Tribunal revives approval under Section 10(23C)(vi) retrospectively, finding no legal basis for withdrawal.

The Tribunal set aside the PCIT(Central)'s order withdrawing approval under Section 10(23C)(vi) retrospectively, reviving the original approval from the date of withdrawal. The Assessee Society's appeal was allowed, with the Tribunal finding no legal basis for withdrawal based on retrospective actions related to exemption approval, utilization of immovable properties, ownership and usage of luxury cars, alleged misappropriation of funds, or exchange deed issues.

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Issues Involved:
1. Retrospective Withdrawal of Exemption Approval
2. Utilization of Immovable Properties
3. Ownership and Usage of Luxury Cars
4. Payment of Lower Salary and Misappropriation of Funds
5. Exchange Deed and Alleged Misappropriation of Sale Consideration

Detailed Analysis:

1. Retrospective Withdrawal of Exemption Approval:
The Assessee Society contested the retrospective withdrawal of exemption under Section 10(23C)(vi) by the PCIT(Central), Gurgaon. The Tribunal referred to various judicial precedents, including the decisions of the Hon'ble Allahabad High Court in Agra Development Authority and the Hon'ble Rajasthan High Court in Indian Medical Trust, which held that the cancellation of registration or exemption should be prospective and not retrospective. The Tribunal concluded that the PCIT(Central) was not legally correct in withdrawing the approval retrospectively and such approval can only be withdrawn from the date of issuance of the show cause notice dated 15/06/21, i.e., with effect from A.Y 2022-23 and subsequent years.

2. Utilization of Immovable Properties:
The PCIT(Central) alleged that two properties owned by the Assessee Society were used by the Chairperson and her family members for personal residence, which was against the society's objectives. The Tribunal noted that the usage of the property by the Chairperson was examined at the time of the initial grant of approval under Section 10(23C)(vi) and found to be in line with the society's objectives. The Tribunal also found that the perquisite value of the accommodation was reflected in the Chairperson's income tax returns. Therefore, the Tribunal held that the provision of residential accommodation to the Chairperson in furtherance of the society's educational objectives cannot be a reason for withdrawal of exemption.

3. Ownership and Usage of Luxury Cars:
The PCIT(Central) found that the Assessee Society owned luxury cars used by the Chairperson and other members for personal purposes. The Tribunal noted that the vehicles were registered in the name of the society and used for official purposes. The Tribunal referred to the decision of the Coordinate Mumbai Benches in ITO vs. Cancer Aid & Research Foundation, which held that the provision of vehicles to trustees for official purposes cannot be a ground for cancellation of registration. The Tribunal concluded that the provision of vehicles per se to the members of the society cannot be a reason for withdrawal of exemption under Section 10(23C)(vi).

4. Payment of Lower Salary and Misappropriation of Funds:
The PCIT(Central) alleged that the Assessee Society paid lower salaries to employees and misappropriated the excess amount. The Tribunal found that out of thirty teachers whose statements were recorded, only two teachers stated that they parted with a portion of their salary. The Tribunal held that negative statements (denial of handing over signed cheques) by the majority of teachers cannot be disregarded. The Tribunal also noted that the statement of Mr. Mohan, who allegedly encashed the cheques, was not recorded. The Tribunal concluded that the allegation of misappropriation of funds by inflating salary expenditure was not established and cannot form the basis for withdrawal of exemption.

5. Exchange Deed and Alleged Misappropriation of Sale Consideration:
The PCIT(Central) alleged that the Assessee Society received unaccounted cash as part of the consideration for an exchange deed executed for properties. The Tribunal noted that the exchange deed was registered, and the transaction value was accepted by the stamp duty authority. The Tribunal found that the PCIT(Central) did not refer the matter to a Valuation Officer to verify the alleged over-valuation. The Tribunal held that the exchange deed, being a written contract, cannot be contradicted by rough note pad entries. The Tribunal concluded that the allegation of receiving unaccounted cash was not substantiated and cannot be a reason for withdrawal of exemption.

Conclusion:
The Tribunal set aside the order passed by the PCIT(Central) withdrawing the approval under Section 10(23C)(vi) and revived the original approval from the date of withdrawal. The appeal of the Assessee Society was allowed.

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