Income Tax Appellate Tribunal - Chandigarh
Acharya Atma Ram Jain Model School, ... vs Pr. Chief Commissioner Of Income Tax, ... on 18 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.849/Chd/2015
(Assessment Year : 2014-15)
Acharya Atma Ram Jain Vs. The Principal Chief Commissioner
Model School, Dera Bassi, of Income Tax, Ayakar Bhawan,
Mohali. Chandigarh.
PAN: AACAA4664P
(Appellant) (Respondent)
Appellant by : Shri T.N. Singla
Respondent by : Shri Ravi Sarangal, CIT DR
Date of hearing : 25.05.2017
Date of Pronouncement : 18.08.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Th i s a p p e a l ha s b e e n f i l e d by t h e a s s e s s ee a ga i n st the o r de r pa ss e d by the Learned P r i n ci p a l Chief C o m m i s s i o n e r o f I n c o m e Ta x ( i n s h o r t ' L d . P r . C CI T' ) , N . W. Region, C h an d i g a r h dated 3 0.9 . 2 0 1 5 d e n yi n g approval u n d e r s e c t i o n 10 ( 2 3 C ) ( vi ) o f t h e I n c o me Ta x A c t , 1 9 6 1 ( i n s h o r t ' t he A c t ') .
2. B r i e f l y s t a t ed t he a s s e s se e i s a S o c i e t y r e g i st e r ed w i t h t h e R e gi s tr a r o f S o c i et i e s o n 3 0 - 0 4 - 1 9 96, w i t h t h e f o l l o w i ng a i m s an d o b j e c ti v e s :
• T o p r e p ar e g o o d c i ti z e n s .
• T o P r o p ag ate V e g e tar i an i s m an d J a i n is m
• T o te ac h H i n d i, S an s k r i t, P r ak r i t a n d J ain i s m,
P u n jab i , E n g l is h .
• T o ed u c ate to t h e c h il d r e n ir r e s p e c ti v e o f
c as te o r c r e e d ac c o r d in g to th e i n s tr u c ti o n of e d u c at i o n D e p ar t me n t an d p r e p ar e th e m f o r P u b l ic E x a mi n a ti o n .
2
• To i mp ar t p h ys ic al , s o c i al an d mo r al
e d u c at i o n .
• T o wo r k f or th e we l f ar e o f h e s tu d e n ts an d to i n c u l c ate th e h ab i t o f s i mp l i c i ty a mo n g th e m.
3. V i d e a p p l i c a t i o n d a t e d 3 0 .9 . 2 0 14 , t h e a s se s s e e a p p l i e d fo r g r a nt o f e x e m p ti o n un d e r s e c ti o n 1 0 ( 2 3 C ) ( v i ) i n t h e a s se s s m e n t y e a r 2 0 14 - 1 5 . L e t t e r w a s i s s ue d t o t h e a s s e s s e e ca l l i n g f o r c e r t a i n i n fo r m a t i o n wh i c h w a s d u l y f u r n i s h e d. Th e r e a f t e r t he L d . Pr . C CI T h e l d t h at t h e a i m s a n d o b je c t i v es o f t h e a s s es s e e s o c i e t y r ev e a l ed t h a t t he s a m e w e r e n o t so l e l y f o r t h e p u rp o s e o f e d u c a t i on a n d t h a t it had o th e r o b j e c t i v es of propagating Jainism a nd V e g e t a r i an s a l s o . Th e L d . P r . C CI T h e l d t h a t f o r th e p u r p os e o f s e c t i o n 1 0 ( 2 3C ( v i ) t he i n st i t u ti o n s h o ul d e x i s t s o l e l y f o r t h e p u r p os e o f e d u c a t i o n w h i c h n o t b e i n g s a t i sf i e d i n the p r e s e n t ca s e t he a s s e s s e e w a s n ot e n t i t l ed f o r a p pr o v a l .
4. Aggrieved by the same, the ass e s s e e ha s now c o m e u p i n a p p ea l b e f o re u s . Du r i n g t h e c o u r se o f h e a ri n g b e f o r e u s t h e L d. c o u n s e l f o r th e a s s e s s e e a r gu ed t h a t t h e a s s e s s e e h ad b ee n i n e x i s t e nc e s o l e l y f o r t h e p u r p o s e o f i m p a r t i n g e d u c at i o n a n d e v i de n ce s i n t h i s r e ga r d h a d b e e n f i l e d b ef o r e t he L d . P r . CCI T a l s o. Th e L d . c o u ns e l f o r t h e a s s e s s e e d r e w o u r a t t e nt i o n to t h e f o l l o w i n g d o c u m e n ts w h i c h w e r e fi l e d b e f o r e t h e L d. P r . C CI T i n s u p po r t o f i t s a b o v e cl a i m a n d e n c l o se d i n t h e P a p e r B o o k f i l ed b e f o re us as follows:
1) C e r t i f i ca t e o f r e gi s t r a t i o n g r a nt e d t o t h e a s s e s se e s o c i e t y b y t h e Re g i s t r a r o f S o c i e ti e s , C h a n d i ga r h d a t e d 3 0 . 4 . 1 9 9 6.3
2) Th e a f f i l i a t i o n ce r t i f i c at e g r a n t ed b y t h e C e n t r al B o a r d o f S e c ond a r y E d uc a t i o n f o r S e c on d a r y Sc h o o l E x a m i n a t i o n a n d S e n i o r S e c o n d a r y S c h o o l E x a m i na t i o n f o r a p e r i o d o f t hr e e y e a r s w . e . f . 1 . 4 . 2 0 1 5 t o 3 1 . 3. 2 0 1 7 placed at Paper Book page Nos.2 to 4.
5. Th e L d . c o u n s e l f o r t h e a ss e s s e e p o i n t e d o ut t h a t it is evident f ro m the above two documents that the a s s e s s e e s o c i e t y h a d b e e n r e g i s te r e d f o r r u n n i ng o f s c h oo l b y t h e n a me o f A A R J a i n Mo d e l S c h o o l a nd t h us t h e o n l y objective of es t a b l i s h i n g the society was i m p a r t i ng e d u c a t i o n.
6. Th e L d . c o u ns e l f o r t h e as s e s s ee t h e r ea f t e r d r ew o u r a t t e nt i o n to :
• Th e M e m o r a n d um o f As s o c i at i o n o f t he s o ci e t y pl a c e d a t P a p e r B o o k pag e N o s . 5 t o 9 .
• Th e c o n s t i t u t i on o f t h e s c h o ol r u n b y t h e so c i e t y p l a c e d a t P a p e r B o o k p a g e N o s . 10 t o 2 5 an d • Th e p r o s p e c t u s of t h e sc h o o l r u n b y t h e s o c i e t y p l a c e d a t P a p e r B o o k pag e N o s . 2 6 t o 3 7.
7. Th e L d . c o u n s el f o r t h e a s s e s se e p o i n t e d o u t f ro m t h e a b o v e d o c um e n t s t h a t e v e n t h e a i m s a n d o b j e c t i v e s o f t h e s o c i e t y as me n t i o n e d i n th e M e m o r a n d um o f A s s o c i a t i o n w a s t o i m p a r t e du c a t i o n t o c h i l d re n i r r e s p e c ti v e of c a s t e o r c r e e d a n d a c c ord i n g t o t h e i n s tr u c t i o n s o f t he E d u c a t i o n D e p a r t m e nt . Th e L d . c o u n s e l f or t h e a s s e s s e e po i n t e d o ut t h a t t he s a me f i n d s me n t i o n i n t h e c o n s t i t u t i o n o f t h e s c h o o l a l s o. Th e L d . c o u n s e l f or t h e a s s e s s ee p o i n t e d out t h a t t h e m a n a gi n g c o m m i t t ee w as r e q u i r e d t o c on s i s t o f 1 6 t o 2 1 m e m b e r s w i t h t h e P r i n c i pa l o f t h e s c h o o l b e i n g e x - office m e mb e r , two r e p r e s ent a t i v e s of te a ch e r s , one r e p r e s e n ta t i v e o f p a r e n t s , o ne r ep r e s e n t a ti v e o f E d u c a t i o n 4 D e p a r t m e nt , o n e e d u c a t i o n i s t b y M . C . a n d o n e e du c a t i o n i st from a panel of 3 submitted by the M.C. Th e L d . c o u n s e l f o r t h e as s e s s ee d r e w o u r a t t e nt i o n t o pa g e N o. 2 o f t h e C o n s t i t u ti o n of the s o ci e t y pl a c e d at Pa p e r Book page N o s . 1 1 i n th i s re g a r d . Th e r e a f te r t h e L d . co u ns e l f o r t h e a s s e s s e e d r e w ou r a t t e n t i o n t o th e r u l e s a n d r e gu l a t i o n s o f A A R J a i n M o d e l S c h o o l r u n by t h e s o c i e t y at Pa p e r B o ok p a g e N o s . 1 3 a nd 1 4 a n d a l s o t o t h e c o n s t i t uti o n o f t h e m a n a g i n g b o d y o f t h e s c h o ol p l a c e d a t P a p er B o o k p ag e N o s . 1 5 to 2 1 . D r a w i n g o u r at te n t i o n to t h e p ro s p e c t u s o f t h e s c ho o l pl a c ed a t P a p e r B o ok p a g e s 2 6 t o 3 7 t h e L d. c o u n s e l f o r t he a s s e s s e e p oi n t e d o u t t h a t i t i s ev i d e n t t h a t t h e s o c i e t y w a s e s t a b l i s he d p ri m a r i l y fo r t h e p u r p o s e o f r u n n i n g o f s c h ool a n d t h u s i m p a rt i n g o f e d u c a t i o n. Th e L d . c o u n s e l f o r t h e a s s e s s e e a l s o d r e w o u r a t t e n ti o n t o t h e b a l a n c e s h e e t an d A u d i t R e p o r t o f t h e s c h o o l f o r t h e y e a r e n d i n g 3 1 . 3 . 20 13 p l a c ed a t P a pe r B o o k p a ge N os . 5 0 t o 69 a n d p o i n t ed o u t t h a t t h e s am e c l e a r l y re f l e c ted t h a t t h e a s s e s s e e w a s i n f a c t r un n i n g th e s c h o o l a n d i m p a r t i ng e d u c a t i o n. Th e L d . c o u ns e l f o r th e a s s e ss e e st a te d t h a t a l l t h e s e d o c u m e nt s w e r e f i l e d b e f o re t h e L d . P r . C CI T w h o h a d not even c o m me n t e d on the same while re je c t i n g the a p p l i c a t i o n f i l e d b y t h e a s s e ss e e. Th e L d . co u ns e l f o r t h e a s s e s s e e s t a t e d t h a t t he a b o ve d o c u m e nt s we r e a c l e ar p o i n t e r t o t h e f ac t t h a t t he a s s e ss e e s o c i et y w a s es t a b l i s h ed w i t h t he p r i m e o b j e c t i v e o f i m pa r t i n g e d u c a t i o n a n d wa s a c t u a l l y c o nd u c ti n g t h e s a i d a c t i v i t y a l s o , t h us e s t a b l i s h i ng t h e g e n u i n e n e s s o f i t s o b j e c ti v e s a l s o . Th e L d . co u n s e l f or 5 the a s s es s e e fu r t h e r wi s h e d to file c e r t ai n a d d i t i on a l documents b ef or e us to establish the fact t ha t it was a c t u a l l y en g a g e d o n l y i n t h e a c t i vi t y o f i m pa r t i n g e d u c a t i o n. Th e d o c u m e n t s w i s h e d t o be f i l ed b e f o re u s i n th e f o r m o f a d d i t i o n al e v i de nc e o n 1 8 .1 1 . 2 0 16 w e r e ;
i ) A u d i t e d b a l an ce s h e e t a n d Pr o f i t a n d Lo s s A cc ou n t o f t h e s c h o o l r u n b y t h e a s s es s e e s o c i e t y f or t h e y e a r e n d i n g 3 1. 3 . 2 0 15 a n d ;
i i ) t h e d e t a i l s o f t h e s t u d en t s s tud y i n g i n t h e s cho o l .
8. V i d e l et t e r d a t ed 2 0 . 1 1. 2 0 1 6 ad d r e s s e d t o t h e B e n c h t h e a s s e sse e f i l e d f o l l o w i n g a d d i t i o na l d o cum e n t s :
i) A c k n o w l e dg e m e nt o f r e t u r n o f I n co m e of the s o c i e t y f o r a s se ss m e n t y e ar 2 0 1 4- 1 5 .
ii) B a l a n c e s h e e t & I n co m e a nd E x pe n d i t u r e a c c o u nt o f t h e s c h o o l ru n b y t h e a s s es s e e s o c i e t y f o r f i n a n c i a l y e a r 2 01 3 - 1 4 .
9. Th e L d . c o u n s e l f o r t h e a s s e s s ee r e f e r r i n g t o t he a b o v e d o cu m e n ts e m p h a s i z e d t ha t i t w a s a m p l y c l e a r f r om t h e a b ov e t ha t t h e a s se s s e e s oc i e t y e x i s t e d o nl y f o r t he p u r p o s e o f i m p ar t i n g e d u c a ti o n a n d w a s , t h e r e f or e , e n t i t l ed t o a p p r o va l u n der s e c t i o n 1 0 ( 2 3C ) ( v i ) o f t h e A ct .
10. Th e r e a f t e r t h e Ld . c o u n s e l f o r t he a s s e s s e e s t a ted t h a t m e r e l y m e nt i o n i n g o n e o f th e o b j e c t i v e s o f t h e s o c i e t y a s p r o p a ga t i n g Ve g e t a r i a ni s m a nd J a i n i s m d i d n ot p r e c l u de the assessee fr o m grant of approval u n de r s e c t i on 1 0 ( 2 3 C ) ( vi ) o f t he A c t , m o r e p a r ti c u l a r l y i n t h e ab s e n c e o f a n y f i n di n g t ha t t h e a s se s s e e wa s i n d u l g i n g i n a n y s u c h a c t i v i t y o r i n th at m a t t er i n t h e ab s e n c e o f a ny f in d i n g th a t 6 it was i n d u l g i ng in any activity other than imparting e d u c a t i o n. I n s up p o r t of i t s c o n te n t i o n , L d . c o u ns e l f o r t he assessee r el i e d upon the de c i s i o n of th e Hon'ble J u r i s d i c ti o n a l Hi g h C o u rt i n t he c a s e of H a r f C h a r i t a b l e Tr u s t ( R e g d . ) V s. C CI T & An o t h er r e p o rt e d i n 1 26 D TR 7 3. Th e Ld. counsel for the a s s e ss e e also r e f e rr ed to the C i r c u l a r i s su e d b y t h e C B D T o u t l i n i n g t h e s c o p e o f e n q u i r y to be c o n d u c t ed while g r a n ti ng approval u n de r s e c t i on 1 0 ( 2 3 C ) ( vi ) o f t he A c t . R e f e r r i ng t o C i r c u l a r NO . 1 4 / 2 0 1 5 d a t e d 1 7. 8 . 2 0 15 t h e L d. c o un s e l f o r th e a s se s s ee d r e w o u r attention to p a ra s 1 . 1 t o 1 . . 3 o f t h e s a i d C i rc u l ar w h i c h i s r e p r o d u c ed h e r eu n d e r :
1.1 Clarification has been sought on the scope of enquiry that can be made by the prescribed authority while granting approval us 10(23C)(vi), i.e., whether it would be sufficient for the prescribed authority to consider the nature, existence for non-profit purposes and genuineness of the applicant institution or the conditions prescribed under various Provisos are also required to be considered at the stage of granting approval.
1.2 In this connection, attention is drawn to the decision of Hon'ble Supreme Court in case of American Hotel and Lodging Association Educational Institute vs. CBDT [301 1TR 86](2008) in which it has been held that at the time of granting approval u/s 10(23C)(vi), the prescribed authority is to be satisfied that the institution existed, during the relevant year solely for educational purposes and not for profit. Once the prescribed authority is satisfied about fulfillment of this criteria i.e. the threshold pre-
condition of actual existence of an educational institution under section 10(23C)(vi). it would not be justifiable, in denying approval on other grounds, especially where the compliance depends on events that have not taken place on the date on which the application for grant of approval has been made.
71.3 However, the prescribed, authority is eligible to grant approval u/s 10(23C)(vi), subject to such terms and conditions as deemed necessary including those falling within the framework of various Provisos to the said clause of section 10. It has also been clarified in the said judgment that the compliance of prescribed conditions can be gauged while monitoring the case and in. case of any breach thereof, the approval can be withdrawn, ft is, therefore, clarified, that the principle laid down by the Apex Court in American Hotels case (supra) must be followed while considering the applications filed seeking approval for exemption u/s 10(23C)(vi)."
11. Th e L d . c o u n s el f o r t h e a s s e s se e s t a t e d th a t e ve n a s p e r t he C B D T C i r c u l ar t h e o n l y c o n d i t i o n w h i ch n e e d s to b e s a t i s f i e d f or t h e p u r p o s e o f g r a n t i n g a p p r ov a l u n d e r s e c t i o n 1 0( 2 3 C ) ( v i ) o f t h e A c t , i s t h e a c t u al e x i s te n c e o f a n e d u c a t i o na l i n s ti t u t i o n . Th e r e f o re , e v e n b y t he s ta n d a r d o f t h e B o a r d i t s e l f t h e a s s e s se e wa s l i a b l e to b e g r a n t e d t he s a i d a p p ro v a l .
12. Th e Ld. D.R., on the other hand, filed hi s s u b m i s s i on s i n w r i t i n g w h i c h a re r e p r o d uc e d h ere u n d e r :
" The case is listed for hearing on
2. The assessee has raised various grounds of appeal, however, all pertain to only one issue i.e. the Ld Pr. CCIT erred in treating the educational institution as not existing solely for education purposes, Further, the Ld Pr CCIT ought to have considered whether the educational institute is working for the purpose of profit or not.
3. Facts of the case in brief is that the assessee made an application u/s 10(23C)(vi) of the Act for Asstt.Yr.2014-15. The Ld Pr CCIT did not grant approval on the ground that one of the aims and objective of the applicant is to' propagate vegetarianism and Jainism' and also to teach 'Jainism'. The Ld Pr CCIT, therefore, concluded that the applicant (assessee) is not existing solely for the purpose of education as provided u/s 10(23C)(vi) of the Act. 3.1 In this regard, it would be worthwhile to initially 8 go through section 10(23C)(vi) of the Act for better appreciation:
"Section 10 (23C): any income received by any person on behalf of--
vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or (via) ............................
Provided that 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) shall make an application in the prescnbed form68and manner to the presented authority69 for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) :
................................................."
3.2 A perusal of the bare section makes it amply clear that following conditions are to be fulfilled simultaneously by the assessee to avail the exemption provided under the said section:
• The university or other educational institution must exist solely for educational purposes It should not be for the purpose of profit The above requirements have been affirmed by the Hon'ble Supreme Court in the case of Queens Educational Society vs GIT 55 taxmann.com 255 (SC) wherein the Hon'ble Court has observed that:
"It will be noticed that the Section has three requirements - (a) the educational institution must exist solely for educational purposes (b) it should not be for purposes of profit and (c) the aggregate annual receipts of such institution should not exceed the amount or annual receipts as may be prescribed. Such prescription is to be found in Rule 2CA being an amount ofRs. 1 crore." [para 5] Although, the above observation is in reference to section 10(23C)(iiiad), the first two requirements are also present in section 10(23C)(vi) of the Act.
3.3 Further, in this regard, it would be worthwhile to revisit the decision of Hon'ble Supreme Court in the case of Orissa State Warehousing Corpn. (SC) 237 ITR 589 wherein the Hon'ble Court has observed that a fiscal statute is to be interpreted on the basis of the language used therein and 9 not de hors the same. The relevant of the judgment is extracted below:
"In fine thus, a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. No words ought to be added and only the language used ought to be considered so as to ascertain the proper meaning and intent of the legislation. The court is to ascribe the natural and ordinary meaning to the words used by the Legislature and the court ought not, under any circumstances, to substitute its own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions."
4. In the above background, the facts as present in the case of the assessee and the decision of the Ld Pr CCIT is discussed hereunder.
4.1 It is undisputed fact that one of the objectives of the assessee is "to propagate vegetarianism & Jainism" and "to teach Jainism" (refer page 5 of PB submitted by the assessee). Now the moot question that arises for consideration by the Hon'ble Bench is 'whether propagating vegetarianism & Jainism' would amount to 'educational purposes' or not.
4.2 The Hon'ble ITAT, Delhi had an occasion to examine the same issue i.e. whether the assessee exists solely for the educational purposes in reference to erstwhile section 10(22) of the Act in the case, of Centre for Womens Development vs DCIT 78 TTJ Delhi 744. The facts in this case was that besides educational activities the assessee was also engaged in other activities such as wasteland development, creches for working and ailing women's children, bibliography of violence against girl child etc. In this back ground the Hon'ble ITAT held that the assessee did not exist solely for the educational purposes, The relevant findings of the Hon'ble Court are extracted below:
4.3 "Turning to the case in hand, in the light of definition of educational institution and the scope of s. 10(22), given by the apex Court and the various High Courts in the aforesaid judgment, we find from a plain reading of the aims and objects of the assessee that most of its activities are related to promotion, development and dissemination of knowledge which may be termed as imparting education to the womenfolk. But for bringing the assessee within the ambit of provisions of s. 10(22) of the IT Act, it has to be positively established that assessee did exist solely for the educational purpose and none else.
..................................
10We have also carefully perused the various judgments referred to by the parties out of which some of them are quoted above and we find that in all these cases, in which the assessee was held to be entitled to exemption under s. 10(22), assessee was solely engaged in educational activities and if there are any ancillary activities, that activity is also directly related to the main activity of imparting education. Keeping in view the totality of the facts and circumstances of the case in the light of various judicial pronouncements, we are of the considered opinion that the assessee did not exist solely for educational purposes but was involved in multifarious activities though some of the activities are relatable to educational purpose. As such the assessee's case does not fall within the ambit of s. 10(22) and hence not entitled for exemption under the said section." [para 18] 4.3 In this regard it is important to mention here that the Hon'ble IT AT came to the above findings after considering and discussing the following judgments:
• Aditanar Educational Institution vs Addl GIT 224 ITR 310 (SC) • CIT vs Sorabjee N Parekh 201 ITR 939 (Guj) Educational Inst. Of American Hotel And Motel Association vs CIT 219 ITR 183 (AAR) 4.4 It is further important to mention here that the Hon'ble Supreme Court has held in the case of Queens Educational Society vs CIT 372 ITR 699 (SC) that:
"The provisions of Section 10(23C)(vi) of the Act are analogous to the erstwhile Section 10(22) of the Act, as, has been laid down by Hon'ble Supreme Court in the case of American Hotel and Lodging Association (supra)"
In view of the above, the findings of the Hon'ble ITAT in the case of Centre for Womens Development (supra) which is in reference to erstwhile section 10(22) is equally applicable to section 10(23C)(vi) of the Act.\
5. In view of the above, it is submitted that the Ld Pr CCIT has correctly rejected the application of the assessee since the assessee besides carrying out educational activities was also involved in multifarious activities not amounting to educational purposes. Therefore, the Ld Pr CCIT rightly concluded that the assessee has failed to meet one of the requirement of section 10(23C)(vi) that the educational institution exists solely for educational purposes. And therefore, the assessee is not covered by the provisions of section 10(23C)(vi) of the Act.
6. The above submission may please be taken on record." 11
13. Briefly put th e Ld. D.R. contended th a t u n d e n i a b l y , o n e o f t h e o b j e c t i ve s o f t h e a s s e ss e e s o c i e t y w a s t o p r o m o t e v e g e t a r i a n i s m a n d J a i n i s m a nd t o t e a ch J a i n i s m w hi c h w o u l d n o t am o un t t o e d u c at i o na l p u r p o s e. Th e L d . D . R . he a v i l y r e l i e d u po n o n th e d ec i si o n o f t h e I . T. A . T. D e l h i Be n c h i n t he c as e o f C e n tr e f or W o m e ns D e v e l o p m en t V s . D CI T 7 8 TTJ ( D e l h i ) 7 4 4 i n t hi s re g a r d .
14. We have heard the c o n t e n t i on s of both the p a r t i e s , p e ru s e d t h e o r d e r s o f a u t h o r i t i es b e l o w a n d g o n e t h r o u g h t h e d o cu m e n t s p l ac e d be f o r e u s . Th e on l y r e a s o n we find for d e ny i n g a p p r o v al t o t h e a s s e s s e e s oc i e t y u n d e r s e c t i o n ( 2 3 C ) ( v i ) o f t h e A c t , i s t ha t t h e a s s e s se e s o c i e t y h as o t h e r o b je c t i v es a l s o b e s i d e s i m p a r t i n g e d u c a ti o n a n d t he o t h e r o b j e c ti v e s p o i n t e d l y r ef e r r ed t o b y t h e L d . P r . C CI T a r e propagation of v e g e t a r i an i s m an d Jainism and teaching Jainism. Th e L d . P r . C CI T o n t h i s b a s i s h a s c o n cl u d e d t h a t t h e a s s e ss e e s oc i e t y d i d n o t e x i s t s o l el y f o r e d u c a t i o nal purpose.
15. Th e H o n ' b l e J u r i s d i c t i o n al H i g h C o u r t i n t h e c a se of Harf C h a r i ta b l e Tr u s t (Regd.) (supra) ha s while a d j u d i c a ti n g a n i d e n t i c a l i s s u e h el d t h a t th e a s se ss e e w o u l d n o t b e d i s e n t i t l ed f o r r e g i s t r at i o n m e r e l y b e c a u s e o n e o f t h e c l a u s e s i n i t s t ru s t d e e d p ro v i de d t h a t i t wo u l d c a r r y a l l o t h e r b u s i n es s e s a l s o . Th e H o n ' b l e H i g h C o u r t he l d t h a t i n t h e a b s e n c e o f a n y f i n d i n g t h at t h e a s s e s s e e wa s a c t u a l l y c a r r y i n g o n an y o t h e r b us i n e s s an d m e r e l y o n t he b a s i s o f r e a s o n i n g t h a t t h e t r u st h a d i n t e n t i o n t o c ar r y o u t t he 12 b u s i n e s s , a p pr o va l c o u l d n o t b e d e n i e d t o t h e t ru s t s i n c e i t w o u l d ta n t a m oun t t o g i v i ng a ve r y n a rr o w m e an i n g t o t h e section. Th e H on ' b l e H i g h C o ur t h e l d t ha t t h e p re d o m i n a n t o b j e c t te s t wa s to b e a p pl i e d w h i l e g r a n ti n g a pp ro v a l . Th e r e l e v a n t f i n di n g s o f t he H o n' b l e H i g h C ou r t at pa r a s 1 6 t o 1 8 o f t h e o r d e r ar e a s u n de r :
"It is not disputed that the school as such is also affiliated with the Central Board of Secondary Education, New Delhi and has also been granted registration under Section 12-A w.e.f. 15.07.1997. Merely because one of the clauses of the trust deed provided that the trust would carry on other business as decided by the trustees would not per se dis- entitle it from being considered for registration under Section 10(23C)(vi) of the Act. The reasoning that the Trust had intentions to carry out the business and the said institute was not existing solely for educational purposes would amount to giving a very narrow meaning to the section and the predominant object test was to be applied. As noticed above, it was not that respondent no. 1 came to the conclusion that the Trust was doing some other business and the said business was generating substantial amounts which would over ride the main objects of the trust which have been reproduced above which pertain mainly to the cause of education. Keeping in view the principles which have been discussed regarding the words 'solely for educational purposes and of generating profit', we are of the opinion that in the absence of any such finding that the trust was doing business, the application could not have been rejected only on this ground that one of the clauses in the objects „ .provided such right to the trust. The prescribed authority could have made it conditional by holding that if any such business is carried out, the registration granted is liable to be cancelled. The principles laid down by the Apex Court in American Hotel and Lodging Association's case (supra) can thus be also applied in the circumstances. The said principles read thus:-
"33. Having analysed the provisos to Section 10 (23C)(vi) one finds that there is a difference between stipulation of conditions and compliance thereof 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 standardized form in terms of the first proviso. It is only if the pre-requisite condition of actual existence of the educational institution is fulfilled that the question of compliance of requirements in the provisos would arise. We find merit in the contention advanced on behalf of the appellant that the third proviso contains monitoring conditions/requirements like application, accumulation, 13 deployment of income in specified assets whose compliance depends on events that have not taken place on the date of the application for initial approval.
34. To make the section with the proviso workable we are of the view that the Monitoring Conditions in the third proviso like application/utilization 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 subject to such terms and conditions as it deems fit provided they are not in conflict with the provisions of the 1961 Act (including the abovementioned monitoring conditions). While imposing stipulations subject to which approval is granted, the PA may insist on certain percentage of accounting Income to be utilized/applied for imparting education in India. While making such stipulations, the PA has to examine the activities in India which the applicant has undertaken in its Constitution, MoUs. 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 for the first time. The PA must give an opportunity to the applicant-institute to comply with the monitoring conditions which have been stipulated for the first time by the third proviso. Therefore, cases where earlier the applicant has obtained exemption(s), as in this case, need not be reopened on the ground that the third proviso has not been complied with. However, after grant of approval, if it is brought to the notice of the PA that conditions on which approval was given are breached or that 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."
28. Accordingly, we are of the view that the impugned order cannot be justified solely on the ground that in view of a clause which provided that the Trust could run a business, it would be debarred as such from registration on the ground that it was not existing solely for educational purposes. That 14 merely a conferment of power to do business would not debar the right for consideration to the trust without any finding being recorded that the predominant object of the Trust was to do business. Thus, respondent no. 1 misdirected itself by rejecting the application on this ground without coming to any conclusion that the trust was carrying on any other activity as per clause (i). It is also a matter of fact, as noticed, now that the trust has already also deleted the objectionable clause and which has also been noticed in the subsequent assessment made in the assessment order dated 21.12.2012 for the year 2010-11"
16. W e f i n d t h a t e v en C B D T h a s a f f i r m e d t h i s v i e w i n i t s C i rc u l a r N o .1 4 / 2 0 1 5 d a t e d 1 7 . 8 . 2 0 1 5, b y st a t i n g t h a t t h e a c t u a l e x i s te n c e o f t h e ed uc a t i o n a l i n s t i t uti o n i s t h e t h r e s h o l d p re c o nd i t i o n w h i c h i s t o b e l o o k e d i n to o n l y f o r granting a pp r o va l and the as s e s s e e c a nn o t be denied a p p r o v a l on g r o un d s t h e e v en t s r e l a t i n g t o w h i ch h a v e n ot t a k e n pl a c e o n t h e d a y o n w h i ch a p p l i c a t i o n f or a p p r ov al has been made.
17. I n t h e b a c k dr o p o f t h e a b o v e, w e f i n d t h a t i n t h e p r e s e n t ca s e t h e L d . P r . CCI T h a s n o t g i ve n a n y f i n d i n g on t h e v o l u m i n ou s d o c u m e n t s p ro du c e d b e f o r e i t to e s t a b l i sh the g e nu i n e n e ss of th e a ct i v i t y of i m p a r ti n g e d u c a ti o n c a r r i e d o ut b y t he a s s e s s e e. Th i s u n d e n i a b l y i s a n e s s e n t i a l p r e - r e q u i s i t e f o r g r a n t o f a p p r ov a l a b o u t w h i ch t h e L d .
P r . C CI T h a s t o b e s a t i s f i e d w i th . I n f a c t , t h e L d . P r . C CI T h a s d e n i e d a p p ro v a l m e r e l y f o r th e r e a s o n t h a t th e o b j e c ts i n c l u d e o t h e r a c ti v i t i e s b e s i de s i m p a r t i n g e d u ca t i o n w i t ho ut g i v i n g a n y f i n d i n g w h e t h e r s u c h a c t i v i t i e s w e r e c a r r i e d o ut or not. W e , t h er e f o r e , c o n s i de r i t f i t t o r e st o r e t h e m a t te r b a c k t o t h e f i l e o f t h e L d . P r . C CI T t o e x a m i n e a l l t h e e v i d e n c e s f i l e d by t h e a s s e ss e e an d p a s s a s p ea k i n g o r d e r i n 15 the l i g ht of the p a r a m e te r s laid down by th e H o n ' b le J u r i s d i c ti o n a l Hi g h C o u rt i n t he c a s e of H a r f C h a r i t a b l e Tr u s t ( R e g d . ) ( su p r a ) a n d t h e C B D T C i r c u l a r r e f e r r e d t o above, f or g r a nt i n g a p p ro v a l un d e r s e c ti o n 10 ( 2 3 C ) ( vi ) .
N e e d l e s s t o a dd t h e a s s e ss e e b e g r a n t e d du e o p po r t u n i t y o f h e a r i n g a n d i s f re e t o a d d u c e a l l e v i d e n c e s i t w i s he s t o r e l y u p o n i n su p p o r t o f i t s co n t e n ti o ns .
18. I n v i e w o f t h e a bo v e , t h e a p p ea l of t h e a s s e s s ee i s a l l o w e d f o r s ta t i s t i c a l p ur p o s e s.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 18 t h August, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh