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TMI Blog2021 (8) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction, deserves to be quashed. 3. Without prejudice to the above, the learned CCIT- Panaji failed to appreciate that the appellant had not claimed the payments made to the extent of Rs. 3,57,83,690/- as an application of income during the assessment year 2017-18 and thus there was no violation of the conditions prescribed under Clause (a) of the unnumbered 3rd proviso and thus, Sub Clause A of Clause (i) of unnumbered 15th proviso to Section 10(23C) of the Act, was not attracted under the facts and in the circumstances of the appellant's case. 4. The learned CCIT, Panaji erred in holding that the appellant had violated Condition 1 of the order granting approval for exemption u/s 10(23C)(vi) of the Act, based purely on an expenditure which did not even form a part of application claimed during the assessment year 2017-18 and hence, there was no case to hold that the appellant had violated Sub Clause B of Clause (ii) of unnumbered 15th proviso to Section 10(23C) of the Act, under the facts and in the circumstances of the appellant's case. 5. The learned CCIT, Panaji ought to have appreciated that the appellant is running several educational institutions which exist sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The approval for the amendment was granted by the then CIT-Mangalore vide order dated 31/12/2008 in No. S-37/Amendment/CIT/MNG/08.09. The objects of the appellant trust as per the amended deed dated 29/09/2009 are as follows:- [i] To setup a college of Dental Sciences with all its specialty and super-speciality branches, Hospitals including research. [ii] To setup a Medical College with all its branches or speciality and super-speciality courses, hospitals including research. [iii] To setup a college of Agricultural Science, college or Forests, Botanical Science, Veterinary Science all with all its branches of speciality and super-speciality, research facility. [iv] To setup college of Arts, Fine Arts, dramatics cinematography, film shooting, cine-acting, music including instrumental music, yakshagana, Folk and all types of Indian dances and cultural activities, Entertainments, Para-medical science, Engineering, Bio- Technology, Nano-Technology, Sports, Gymnastics with research facilities. [v] To setup college of studies on Vedas, Vedantha, Philosophy, Astrology, Sanskrit, Agama Shastra, Paurohithya and any other similar branches of knowledge wherever youth can be train ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch business. [4] the assessee will regularly file its return of income before the Income-tax authority in accordance with the provisions of the Income-tax Act, 1961; [5] that in the event of its dissolution, its surplus and assets will be given to an organization which exists solely for charitable purposes and not for purposes of profit and no part of the same will go directly or indirectly to any of the beneficiaries of the society or anybody specified in section 13[3] of the Income-tax Act, 1961; [6] the approval granted shall be subject to the provision of proviso to section 143[3]; [7] the approval shall be void if it is subsequently found that it has been obtained fraud or misappropriation of fact; [8] the above approval is given only for the purpose of sec. 10[23][vi] of the Income-tax Act, 1961 and not for any other purpose/s. 7. It is submitted that the aforesaid approval granted to the appellant trust by the order dated 15/04/2010 continued to remain in force and thus, the appellant was entitled to claim exemption u/s. 10(23C)(vi) of the Act. However, since the appellant was having only excess of application over income for several years, there was no occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [iii] That, in this situation, where money was paid out of books for unrelated activities could only be inferred as misuse of funds and that the act of not claiming the expenditure as application would not absolve the appellant. That, it appears that the management had siphoned funds and the benefits were passed on to persons u/s 13(3) of the Act. 11. Upon reference by the A.O., the learned CCIT, Panaji was of the view that the unnumbered 15th proviso to Section 10(23C)(vi) was prima facie attracted to the appellant's case and hence, he issued a show cause notice on the appellant dated 18/02/2020 calling upon to state as to why the approval granted should not be withdrawn. In the show cause notice dated 18/02/2020, the CCIT, Panaji, identified the following issues that are purportedly in contravention to the regulations under the relevant provisions of the Act and sought explanations regarding the same:- [i] That, despite specific request, the appellant could not provide purpose for payment to several individuals and explain its relevance to the objects of the trust and had failed to furnish original vouchers. [ii] That the appellant had paid sums of money in cash towards "Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird proviso/ that the activities are not being carried out in accordance with the conditions subject to which the approval was granted. [ii] That the fact that the appellant did not possess original receipts as payments were made through middle men was proof enough that the amount of Rs. 3,57,83,690/- was not applied to the objects of the trust, thus attracting Sub Clause A of Clause (i) of unnumbered 15th proviso to Section 10(23C) of the Act. [iii] That there was a violation of Condition 1 of the renewal granted which states that "the assessee applies its income, or accumulates its income for the application, wholly and exclusively, for the objects for which it is established and application of its income must be in accordance with Third Proviso to Section 10[23][vi]" and this violation would bring Sub Clause B of Clause (ii) of unnumbered 15th proviso to Section 10(23C) of the Act into play. [iv] That the aforesaid payments made by the appellant trust appear to be for the renewal of the recognition granted by MCI as the appellant had claimed that the recognition was withdrawn and later granted and it appeared that these payments made were opposed to public policy. [v] T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r withdrawing exemption granted, and thus the impugned order passed dated 04/05/2020 is without the requisite jurisdiction and is bad in law and deserves to be quashed. It is prayed accordingly. 20. On the other hand, the ld. DR submitted that in the Ground of Appeal No. 2, the appellant has challenged the assumption of jurisdiction by the CCIT, Panaji and the same is reproduced below for immediate reference:- "2. The order passed u/s 10(23C)(vi) of the Act, dated: 04/05/2020, withdrawing the exemption granted is bad in law and void ab-inito in as much as the learned CC_TT, Panaji who has passed the impugned order is not the prescribed authority in terms 2CA of the .T. T. Rules and thus, the impugned order passed being without jurisdiction, deserved to be quashed." 21. In this regard, she submitted that copy of the report was called from the CIT (Exemptions), Bangalore and the relevant part of the report is reproduced herewith :- "The contention of the assessee is that the Chief Commissioner of Income Tax is not the authority to withdraw the recognition u/s 10(23C)(vi) by relying on the proviso to sub rule (1) of Rule 2CA wherein it is prescribed that the Principal Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly granted the registration and not the prescribed authority as on the date of withdrawal proceedings. * In the instant case the recognition u/s 10(23C)(vi) was granted by the Chief Commissioner of Income Tax, Panaji on 15/04/2010 and hence he is "that prescribed authority" who is vested with the power to withdraw the recognition u/s 10(23C)(vi) granted by him as per the provisions of the Act discussed above. 23. We have heard the rival submissions. The legal objection of the assessee is that the CCIT who has withdrawn the approval granted to the assessee u/s. 10(23C)(vi) of the Act is having no jurisdiction since he is not the prescribed authority as per provisions of this section. The power and jurisdiction to withdraw the approval granted u/s. 10(23C)(vi) of the Act is provided under 13th proviso to the said section which reads as under:- "Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government [or is approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (vi) or any hospital or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961 (43 of 1961) read with sub-rule (3) of rule 2CA of the Income-tax Rules, 1962, the Central Board of Direct Taxes hereby authorises the following Chief Commissioners or Directors General to act as 'prescribed authority' for the purposes of sub-clause (vi) and subclause (via) of clause (23C) of section 10 in relation to any university or other educational institution or any hospital or other medical institution with effect from the 1st day of June, 2007 namely,- (i) for cases falling in the jurisdiction of Director of Income-tax (Exemption), Ahmedabad, the prescribed authority shall be Chief Commissioner of Income-tax, Ahmedabad-IV, Ahmedabad; (ii) for cases falling in the jurisdiction of Director of Income-tax (Exemptions), Bangalore, the prescribed authority shall be Chief Commissioner of Income-tax, Bangalore-I, Bangalore; (iii) for cases falling in the jurisdiction of Director of Income-tax (Exemptions), Chennai, the prescribed authority shall be Chief Commissioner of Income-tax, Chennai-III, Chennai; (iv) for cases falling in the jurisdiction of Director of Income-tax (Exemptions), Hyderabad, the prescribed authority shall be Chief Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner is the prescribed authority and it is not the Chief Commissioner of Income Tax [CCIT]. In the present case, the withdrawal u/s. 10(23C)(vi) of the Act dated 4.5.2020 was passed by the CCIT, Panaji, Goa and not by Principal Commissioner or Commissioner. Being so, the order passed by the said authority is not valid as it is without jurisdiction. Hence, we are of the considered opinion that it is passed by inappropriate authority and has no legs to stand. The same is accordingly annulled. 27. Without prejudice to the above legal issue raised on merits, the second contention of the ld. AR is that there is no case for holding that the appellant trust has committed any violation of the statutory provisions of the Act in order to withdraw the approval granted u/s. 10[23C][vi] of the Act. At this juncture, it would be relevant to reproduce the provisions of Section 10(23C)(vi) of the Act along with unnumbered 3rd Proviso and the unnumbered 15th Proviso to Section 10(23C) of the Act that have been invoked by the learned CCIT, Panaji to withdraw the approval granted to the appellant trust as under:- 9.1 Section 10(23C)(vi) of the Act provides that income of the following educational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify, 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." 29. Finally, the unnumbered 15th proviso to Section 10(23C) provides withdrawal of the approval granted in certain situations and the same reads as under:- "Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government or is approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that- (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not- (A) applied its income in accordance with the provisions contained in clause (a) of the third p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CCIT, Panaji is that the appellant trust has violated Sub-Clause [A] of clause [i] of the unnumbered 15th proviso, which is that the appellant trust has not applied its income in accordance with the provisions contained in clause [a] of the third proviso. Furthermore, the learned CCIT, Panaji has alleged that the appellant has violated Sub-Clause [B] of clause [ii] of the unnumbered 15th proviso, which is that the activities are not being carried out in accordance with all or any of the conditions subject to which the appellant was granted approval. 32. Thus, it is only on these 2 counts that the approval granted earlier stands withdrawn by the learned CCIT, Panaji, in the impugned order. 33. The entire basis for arriving at the aforesaid conclusions are on account of the payments made to the extent of Rs. 3,57,83,690/- that was reported by the learned A.O. as set out in the earlier part of these submissions. The break-up of these payments are summarized as under:- Particulars Amount in Rs. Remarks Dental Camp Expenses 3,20,690/- No adverse comments except that no vouchers produced although A.O held that these amounts were petty expenses that can be related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the educational institutions run by the appellant. [e] That, though the appellant was not in possession of the original vouchers, the appellant strived to produce the copies of the vouchers wherever possible. [f] That, there was no requirement for deduction of TDS at the time and the liability for deducting tax was brought in by the unnumbered 13th proviso w.e.f 01/04/2019 only. Hence, there was no violation on the part of the appellant regarding deduction of TDS as there was no statutory requirement existing for the same at that time. 35. The ld. AR submitted, under the aforesaid factual matrix, that there is no violation of the statutory provisions on the appellant's part as held by the learned CCIT, Panaji on both the counts mentioned in the impugned order. 36. A close examination of Clause (a) of the unnumbered 3rd proviso shows that the onus cast upon the appellant is to apply its income, or accumulate it for application, wholly and exclusively to the objects for which it is established. In the case of the appellant, as mentioned above, the impugned payments to the extent of Rs. 3,57,83,690/- was never claimed as an application of income in order to hold that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established that the aforesaid payments made were never claimed as application of income at all and that thus the conditions imposed in the order of approval are not violated. Furthermore, the appellant had not earned a surplus in several years (since AY 2005-06) and the net deficiency for the year was Rs. 26,38,94,595/- after disallowing the payment of Rs. 3,57,83,690/-. Hence, there was a deficiency of income in the appellant trust and it cannot be said that any income of the appellant has been applied for non-educational purposes. 39. Hence, it is submitted that the activities of the trust are being carried out in accordance with all of the conditions subject to which it was approved. Thus, sub clause B of clause (ii) of the unnumbered 15th Proviso to Section 10(23C) of the Act is also not attracted. The appellant is running its educational institutions with the sole purpose of imparting education and there is no change in the nature of activities of the appellant trust. The withdrawal of the approval on this score is totally unjustified and unwarranted and it is prayed that the same may kindly be vacated. 40. In light of the above, it is submitted that there is no case to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval granted u/s. 10(23C)(vi) of the Act on this count is not possible. Under the 15th proviso to s. 10(23C)(vi) of the Act, the prescribed authority has to satisfy himself about the existence of default/violation committed by the assessee as contemplated under sub-clause (d) of clause (ii) of un-numbered 15th proviso which is that the activities are not being carried out in accordance with any of the conditions subject to which assessee was granted approval. In the present case, the assessee was solely existing to support and promote advancement of educational in all its branches as follows:- "(a) To support and.to promote the advancement of educational activities in all its branches and aspects such as kindergarden primary and high schools and colleges, leading up to the teaching degree, post-graduate and doctorate course in arts, commerce, medicine, pharmacy, nursing, management. including hotel management and catering technology, Hospital, management and fine arts, architectures, vocational courses;. physical education, sports and such other subjects as the trustees may deem fit for the benefit of the students speaking and/or knowing Tulu language and students of all ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be intended to enhance, improve or research for efficiency or superior work or activity of the trust. (k) to purchase, taken on lease or exchange or otherwise secure any movable or immovable property which may deem necessary or expedient or desirable for any of the objects of the trust. (l) to borrow money or receive money on deposit and assets upon such terms, conditions as the Board of Trustees shall deem necessary or expedient in the best interest of the trust. (m) to enter into and carry out arrangements to join, co-operate or amalgamate this trust with any other association, society, institution or trust of allied objects upon such terms and conditions as the trustees may think fit." 46. Further it was amended on 29.09.2009 wherein further objects were as follows:- "4(o) (i) To setup a college of Engineering with all speciality and super-speciality branches both in Under Graduate, Post Graduate, research and diploma levels. (ii) To start technical institutions conducting courses, programmes in the field of technical education, training and research in engineering and technology including MCA, MBA, architecture, town planning management, pharmacy, Hotel Management ..... X X X X Extracts X X X X X X X X Extracts X X X X
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