TMI Blog2021 (8) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... .628/Bang/2020 - - - Dated:- 23-7-2021 - Shri Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri V. Srinivasan, Advocate For the Respondent : Ms. Neera Malhotra, CIT(DR), ITAT, Bengaluru. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order u/s. 10(23C)(vi) of the Income-tax Act, 1961 [the Act] for the assessment year 2017-18. 2. The assessee has raised the following grounds of appeal:- 1. The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 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-initio in as much as the learned CCIT, Panaji who has passed the impugned order is not the prescribed authority in terms of Rule 2CA of the I.T. Rules and thus, the impugned order passed being without jurisdiction, deserves to be quashed. 3. Without prejudice to the above, the learned CCIT- Panaji failed to appreciate that the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal institutions under its umbrella: Sl.No Name of the Institution 1 Srinivas College of Hotel Management Trust 2 Srinivas College of Physiotherapy Research Centre 3 Srinivas College of P G Management Trust 4 Srinivas College of Education 5 Srinivas Institute of Medical Science Research Centre 6 Srinivas Institute of Technology 7 Srinivas Institute of Health Science Trust 8 Srinivas Institute of Dental Science 9 Srinivas School of Engineering 4. The appellant was granted registration u/s 12A vide No. Accts/718/10A/Vol/B II/ S-290 dated 14/06/1988 by the then Commissioner of Income tax -III, Bangalore. This approval granted u/s. 12A of the Act continues to remain in force. 5. With a view to expand and specifically set out the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king over running and/or maintaining an educational institutions. 6. Pursuant the aforesaid amendment of the objects clause and since the appellant trust was running several educational institutions, which exist solely for educational purposes and not for the purposes of profit, the appellant trust made an application for recognition u/s 10(23C)(vi) before the then prescribed authority i.e., the CCIT, Panaji. The prescribed authority granted the approval, which has since been renewed vide order no. F. No. CCIT/PNJ/136(10)/2010-11 dated 15/04/2010. The approval granted u/s 10(23C)(vi) was subject to the appellant abiding by the conditions set out below:- [1] 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]; [2] the assessee will not invest or deposit its funds [other than voluntary contributions received and maintained in the form of jewellery, furniture, etc] for any period during the previous years relevant to the assessment years mentioned above otherwise than in any one or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 3,57,83,690/- to several persons that formed part of the sum of ₹ 12,24,78,046/- [donations charity], which was not claimed as application. On further enquiry, the AO also noted that the appellant had made these payments both by way of cash as well as cheque and that the appellant had submitted that it did not have the original vouchers in support of these payments. According to the AO, the aforesaid payments made by the appellant amounted to the violation of the conditions for grant of approval u/s. 10(23C)(vi) of the Act and hence, in terms of the proviso to section 143(3) of the Act, the AO made a reference to the prescribed authority for withdrawal of the approval granted since he could not pass any order of assessment denying the exemption claimed without withdrawal of the approval by the prescribed authority. 10. The ld. AR submitted that the A.O. took the view that the prescribed authority was the learned CCIT, Panaji, who had initially granted the approval u/s 10(23C)(vi) of the Act. It has been stated by the learned CCIT, Panaji in the impugned order that the A.O. had concluded as under:- [i] That, the appellant could not establish that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) of the 3rd proviso and thus, he gave an opportunity to show as to why the approval u/s 10(23C)(vi) should not be cancelled/withdrawn. 13. It is submitted that the appellant availed the aforesaid opportunity provided by the CCIT, Panaji and had filed written submissions contending that there was no violation of the unnumbered 15th Proviso to Section 10(23C) and that all the educational institutions were being genuinely run, wherein every year the application exceeded the gross receipts earned, resulting in the appellant incurring a deficiency of funds. The appellant also contended that the sum of ₹ 3,57,83,690/- based on which the A.O. had opined that the withdrawal of the approval was required, was less than 10% of the gross receipts earned during the assessment year 2017-18. It was also contended that the aforesaid sum was not claimed as application of income in the computation of total income at all and hence, there was no justification to withdraw the approval granted earlier as these payments alone cannot be the basis to determine the nature of activities carried on. 14. However, the CCIT, Panaji did not accept the aforesaid contentions or explanation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. It is submitted that as per the provisions of Section 10(23C)(vi) of the Act, read with Rule 2CA of the I.T. Rules, 1962, [as it stood at the relevant point of time], the prescribed authority is the Principal Commissioner or Commissioner of Income tax, who alone is competent to pass the order withdrawing exemption granted under Section 10(23C)(vi) of the Act. The prescribed authority at the time of granting approval was in no doubt the learned CCIT, Panaji in the year 2010, however thereafter, the Rules were amended from time to time. The prescribed authority referred to in the Act in section 10[23C][vi] or for that matter, in the proviso to section 143[3] of the Act, has to be examined in light of the prescribed authority that is specified under the Rules. Rule 2CA of the I.T.Rules [as it was at the relevant point of time] provides that on and with effect from 15/11/2014, the Principal Commissioner or Commissioner is the prescribed authority. 18. It is submitted that the A.O. in terms of the proviso to Section 143(3) is required to make a reference to the prescribed authority in case of contravention of the provisions of Section 10(23C)(vi). The term prescribed autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the recognition u/s 10(23C)(vi) by the Chief Commissioner of Income Tax, Panaji. Hence the Chief Commissioner of Income Tax, Panaji rightly assumed jurisdiction to withdraw recognition u/s 10(23C)(vi) which was granted by him. Judicial propriety also desires that when the order of granting recognition u/s 10(23C)(vi) is passed by an authority of rank of Chief Commissioner of Income Tax the decision on withdrawing the recognition u/s 10(23C)(vi) cannot be taken by an authority lower than the rank of Chief Commissioner of Income Tax. Hence the contention of the assessee that the Chief Commissioner of Income Tax was not the competent authority to decide on the issue of withdrawal of recognition u/s 10(23C)(vi) is without merit. Moreover as evident from the proceedings before the Chief Commissioner of Income Tax, Panaji the assessee has appeared before the Chief Commissioner of Income Tax and furnished the details called for. It is also evident from the order of the Chief Commissioner of Income Tax, Panaji that the assessee never objected to the jurisdiction of the Chief Commissioner of Income Tax, Panaji in holding the proceedings to withdraw reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal institution or any hospital or other medical institution- (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer . 24. The 13th proviso to section 10(23C)(vi) confers the power/jurisdiction to withdraw the approval to the Government or the prescribed authority. It further postulates that the prescribed authority, if satisfied that such fund or institution has not com-plied with the conditions as provided thereunder, can withdraw the approval. For initiation of proceedings to withdraw the approval the mand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cases other than those mentioned at (i) to (vii) above, the Chief Commissioner or Director General to whom the Assessing Officer having jurisdiction to assess the university or other educational institution or any hospital or other medical institution referred to in sub-clause (vi) and sub-clause (via) of clause (23C) of section 10 of the Act is subordinate. The above Notification was withdrawn by Notification dated 15.11.2014 by the CBDT which reads as follows:- SECTION 10(23C)(vi)/(via) OF THE INCOME-TAX ACT, 1961 - EXEMPTIONS - UNIVERSITY/EDUCATIONAL INSTITUTIONS/HOSPITALS - PRESCRIBED AUTHORITY - SUPERSESSION OF NOTIFICATION NO. SO 852(E) [F.NO. 153/41/2007-TPL], DATED 30-5-2007 NOTIFICATION NO. 76/2014 (F.NO. 196/26/2014-ITA.I), DATED 1-12-2014 SUPERSEDED BY NOTIFICATION NO. 20/2015 [F.NO. 196/26/2014-ITA.I]/SO 676(E), DATED 5-3-2015] In pursuance of the provisions contained in sub-clauses (vi) and (via) of clause (23C) of section 10 of the Income-tax Act, 1961 (43 of 1961) read with rule 2CA of the Income-tax Rules, 1962, and in supersession of the notification of the Government of India in the Ministry of Finance, Department of Revenue, Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal 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)- (a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and (b) does not invest or deposit its funds, other than- (i) any assets held by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1973; (ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sity or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality,] it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer 30. The ld. AR firstly submitted that the appellant is running several educational institutions which exist solely for educational purposes and not for the purposes of profit and there is no dispute on this aspect of the matter. During the relevant financial year, there is no change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces written off 1,50,00,000/- Amount paid in cash and written off and vouchers produced only for a part of the payment. Other religious and charitable donations 1,00,63,000/- All payments made in cash and only a statement was given. 34. With regard to the aforesaid observations in respect to the payment of ₹ 3,57,83,690/-, it is submitted as under:- [a] That, the sum of ₹ 3,20,690/- paid by the appellant was towards dental camp expenses and that the appellant is running a dental college. Hence, the payment was incurred for the purposes of education and a statement of expenses in this regard had also been furnished during the course of proceedings and these payments are not seriously doubted. [b] That, with regard to the payment of brokerage, the appellant had paid the entire brokerage amount vide account payee cheques and that the details of the payments made were also produced before the learned A.O. for the purpose of verification. The payments were made for the compliance of the requirements to the consultant brokers to meet the technical req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal receipts for the aforesaid payments, which have not even been claimed as application for the assessment year 2017- 18, it is submitted that the mere failure to give the original receipts does not prove that the income of the trust has been applied for other purposes, which is not connected to educational purposes. In fact certain payments were made by account payee cheque, which had also been produced for the purposes of verification. In other words, there is neither a case made out that the appellant has applied the income for other purposes nor is there any claim for application of income at all in the first place. 37. Sub Clause A of Clause (i) of unnumbered 15th proviso allows for withdrawal of approval u/s 10(23C) when the trust has not applied its income in accordance with the provisions contained in clause (a) of the third proviso. As established above, there was no violation of the third proviso as the payment of ₹ 3,57,83,690/- had not been claimed as an application of income at any point. Hence, the withdrawal of the approval on this ground is unjustified and the same deserves to be vacated. 38. That apart, it is submitted that the appellant has not vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and hence, there is no valid case made out for withdrawal of the exemption granted u/s 10(23C)(vi) of the Act, which the appellant is rightfully entitled. It is submitted that the order of withdrawal of exemption u/s 10(23C)(vi) of the Act is opposed to law and it is prayed that the same be quashed. 41. Regarding ground Nos. 3 to 6, the ld. DR submitted that the CCIT, Panaji in his order dated 04/05/2020 has passed a detailed order while deciding on the issue of withdrawal of recognition u/s 10(23C)(vi). All the documents relied upon by him is part of the order and all the vouchers, ledger extracts submitted by the assessee are already part of the paper book submitted by the assessee before the ITAT. 42. She further submitted that the contention of the assessee in ground No. 4 was raised before the CCIT during the withdrawal proceedings and the same has been adjudicated by the CCIT in Para 6.4 at page No. 13 and 14 of the order dated 04/05/2020. All the contentions of the assessee trust has been adjudicated by the CCIT in para 6 to 6.6 of the order dated 04/05/2020 and same to be confirmed. 43. We have heard both the parties on merits and considered the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries. (b) to promote the Tulu language and the knowledge of tulu speaking people in general and that of students speaking tulu in the aforesaid institutions in particular. (c) to establish new or by take over provide, endow, equip, furnish, maintain, develop, control, manage and conduct all educational institutions of the kind described in clause (a) above. (d) to establish new or by take over, provide, endow, furnish, maintain, develop, control, manage and conduct hospitals, laboratories, research centres in all or any of their departments and sections for providing medical, surgical and nursing care or treatment, for indoor and outdoor patients and such other institutions as the board of trustees may deem necessary or convenient for any of its purposes which are charitable and not an activity for profit. (e) to bring out, encourage and develop the intuitive and research faculties of the pupils and doctors and to afford for research work in all sciences. (f) to institute scholarships and award for persons who have achieved outstanding excellence in the field of learning, education, science or social work or any other similar field. (g) to accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology, applied arts and crafts, PG diploma in business management/administration and such other programmes and area at under graduate, post graduate, polytechnic, diploma and post diploma levels. (4(p) To start educational institution in any technical, nontechnical, Science, Arts and research streams. [iii] To start and setup an educational institutions wherever it is referred in this Deed shall also mean and includes taking over running and/or maintaining an educational institutions. 47. Being so, the assessee wholly and exclusively carried out its objects for which it was established and even if there is a violation as suggested by CCIT, it was not claimed for the purpose of application of income. Further, there is no allegation by the CCIT that assessee has not carried out the objects for which it was established and examination of the accounts of the assessee shows that assessee duly carried out its activities so as to attain its objects mentioned in the trust deed. There was no activities carried out in violation of its object clause so as to deny exemption u/s. 10(23C)(vi) of the Act. Accordingly, this ground of appeal of the assessee is also allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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