TaxTMI 
TaxTMI 
2021 (8) TMI 331
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....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 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 ....
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....jects of the trust on 29/09/2009 to include specific activities of education besides, changing some of the powers of the trustees. 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 colleg....
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....pply in relation to any income being profits and gains of business, unless the business is incidental to the attainment of the objectives of the Society and separate books of accounts are maintained in respect of such 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 ....
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....ntify the beneficiaries and prove the relevance of such payments to the objects of the appellant trust. [ii] That merely because the objects of the trust are benevolent and charitable, the trust does not get registration/ approval if its activities are otherwise. [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....
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.... of section 10[23C][vi] of the Act and hence, he passed the impugned order u/s 10(23C)(vi) of the Act dated 04/05/2020, withdrawing the exemption earlier granted vide order dated 15/04/2010. He held that :- [i] That the appellant had not applied its income in accordance with the stipulations of clause (a) of the third 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 15t....
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.... the relevant point of time. It cannot be understood to mean that the prescribed authority is the authority who had granted approval u/s 10(23C)(vi) of the Act simply because such authority does not have any power under the Act to take cognizance of the matter. 19. In view of the above, it is submitted that the CCIT, Panaji had no authority to pass the order 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 re....
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....tution is approved by an prescribed authority and "that prescribed authority" is satisfied that the conditions in sub clause (i), (ii) and (iii) of said proviso are attracted then "that prescribed authority" shall withdraw the recognition after giving reasonable opportunity. * It is pertinent to note that the word "that prescribed authority" is used in the legislation to specifically refer to "that prescribed authority" which originally 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 approv....
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....ority. 25. The original Notification on this issue was issued on 30.5.2007 which reads as follows:- "SECTION 10(23C)(vi)/(via) OF THE INCOME-TAX ACT, 1961 - EXEMPTION - UNIVERSITY/EDUCATIONAL INSTITUTIONS/HOSPITALS - PRESCRIBED AUTHORITY NOTIFICATION NO. SO 852(E) [F.NO. 153/41/2007-TPL], DATED 30-5-2007 [SUPERSEDED BY NOTIFICATION NO. 76/2014 (F.NO. 196/26/2014-ITA.I), DATED 1-12-2014] 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 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, ....
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....Board of Direct Taxes dated the dated 30th May, 2007 except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby authorizes the Commissioners of Income-tax (Exemptions), to act as 'prescribed authority' for the purposes of sub-clause (vi) and sub-clause (via) of clause (23C) of section 10 with effect from the 'specified date'. 2. The 'specified date' for the purpose of the aforesaid rule 2CA shall be the 15th day of November, 2014." 26. Thus it is clear that as per Rule 2CA of the Income-tax Rules w.e.f. 15.11.2014, the Principal Commissioner or Commissioner 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 ....
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....ucational institution or any hospital or other medical institution as on the 1st day of June, 1998; (ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution before the 1st day of March, 1983; (iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) and sub-clause (ia), by way of bonus shares allotted to the fund, trust or institution or any university or other educational institution or any hospital or other medical institution ; (iv) voluntary contributions received and 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....
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....the matter. During the relevant financial year, there is no change in the nature of activities undertaken by the appellant and the genuineness of the educational activities carried on by the appellant trust cannot be called into question. In fact, the appellant has not earned a surplus from running of educational institutions and this has been the position from many years now. Hence, by no stretch of imagination can it be alleged that the activities of the appellant trust are not genuine. At any rate, the learned CCIT, Panaji also has not doubted the genuineness of the activities carried on by the appellant and no adverse view has been taken on this score for withdrawal of the recognition granted. 31. Secondly, it was pointed out here that the allegation of the 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....
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....ant had also produced copies of the vouchers and bank statements in respect of the brokerage paid. [c] That, the petty advances also represented amounts paid in cash and the appellant had furnished a ledger of the petty advances written off and had also produced Xerox copies of vouchers for some of the advances written off and the purpose of payment of the same could not be doubted only on the basis that payments were in cash. Here again, the same was not claimed as application of income. [d] That the appellant had produced a ledger copy of the religious and charitable donations paid aggregating Rs. 1,00,63,000/-, which were donations were made to temples, sports clubs, Ayyappa devotees and Dasara Sponsorships as well as marriage gifts made to employees and staff, which were all connected with the running 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 unnumbere....
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....ed order in order to invoke Sub-Clause B of Clause [ii] of unnumbered 15th proviso. It is submitted that the learned CCIT, has concluded that the appellant had violated 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]". The learned CCIT, Panaji alleged that the appellant had not applied its income wholly and exclusively for the objects for which it was established in accordance with the third proviso and this violation would bring Sub Clause B of Clause (ii) of unnumbered 15th proviso to Section 10(23C) of the Act into play. In so far as this allegation is concerned, it is submitted that the appellant has 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 disallowi....
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....e [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. 44. It was explained before us by the ld. AR that even the amount of Rs. 3,57,83,690 was never claimed as application of income so as to hold that assessee has violated the condition imposed under Sub-Clause [B] of clause [ii] of the unnumbered 15th proviso of s. 10(23C)(vi) of the Act. The allegation of the CCIT is that the assessee failed to give original receipt of proof and that income has been applied for other purpose which is not connected to the education purpose. 45. It is an admitted fact that the assessee has not claimed the above expenditure as application of income while claiming exemption u/s. 10(23C)(vi) of the Act and hence withdrawal of 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....
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.... (h) to make, enact, order, maintain, reframe, re-enact and enforce rules and regulations from time to time in the management and conduct of the work, business and in respect of the activities of institutions run by it, to conduct functions, duties, remunerations, and privileges of its officers and staff, personnel, students, visitors and other connected with the trust or in its work, activities or functions. (i) to take such steps by personal or written appeals or by advertisement or otherwise as may be deemed expedient for the purpose of establishing the functions and activities of the trust or to secure contribution to the funds of the trust in the shape of donations, subscriptions or otherwise. (j) to negotiate and enter into any agreement with any government or its department, university, municipality or any other public or private authorities which may be conducive to financing any of the objects of the trust or 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 exped....