Acharya Atma Ram Jain Model School, Mohali V. Pr. Chief Commissioner of Income Tax, Chandigarh

ITA 849/CHANDI/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6944 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 11-04-2016
• Assessment Year: 2014-2015
• Appeal Filed On: 23-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Charitable institution; Additional evidence
• Section: 10

Judgement Text

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 . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER PASSED BY THE LEARNED PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (IN SHORT LD.PR.CCIT), N.W. REGION, CHANDIGARH DATED 30.9.2015 DENYING APPROVAL UNDER SECTION 10(23C)(VI) OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT). 2. BRIEFLY STATED THE ASSESSEE IS A SOCIETY REGIST ERED WITH THE REGISTRAR OF SOCIETIES ON 30-04-1996, WITH THE FOLLOWING AIMS AND OBJECTIVES: TO PREPARE GOOD CITIZENS. TO PROPAGATE VEGETARIANISM AND JAINISM TO TEACH HINDI, SANSKRIT, PRAKRIT AND JAINISM, PUNJABI, ENGLISH. TO EDUCATE TO THE CHILDREN IRRESPECTIVE OF CASTE OR CREED ACCORDING TO THE INSTRUCTION OF EDUCATION DEPARTMENT AND PREPARE THEM FOR PUBLIC EXAMINATION. 2 TO IMPART PHYSICAL, SOCIAL AND MORAL EDUCATION. TO WORK FOR THE WELFARE OF HE STUDENTS AND TO INCULCATE THE HABIT OF SIMPLICITY AMONG THEM. 3. VIDE APPLICATION DATED 30.9.2014, THE ASSESSEE APPLIED FOR GRANT OF EXEMPTION UNDER SECTION 10(23C )(VI) IN THE ASSESSMENT YEAR 2014-15. LETTER WAS ISSUED TO THE ASSESSEE CALLING FOR CERTAIN INFORMATION WHICH WAS DULY FURNISHED. THEREAFTER THE LD. PR.CCIT HELD THAT TH E AIMS AND OBJECTIVES OF THE ASSESSEE SOCIETY REVEALED THA T THE SAME WERE NOT SOLELY FOR THE PURPOSE OF EDUCATION A ND THAT IT HAD OTHER OBJECTIVES OF PROPAGATING JAINISM AND VEGETARIANS ALSO. THE LD. PR.CCIT HELD THAT FOR TH E PURPOSE OF SECTION 10(23C(VI) THE INSTITUTION SHOULD EXIST SOLELY FOR THE PURPOSE OF EDUCATION WHICH NOT BEING SATISFIED IN THE PRESENT CASE THE ASSESSEE WAS NOT ENTITLED FOR APP ROVAL. 4. AGGRIEVED BY THE SAME, THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE ARGUED T HAT THE ASSESSEE HAD BEEN IN EXISTENCE SOLELY FOR THE PURPO SE OF IMPARTING EDUCATION AND EVIDENCES IN THIS REGARD HA D BEEN FILED BEFORE THE LD. PR.CCIT ALSO. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING DOCUME NTS WHICH WERE FILED BEFORE THE LD. PR.CCIT IN SUPPORT OF ITS ABOVE CLAIM AND ENCLOSED IN THE PAPER BOOK FILED BE FORE US AS FOLLOWS: 1) CERTIFICATE OF REGISTRATION GRANTED TO THE ASSES SEE SOCIETY BY THE REGISTRAR OF SOCIETIES, CHANDIGARH D ATED 30.4.1996. 3 2) THE AFFILIATION CERTIFICATE GRANTED BY THE CENTR AL BOARD OF SECONDARY EDUCATION FOR SECONDARY SCHOOL EXAMINATION AND SENIOR SECONDARY SCHOOL EXAMINATION FOR A PERIOD OF THREE YEARS W.E.F. 1.4.2015 TO 31.3 .2017 PLACED AT PAPER BOOK PAGE NOS.2 TO 4. 5. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT IT IS EVIDENT FROM THE ABOVE TWO DOCUMENTS THAT THE ASSESSEE SOCIETY HAD BEEN REGISTERED FOR RUNNING OF SCHOOL BY THE NAME OF AAR JAIN MODEL SCHOOL AND THUS THE O NLY OBJECTIVE OF ESTABLISHING THE SOCIETY WAS IMPARTING EDUCATION. 6. THE LD. COUNSEL FOR THE ASSESSEE THEREAFTER DRE W OUR ATTENTION TO: THE MEMORANDUM OF ASSOCIATION OF THE SOCIETY PLACED AT PAPER BOOK PAGE NOS.5 TO 9. THE CONSTITUTION OF THE SCHOOL RUN BY THE SOCIETY PLACED AT PAPER BOOK PAGE NOS.10 TO 25 AND THE PROSPECTUS OF THE SCHOOL RUN BY THE SOCIETY PLA CED AT PAPER BOOK PAGE NOS.26 TO 37. 7. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT FR OM THE ABOVE DOCUMENTS THAT EVEN THE AIMS AND OBJECTIV ES OF THE SOCIETY AS MENTIONED IN THE MEMORANDUM OF ASSOC IATION WAS TO IMPART EDUCATION TO CHILDREN IRRESPECTIVE OF CASTE OR CREED AND ACCORDING TO THE INSTRUCTIONS OF THE EDUC ATION DEPARTMENT. THE LD. COUNSEL FOR THE ASSESSEE POINT ED OUT THAT THE SAME FINDS MENTION IN THE CONSTITUTION OF THE SCHOOL ALSO. THE LD. COUNSEL FOR THE ASSESSEE POIN TED OUT THAT THE MANAGING COMMITTEE WAS REQUIRED TO CONSIST OF 16 TO 21 MEMBERS WITH THE PRINCIPAL OF THE SCHOOL BEIN G EX- OFFICE MEMBER, TWO REPRESENTATIVES OF TEACHERS, ONE REPRESENTATIVE OF PARENTS, ONE REPRESENTATIVE OF ED UCATION 4 DEPARTMENT, ONE EDUCATIONIST BY M.C. AND ONE EDUCAT IONIST FROM A PANEL OF 3 SUBMITTED BY THE M.C. THE LD. CO UNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE NO.2 OF THE CONSTITUTION OF THE SOCIETY PLACED AT PAPER BOOK PA GE NOS.11 IN THIS REGARD. THEREAFTER THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE RULES AND REGULA TIONS OF AAR JAIN MODEL SCHOOL RUN BY THE SOCIETY AT PAPER B OOK PAGE NOS.13 AND 14 AND ALSO TO THE CONSTITUTION OF THE MANAGING BODY OF THE SCHOOL PLACED AT PAPER BOOK PA GE NOS.15 TO 21. DRAWING OUR ATTENTION TO THE PROSPEC TUS OF THE SCHOOL PLACED AT PAPER BOOK PAGES 26 TO 37 THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IT IS EVI DENT THAT THE SOCIETY WAS ESTABLISHED PRIMARILY FOR THE PURP OSE OF RUNNING OF SCHOOL AND THUS IMPARTING OF EDUCATION. THE LD. COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE BALANCE SHEET AND AUDIT REPORT OF THE SCHOOL FOR TH E YEAR ENDING 31.3.2013 PLACED AT PAPER BOOK PAGE NOS.50 T O 69 AND POINTED OUT THAT THE SAME CLEARLY REFLECTED THA T THE ASSESSEE WAS IN FACT RUNNING THE SCHOOL AND IMPARTI NG EDUCATION. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT ALL THESE DOCUMENTS WERE FILED BEFORE THE LD. PR.CCIT W HO HAD NOT EVEN COMMENTED ON THE SAME WHILE REJECTING THE APPLICATION FILED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ABOVE DOCUMENTS WERE A CLE AR POINTER TO THE FACT THAT THE ASSESSEE SOCIETY WAS E STABLISHED WITH THE PRIME OBJECTIVE OF IMPARTING EDUCATION AND WAS ACTUALLY CONDUCTING THE SAID ACTIVITY ALSO, THUS ES TABLISHING THE GENUINENESS OF ITS OBJECTIVES ALSO. THE LD. CO UNSEL FOR 5 THE ASSESSEE FURTHER WISHED TO FILE CERTAIN ADDITIO NAL DOCUMENTS BEFORE US TO ESTABLISH THE FACT THAT IT W AS ACTUALLY ENGAGED ONLY IN THE ACTIVITY OF IMPARTING EDUCATION. THE DOCUMENTS WISHED TO BE FILED BEFORE US IN THE F ORM OF ADDITIONAL EVIDENCE ON 18.11.2016 WERE; I)AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE SCHOOL RUN BY THE ASSESSEE SOCIETY FOR THE YEAR ENDING 31.3.2015 AND; II) THE DETAILS OF THE STUDENTS STUDYING IN THE S CHOOL. 8. VIDE LETTER DATED 20.11.2016 ADDRESSED TO THE BENCH THE ASSESSEE FILED FOLLOWING ADDITIONAL DOCUM ENTS: I) ACKNOWLEDGEMENT OF RETURN OF INCOME OF THE SOCIETY FOR ASSESSMENT YEAR 2014-15. II) BALANCE SHEET & INCOME AND EXPENDITURE ACCOUNT OF THE SCHOOL RUN BY THE ASSESSEE SOCIETY FOR FINANCIAL YEAR 2013-14. 9. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO T HE ABOVE DOCUMENTS EMPHASIZED THAT IT WAS AMPLY CLEAR FROM THE ABOVE THAT THE ASSESSEE SOCIETY EXISTED ONLY FO R THE PURPOSE OF IMPARTING EDUCATION AND WAS, THEREFORE, ENTITLED TO APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT. 10. THEREAFTER THE LD. COUNSEL FOR THE ASSESSEE ST ATED THAT MERELY MENTIONING ONE OF THE OBJECTIVES OF THE SOCIETY AS PROPAGATING VEGETARIANISM AND JAINISM DID NOT PR ECLUDE THE ASSESSEE FROM GRANT OF APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT, MORE PARTICULARLY IN THE AB SENCE OF ANY FINDING THAT THE ASSESSEE WAS INDULGING IN ANY SUCH ACTIVITY OR IN THAT MATTER IN THE ABSENCE OF ANY FI NDING THAT 6 IT WAS INDULGING IN ANY ACTIVITY OTHER THAN IMPARTI NG EDUCATION. IN SUPPORT OF ITS CONTENTION, LD. COUNSE L FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HARF CHARI TABLE TRUST (REGD.) VS. CCIT & ANOTHER REPORTED IN 126 DT R 73. THE LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO T HE CIRCULAR ISSUED BY THE CBDT OUTLINING THE SCOPE OF ENQUIRY TO BE CONDUCTED WHILE GRANTING APPROVAL UNDER SECTI ON 10(23C)(VI) OF THE ACT. REFERRING TO CIRCULAR NO.1 4/2015 DATED 17.8.2015 THE LD. COUNSEL FOR THE ASSESSEE DR EW OUR ATTENTION TO PARAS 1.1 TO 1..3 OF THE SAID CIRCULA R WHICH IS REPRODUCED HEREUNDER: 1.1 CLARIFICATION HAS BEEN SOUGHT ON THE SCOPE OF EN QUIRY THAT CAN BE MADE BY THE PRESCRIBED AUTHORITY WHILE GRANT ING 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 ALS O REQUIRED TO BE CONSIDERED AT THE STAGE OF GRANTING APPROVAL. 1.2 IN THIS CONNECTION, ATTENTION IS DRAWN TO THE DEC ISION 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 TIM E OF GRANTING APPROVAL U/S 10(23C)(VI), THE PRESCRIBED AUTHORITY IS TO BE SATISFIED THAT THE INSTITUTION EXIS TED, DURING THE RELEVANT YEAR SOLELY FOR EDUCATIONAL PURPOS ES AND NOT FOR PROFIT. ONCE THE PRESCRIBED AUTHORITY IS S ATISFIED ABOUT FULFILLMENT OF THIS CRITERIA I.E. THE THRESHOLD P RE- CONDITION OF ACTUAL EXISTENCE OF AN EDUCATIONAL INSTITU TION UNDER SECTION 10(23C)(VI). IT WOULD NOT BE JUSTIFIABL E, IN DENYING APPROVAL ON OTHER GROUNDS, ESPECIALLY WHERE T HE COMPLIANCE DEPENDS ON EVENTS THAT HAVE NOT TAKEN PL ACE ON THE DATE ON WHICH THE APPLICATION FOR GRANT OF APPROVAL HAS BEEN MADE. 7 1.3 HOWEVER, THE PRESCRIBED, AUTHORITY IS ELIGIBLE TO GR ANT APPROVAL U/S 10(23C)(VI), SUBJECT TO SUCH TERMS AND CONDITIONS AS DEEMED NECESSARY INCLUDING THOSE FALLIN G WITHIN THE FRAMEWORK OF VARIOUS PROVISOS TO THE SAID CLAUSE OF SECTION 10. IT HAS ALSO BEEN CLARIFIED IN T HE SAID JUDGMENT THAT THE COMPLIANCE OF PRESCRIBED CONDITION S CAN BE GAUGED WHILE MONITORING THE CASE AND IN. CASE OF ANY BREACH THEREOF, THE APPROVAL CAN BE WITHDRAWN, FT I S, THEREFORE, CLARIFIED, THAT THE PRINCIPLE LAID DOWN BY T HE 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. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT E VEN AS PER THE CBDT CIRCULAR THE ONLY CONDITION WHICH N EEDS TO BE SATISFIED FOR THE PURPOSE OF GRANTING APPROVAL U NDER SECTION 10(23C)(VI) OF THE ACT, IS THE ACTUAL EXIST ENCE OF AN EDUCATIONAL INSTITUTION. THEREFORE, EVEN BY THE ST ANDARD OF THE BOARD ITSELF THE ASSESSEE WAS LIABLE TO BE GRAN TED THE SAID APPROVAL. 12. THE LD. D.R., ON THE OTHER HAND, FILED HIS SUBMISSIONS IN WRITING WHICH ARE REPRODUCED HEREUND ER: 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 P R. CCIT ERRED IN TREATING THE EDUCATIONAL INSTITUTION AS NO T EXISTING SOLELY FOR EDUCATION PURPOSES, FURTHER, THE LD PR C CIT OUGHT TO HAVE CONSIDERED WHETHER THE EDUCATIONAL INST ITUTE 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 APPR OVAL ON THE GROUND THAT ONE OF THE AIMS AND OBJECTIVE OF THE AP PLICANT 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 O N BEHALF OF VI) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUT ION 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 AUT HORITY; OR (VIA) . PROVIDED THAT THE FUND OR TRUST OR INSTITUTION OR ANY UNIVE RSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERRED TO IN SUB-CLAUSE (IV) OR SUB-CLAU SE (V) OR SUB- CLAUSE (VI) OR SUB-CLAUSE (VIA) SHALL MAKE AN APPLICA TION IN THE PRESCNBED FORM 68 AND MANNER TO THE PRESENTED AUTHORITY 69 FOR THE PURPOSE OF GRANT OF THE EXEMPTION, OR CONTINUANC E THEREOF, UNDER SUB-CLAUSE (IV) OR SUB-CLAUSE (V) OR SUB-CLAUSE (V I) 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 SA ID SECTION: THE UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION MUST EXIST SOLELY FOR EDUCATIONAL PURPOSES IT SHOULD NOT B E FOR THE PURPOSE OF PROFIT THE ABOVE REQUIREMENTS HAVE B EEN AFFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE O F 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 REQUI REMENTS - (A) THE EDUCATIONAL INSTITUTION MUST EXIST SOLELY FOR EDUC ATIONAL PURPOSES (B) IT SHOULD NOT BE FOR PURPOSES OF PROFIT AND (C) THE AGGREGATE ANNUAL RECEIPTS OF SUCH INSTITUTION SH OULD NOT EXCEED THE AMOUNT OR ANNUAL RECEIPTS AS MAY BE PRES CRIBED. 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 S ECTION 10(23C)(IIIAD), THE FIRST TWO REQUIREMENTS ARE ALSO PRES ENT 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 WHE REIN THE HON'BLE COURT HAS OBSERVED THAT A FISCAL STATUT E IS TO BE INTERPRETED ON THE BASIS OF THE LANGUAGE USED TH EREIN 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 INTER PRETED ON THE BASIS OF THE LANGUAGE USED THEREIN AND NOT D E 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 LEGI SLATION. THE COURT IS TO ASCRIBE THE NATURAL AND ORDINARY ME ANING 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 PRES ENT 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' A ND '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 PROPAG ATING VEGETARIANISM & JAINISM' WOULD AMOUNT TO 'EDUCATION AL PURPOSES' OR NOT. 4.2 THE HON'BLE ITAT, DELHI HAD AN OCCASION TO EXAMINE THE SAME ISSUE I.E. WHETHER THE ASSESSEE EXISTS SOL ELY FOR THE EDUCATIONAL PURPOSES IN REFERENCE TO ERSTWHILE S ECTION 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 AS SESSEE WAS ALSO ENGAGED IN OTHER ACTIVITIES SUCH AS WASTEL AND DEVELOPMENT, CRECHES FOR WORKING AND AILING WOMEN'S CHILDREN, BIBLIOGRAPHY OF VIOLENCE AGAINST GIRL CHIL D ETC. IN THIS BACK GROUND THE HON'BLE ITAT HELD THAT THE ASS ESSEE DID NOT EXIST SOLELY FOR THE EDUCATIONAL PURPOSES, THE R ELEVANT FINDINGS OF THE HON'BLE COURT ARE EXTRACTED BELOW: 4.3 'TURNING TO THE CASE IN HAND, IN THE LIGHT OF DEFINI TION OF EDUCATIONAL INSTITUTION AND THE SCOPE OF S. 10(22), G IVEN BY THE APEX COURT AND THE VARIOUS HIGH COURTS IN THE A FORESAID JUDGMENT, WE FIND FROM A PLAIN READING OF THE AIMS AN D 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 AM BIT OF PROVISIONS OF S. 10(22) OF THE IT ACT, IT HAS TO BE P OSITIVELY ESTABLISHED THAT ASSESSEE DID EXIST SOLELY FOR THE ED UCATIONAL PURPOSE AND NONE ELSE. . 10 WE 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 UN DER S. 10(22), ASSESSEE WAS SOLELY ENGAGED IN EDUCATIONAL A CTIVITIES AND IF THERE ARE ANY ANCILLARY ACTIVITIES, THAT ACTIVIT Y IS ALSO DIRECTLY RELATED TO THE MAIN ACTIVITY OF IMPARTING EDUCAT ION. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE CASE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEM ENTS, 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 ASSES SEE'S CASE DOES NOT FALL WITHIN THE AMBIT OF S. 10(22) AND HE NCE NOT ENTITLED FOR EXEMPTION UNDER THE SAID SECTION.' [PARA 18] 4.3 IN THIS REGARD IT IS IMPORTANT TO MENTION HERE TH AT THE HON'BLE IT AT CAME TO THE ABOVE FINDINGS AFTER CONSI DERING AND DISCUSSING THE FOLLOWING JUDGMENTS: ADITANAR EDUCATIONAL INSTITUTION VS ADDL GIT 224 IT R 310 (SC) CIT VS SORABJEE N PAREKH 201 ITR 939 (GUJ) EDUCATIO NAL 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 EDUCAT IONAL SOCIETY VS CIT 372 ITR 699 (SC) THAT: 'THE PROVISIONS OF SECTION 10(23C)(VI) OF THE ACT AR E 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 IT AT IN THE CASE OF CENTRE FOR WOMENS DEVELOPMENT (SUPRA) WHICH IS IN REFERENCE TO ERSTWHILE SECTION 10(22) IS EQUALLY APP LICABLE 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 ASSES SEE SINCE THE ASSESSEE BESIDES CARRYING OUT EDUCATIONAL ACTIVIT IES WAS ALSO INVOLVED IN MULTIFARIOUS ACTIVITIES NOT AMOUNTI NG TO EDUCATIONAL PURPOSES. THEREFORE, THE LD PR CCIT RIGHTLY CONCLUDED THAT THE ASSESSEE HAS FAILED TO MEET ONE O F THE REQUIREMENT OF SECTION 10(23C)(VI) THAT THE EDUCATI ONAL INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES. AND THEREFORE, THE ASSESSEE IS NOT COVERED BY THE PROVIS IONS OF SECTION 10(23C)(VI) OF THE ACT. 6. THE ABOVE SUBMISSION MAY PLEASE BE TAKEN ON RECORD. 11 13. BRIEFLY PUT THE LD. D.R. CONTENDED THAT UNDENIABLY, ONE OF THE OBJECTIVES OF THE ASSESSEE S OCIETY WAS TO PROMOTE VEGETARIANISM AND JAINISM AND TO TEA CH JAINISM WHICH WOULD NOT AMOUNT TO EDUCATIONAL PURPO SE. THE LD. D.R. HEAVILY RELIED UPON ON THE DECISION OF THE I.T.A.T. DELHI BENCH IN THE CASE OF CENTRE FOR WOME NS DEVELOPMENT VS. DCIT 78 TTJ (DELHI) 744 IN THIS REG ARD. 14. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES, PERUSED THE ORDERS OF AUTHORITIES BELOW AN D GONE THROUGH THE DOCUMENTS PLACED BEFORE US. THE ONLY R EASON WE FIND FOR DENYING APPROVAL TO THE ASSESSEE SOCIE TY UNDER SECTION (23C)(VI) OF THE ACT, IS THAT THE ASSESSEE SOCIETY HAS OTHER OBJECTIVES ALSO BESIDES IMPARTING EDUCATION A ND THE OTHER OBJECTIVES POINTEDLY REFERRED TO BY THE LD. P R.CCIT ARE PROPAGATION OF VEGETARIANISM AND JAINISM AND TEACHI NG JAINISM. THE LD. PR.CCIT ON THIS BASIS HAS CONCLUD ED THAT THE ASSESSEE SOCIETY DID NOT EXIST SOLELY FOR EDUCA TIONAL PURPOSE. 15. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF HARF CHARITABLE TRUST (REGD.) (SUPRA) HAS WHILE ADJUDICATING AN IDENTICAL ISSUE HELD THAT THE ASSES SEE WOULD NOT BE DISENTITLED FOR REGISTRATION MERELY BECAUSE ONE OF THE CLAUSES IN ITS TRUST DEED PROVIDED THAT IT WOULD CA RRY ALL OTHER BUSINESSES ALSO. THE HON'BLE HIGH COURT HELD THAT IN THE ABSENCE OF ANY FINDING THAT THE ASSESSEE WAS AC TUALLY CARRYING ON ANY OTHER BUSINESS AND MERELY ON THE BA SIS OF REASONING THAT THE TRUST HAD INTENTION TO CARRY OUT THE 12 BUSINESS, APPROVAL COULD NOT BE DENIED TO THE TRUST SINCE IT WOULD TANTAMOUNT TO GIVING A VERY NARROW MEANING TO THE SECTION. THE HON'BLE HIGH COURT HELD THAT THE PRED OMINANT OBJECT TEST WAS TO BE APPLIED WHILE GRANTING APPROV AL. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT AT PARA S 16 TO 18 OF THE ORDER ARE AS UNDER: IT IS NOT DISPUTED THAT THE SCHOOL AS SUCH IS ALSO A FFILIATED WITH THE CENTRAL BOARD OF SECONDARY EDUCATION, NEW DE LHI 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 OT HER BUSINESS AS DECIDED BY THE TRUSTEES WOULD NOT PER SE DIS- ENTITLE IT FROM BEING CONSIDERED FOR REGISTRATION UNDE R SECTION 10(23C)(VI) OF THE ACT. THE REASONING THAT THE TRUST H AD INTENTIONS TO CARRY OUT THE BUSINESS AND THE SAID I NSTITUTE WAS NOT EXISTING SOLELY FOR EDUCATIONAL PURPOSES WOULD AMOU NT TO GIVING A VERY NARROW MEANING TO THE SECTION AND THE PREDOMINANT OBJECT TEST WAS TO BE APPLIED. AS NOTICED AB OVE, IT WAS NOT THAT RESPONDENT NO. 1 CAME TO THE CONCLUSION THAT THE TRUST WAS DOING SOME OTHER BUSINESS AND THE SAID BU SINESS WAS GENERATING SUBSTANTIAL AMOUNTS WHICH WOULD OVER RI DE THE MAIN OBJECTS OF THE TRUST WHICH HAVE BEEN REPRO DUCED ABOVE WHICH PERTAIN MAINLY TO THE CAUSE OF EDUCATION. K EEPING IN VIEW THE PRINCIPLES WHICH HAVE BEEN DISCUSSED REG ARDING THE WORDS 'SOLELY FOR EDUCATIONAL PURPOSES AND OF GEN ERATING PROFIT', WE ARE OF THE OPINION THAT IN THE ABSENCE O F ANY SUCH FINDING THAT THE TRUST WAS DOING BUSINESS, THE APPLI CATION 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 CONDITION AL BY HOLDING THAT IF ANY SUCH BUSINESS IS CARRIED OUT, THE REGISTRATION GRANTED IS LIABLE TO BE CANCELLED. THE PRIN CIPLES LAID DOWN BY THE APEX COURT IN AMERICAN HOTEL AND LO DGING 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 STIPULA TION OF CONDITIONS AND COMPLIANCE THEREOF THE THRESHOLD CONDITIONS ARE ACTUAL EXISTENCE OF AN EDUCATIONAL INSTITUTION AND APPROVAL OF THE PRESCRIBED AUTHORITY F OR 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 O F COMPLIANCE OF REQUIREMENTS IN THE PROVISOS WOULD ARIS E. WE FIND MERIT IN THE CONTENTION ADVANCED ON BEHALF O F THE APPELLANT THAT THE THIRD PROVISO CONTAINS MONITORING CONDITIONS/REQUIREMENTS LIKE APPLICATION, ACCUMULATI ON, 13 DEPLOYMENT OF INCOME IN SPECIFIED ASSETS WHOSE COMPLIANCE DEPENDS ON EVENTS THAT HAVE NOT TAKEN PLA CE 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 T HE THIRD PROVISO LIKE APPLICATION/UTILIZATION OF INCOME, PATT ERN 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 PRESE NT 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 IN TO FORCE, THE PA CAN GRANT APPROVAL SUBJECT TO SUCH TERM S AND CONDITIONS AS IT DEEMS FIT PROVIDED THEY ARE NOT IN CONFLICT WITH THE PROVISIONS OF THE 1961 ACT (INCLUDIN G THE ABOVEMENTIONED MONITORING CONDITIONS). WHILE IMPOSING STIPULATIONS SUBJECT TO WHICH APPROVAL IS GRANTED, TH E PA MAY INSIST ON CERTAIN PERCENTAGE OF ACCOUNTING INCOM E 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 AR E - 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 FI T IN CASE WHERE THE INSTITUTE APPLIES FOR INITIAL APPROVAL FO R 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 EARLIE R THE APPLICANT HAS OBTAINED EXEMPTION(S), AS IN THIS CASE, NEED NOT BE REOPENED ON THE GROUND THAT THE THIRD PROVIS O HAS NOT BEEN COMPLIED WITH. HOWEVER, AFTER GRANT OF APPROVAL, IF IT IS BROUGHT TO THE NOTICE OF THE PA TH AT CONDITIONS ON WHICH APPROVAL WAS GIVEN ARE BREACHED OR THAT CIRCUMSTANCES MENTIONED IN THE THIRTEENTH PROV ISO 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 MA Y BE GRANTED FINDS SUPPORT FROM SUB-CLAUSE (II)(B) IN T HE 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 BUS INESS, IT WOULD BE DEBARRED AS SUCH FROM REGISTRATION ON THE G ROUND THAT IT WAS NOT EXISTING SOLELY FOR EDUCATIONAL PURPOS ES. THAT 14 MERELY A CONFERMENT OF POWER TO DO BUSINESS WOULD NO T DEBAR THE RIGHT FOR CONSIDERATION TO THE TRUST WITHOUT ANY FINDING BEING RECORDED THAT THE PREDOMINANT OBJECT OF THE T RUST WAS TO DO BUSINESS. THUS, RESPONDENT NO. 1 MISDIRECTED ITSELF BY REJECTING THE APPLICATION ON THIS GROUND WITHOUT COM ING TO ANY CONCLUSION THAT THE TRUST WAS CARRYING ON ANY OTHER ACTIVITY AS PER CLAUSE (I). IT IS ALSO A MATTER OF FACT, AS NOTICE D, NOW THAT THE TRUST HAS ALREADY ALSO DELETED THE OBJECTIONABLE CL AUSE 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. WE FIND THAT EVEN CBDT HAS AFFIRMED THIS VIEW IN ITS CIRCULAR NO.14/2015 DATED 17.8.2015, BY STATING THAT THE ACTUAL EXISTENCE OF THE EDUCATIONAL INSTITUTION IS THE THRESHOLD PRECONDITION WHICH IS TO BE LOOKED INTO O NLY FOR GRANTING APPROVAL AND THE ASSESSEE CANNOT BE DENIE D APPROVAL ON GROUNDS THE EVENTS RELATING TO WHICH H AVE NOT TAKEN PLACE ON THE DAY ON WHICH APPLICATION FOR APP ROVAL HAS BEEN MADE. 17. IN THE BACKDROP OF THE ABOVE, WE FIND THAT IN THE PRESENT CASE THE LD. PR.CCIT HAS NOT GIVEN ANY FIND ING ON THE VOLUMINOUS DOCUMENTS PRODUCED BEFORE IT TO ESTA BLISH THE GENUINENESS OF THE ACTIVITY OF IMPARTING EDUCAT ION CARRIED OUT BY THE ASSESSEE. THIS UNDENIABLY IS AN ESSENTIAL PRE-REQUISITE FOR GRANT OF APPROVAL ABOUT WHICH THE LD. PR.CCIT HAS TO BE SATISFIED WITH. IN FACT, THE LD. PR.CCIT HAS DENIED APPROVAL MERELY FOR THE REASON THAT THE OBJECTS INCLUDE OTHER ACTIVITIES BESIDES IMPARTING EDUCATIO N WITHOUT GIVING ANY FINDING WHETHER SUCH ACTIVITIES WERE CAR RIED OUT OR NOT. WE, THEREFORE, CONSIDER IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF THE LD. PR.CCIT TO EXAMINE ALL THE EVIDENCES FILED BY THE ASSESSEE AND PASS A SPEAKING ORDER IN 15 THE LIGHT OF THE PARAMETERS LAID DOWN BY THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF HARF CHARI TABLE TRUST (REGD.) (SUPRA) AND THE CBDT CIRCULAR REFERRE D TO ABOVE, FOR GRANTING APPROVAL UNDER SECTION 10(23C)( VI). NEEDLESS TO ADD THE ASSESSEE BE GRANTED DUE OPPORTU NITY OF HEARING AND IS FREE TO ADDUCE ALL EVIDENCES IT WISH ES TO RELY UPON IN SUPPORT OF ITS CONTENTIONS. 18. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESS EE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH 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