decision of Bombay High Court in case of Yash Society vs. Chief Commissioner of Income Tax and ors reported in 375 ITR 152 in which, the Court finding that the institution, which claimed to be existing for philanthropic purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3; (iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) and sub-clause(ia)], by way of bonus shares allotted to the fund, trust or institution [or any university or other educational institution or any hospital or other medical institution]; (iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify, 10. for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; Provided also that where the total income, of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub clause (iv) or sub clause (v) or sub clause (vi) or sub clause (via), without giving effect to the provisions of the said sub clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or any university or other educational institution or any hospital or other medical institution shall get its accounts audited in respect of that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arose as to what is the meaning of expression activity for profit. Reference was made to the decision of Supreme Court in case of Aditanar Educational Institution vs. Addl. Commissioner of Income Tax reported in [1997] 224 ITR 310 (SC) in which, it is observed that after meeting the expenditure when any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cease to be one existing solely for the purposes, since the object is not one to make profit. After referring to such and other decisions, the Court held and observed 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 Commissioner of Income Tax s orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue s appeals from the Punjab and Haryana High Court s judgment dated 29.1.2010 and the judgments following it are dismissed. We reiterate that the correct tests wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Proviso to section 10(23C). This proviso provides that where the total income of the trust or institution referred to in clause (vi) besides others without giving effect to the exemption clauses exceeds the tax exemption limit such trust or the institution shall get its accounts audited and furnish the same alongwith return of income. This requirement obviously would arise at the time of filing of the return and not at the time of filing of application for approval and was therefore, wrongly invoked by the Commissioner for rejecting the application. In case of American Hotel and Lodging Association Educational Institute vs. Central Board of Direct Taxes and others reported in 301 ITR 86, the Supreme Court had occasion to examine these provisions and held that the threshold conditions are actually existence of an educational institution and approval of the prescribed authority for which every applicant has to move an application. Various provisos under section 10(23C) for requirements and the same of the provisos were seen as laying down monitoring conditions in order to make the section workable. In case of Queen's Educational Society ( supra) it was observed that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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