TaxTMI 
TaxTMI 
2009 (5) TMI 41
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....the case on the basis of material on record and as alleged in the writ petition are that the petitioner is a society registered under the Societies Registration Act, 1860 in the name and style "City Montessori School" (hereinafter referred to as C.M.S.) and registration to the petitioner was granted on 4.6.1963 bearing Registration no. 111 of 1963-64. The petitioner has 20 branches in different parts of Lucknow City. In the beginning, the income of the petitioner was not taxable, hence no Income Tax Returns were filed up to the assessment year 1991-92. The society has been running the school for classes from K.G. to XIIth. Over the years, the school has grown in size with thousands of boys and girls studying in its several branches in the city of Lucknow. It was only when the notice under Section 142 (1) of the I.T. Act, 1961 was issued to the petitioner for filing return of the income-tax for the assessment year 1991-92, the petitioner filed its return first time on 25.2.1992 by showing the income "nil" and also claimed exemption under erstwhile Section 10(22) of the Act. However, the Assessing Officer as well as C.I.T.(A) did not allow exemption on the interest income from fixed ....
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....missioner of Income Tax, thereafter recommended for exemption to the Chief Commissioner of Income Tax vide letter dated 13.9.2000. The petitioner has further alleged that the recommendations were made by the Chief Commissioner of Income Tax, Lucknow to the CBDT, New Delhi on 25.9.2000, 25.10.2000, 16.2.2001 and 18.6.2001 and being prejudiced with the favourable recommendations in favour of the petitioner, the Director Investigation against whom a notice under Section 80 C.P.C. was issued passed an order of transfer dated 8.12.2000 under Section 127 (2) of the Income Tax Act, 1961. The petitioner thereafter challenged the said order dated 8.12.2000 by way of a writ petition, which was registered as Writ Petition No.2310 of 2000 and during the pendency of the writ petition, the period for seeking exemption under Section 10 (23C) (vi) expired and thereafter an application dated 27.3.2001 for the Assessment Years 2002-03, 2003-04 and 2004-05 and an application dated 16.3.2004 for the Assessment Years 2005-06, 2006-07 and 2007-08 were moved under Section 10 (23C) (vi) of the Act. The Writ Petition No.2818 of 2000 (M/B) and Writ Petition No.2310 of 2000 (M/B) challenging the search condu....
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....y has been entrusted i.e Founder Members, Patrons, Advisors and Life Members and the rules and regulations provide that the Founder Manager Sri Jagdish Gandhi and the Founder Director Smt.Bharati Gandhi will remain Founder Director for life and after them their nominees or heirs will be the Founder Members while other officers and members of the educational institution are elected for three years and since the Founder Manager and Founder Director are not subject to the election process, they continue in the Executive Committee of the society for life. He further submitted that Sri Jagdish Gandhi and Smt.Bharti Gandhi are living in a modest way in a small rented accommodation and maintain a very simple personal life and devoting all their energies to the growth of the institution and the assets do not vest in any private person and its constitution does not permit any profit of the institution to be diverted to any individual or organization. He further submitted that the petitioner was registered under Section 12A of the Income Tax Act on 01.8.1998 and approval for exemption under Section 80G was also granted on 29.1.1999 and thereafter the petitioner moved an application on 04.02.....
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....sa). He further submitted that the Constitution of City Montessori School does not permit any profit of the institution to be diverted to any individual or organization and the learned Chief Commissioner of Income Tax has wrongly held that excess of income over expenditure has to be worked out after disregarding depreciation and even in the case of Charitable Institution, depreciation has to be allowed as a necessary deduction and the excess has to be worked out only after taking the depreciation into consideration. Learned counsel for the petitioner has relied upon the decisions of the Karnataka High Court in CIT v. Society of Sisters of St., reported in (1984) 146 ITR 28, CIT v. Raipur Palloyyine Society, reported in (1989) 180 ITR 579 and CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, reported in (1992) 198 ITR 593. He further submitted that the Chief Commissioner was under a delusion that the Societies Registration Act, 1860 prohibits the concept of some members being Life Members of managing committee of the society and unless rules and regulations of the society provide for a periodic election of all the members of its governing body, it will be contrary to the ....
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....in spite of repeated demands and no efforts were made by the petitioner to show that profits/surpluses were exclusively used for the educational purposes. He further submitted that the Chief Commissioner of Income Tax in para 22 of his order dated 11.4.2008 has explained that the contention put forward by the assessee that the profits/surpluses have been exclusively used for educational purposes could not be examined because the assessee did not produce the books of accounts as asked for by him in his letter dated 23.11.2007 and in the absence of necessary books of accounts the Chief Commissioner of Income Tax has rightly rejected the application of the petitioner. He further submitted that the Rules of the Society provide for total control of the affairs of the Society in the hands of Sri Jagdish Gandhi along with his wife Smt. Bharti Gandhi who have ensured that after their death the affairs/profits/assets of the City Montessori School pass on to their nominees/heirs. He further submitted that from the impugned order, it is evident that the petitioner was avoiding to appear before the Chief Commissioner of Income Tax along with the books of accounts and he was filing number of....
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....1 of 1963-64. The petitioner has 20 branches in different parts of Lucknow City. In the beginning, the income of the petitioner was not taxable, hence no Income Tax Returns were filed up to the assessment year 1991-92. The society has been running the school for classes from K.G. to XIIth. Over the years, the school has grown in size with thousands of boys and girls studying in its several branches in the city of Lucknow. It was only when the notice under Section 142 (1) of the I.T. Act, 1961 was issued to the petitioner for filing return of the income-tax for the assessment year 1991-92, the petitioner filed its return first time on 25.2.1992 by showing the income "nil" and also claimed exemption under erstwhile Section 10(22) of the Act. However, the Assessing Officer as well as C.I.T (A) did not allow exemption on the interest income from fixed deposits received by the petitioner. The Income Tax Appellate Tribunal vide its judgment and order dated 31.1.1996 observed that no tax could be levied as it is purely an educational institution and not existing for purposes of profit. The petitioner was granted exemption under Section 12A of the Act on 18.12.1998 whereby any donation to ....
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.... an application dated 27.3.2001 for the Assessment Years 2002-03, 2003-04 and 2004-05 and an application dated 16.3.2004 for the Assessment Years 2005-06, 2006-07 and 2007-08 were moved under Section 10(23C)(vi) of the Act. Writ Petition No. 2310 of 2000 preferred by the petitioner was allowed by this Court by the judgment and order dated 23.05.2007 and a direction was issued that the pending applications of the petitioner for grant of exemption be considered and disposed of expeditiously, say, within a period of three months from the date of receipt of a certified copy of the order, in accordance with law. The order of transfer of the assessment cases by the order dated 08.12.2000 was also quashed by this Court. Writ Petition No. 2818 of 2000 in which the search conducted by the Income Tax Department on the business premises and residence of the petitioner had been challenged was also allowed and the search and seizure were declared as illegal. Since the Chief Commissioner of Income Tax was taking no interest in disposal of the applications moved by the petitioner under Section 10(23C)(vi) of the Act, the petitioner filed a contempt petition in this Court against Sri K.K. Pa....
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.... LETTER OF RECOMMENDATION DATED 06.04.2004: "This letter of recommendation has been sent by Chief Commissioner to CBDT, New Delhi in response to letter of CBDT, New Delhi dated 12.03.2001 by which certain clarifications had been sought by the CBDT, New Delhi which reads as under: "Your kind attention is drawn to the Board's letter F.No.197/85/2000-ITA-I dated 12th March, 2001 through which certain clarifications was sought in the above matter. The clarification and complete report has already been forwarded vide this office letter even no. dated 18th June, 2001. No communication in the matter has been received so far. I am directed to request you to kindly communicate the Board's decision in the matter at the earliest convenience." It is submitted that this decision has been formally communicated to the CBDT, New Delhi by the Chief Commissioner vide letter dated 08.06.2004 which reads as under: "Please refer to your letter dated 7th June, 2004 on the above subject. 2. I am directed to inform you that your application has already been forwarded to the Board vide this office dated 22nd September, 2000 along with the recommendation for exemption u/s 10(23C)(vi)....
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....Act. The exemption in the said Section at the relevant time was of "any income of University and other educational institution existing solely for the educational purposes and not for the purposes of profit." The said Section was substituted with effect from 1.4.1999. Now the educational institution will have to seek exemption under Section 10(23C) which reads as under:- Sub-clause-(vi):- "..... any university or 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" (iiiab):- "any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government" (iiiad):- "any university or other educational institution existing solely for educational purposes and not for the purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed." Income Tax Rule 2BC prescribed the limit of only Rs. 1 crore. It me....
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.... and certainly not for profit, then it can be treated as charitable institution. In the instant case, no adverse material was brought on record by the opposite-parties to reject the application dated 4.2.1999 for seeking said exemption. In American Hotel & Lodging Association Educational Institute v. Central Board of Direct Taxes and others, reported in (2008) 10 SCC 509, Hon'ble the Supreme Court has held that- "While granting approval under s. 10(23C)(vi), the prescribed authority has only to see that the applicant fulfils the threshold precondition of actual existence of an educational institution and can impose stipulations that certain percentage of accounting income would be utilized for impartation of education in India, although there is no requirement in the third proviso to s. 10(23C)(vi) that the application of income must be made in India: order passed by CBDT rejecting the appellant's application for approval on the ground that it has not applied its income for the purpose of education in India is set aside and the matter is remitted to CBDT for fresh consideration in accordance with law." In the said judgment Hon'ble the Supreme Court has further observed - ....
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....nd that the assessee did not produced the books of account in pursuance of the letter dated 23.11.2007. From the above it appears that the Chief Commissioner of Income Tax has rejected the application dated 04.02.1999 for exemption as he was summoned by this Court in the contempt proceedings initiated by the petitioner. It was not open for Chief Commissioner of Income Tax to go into the constitutional validity of the society as the society is registered under the Societies Registration Act, 1860, which is a self code. The Executive Committee of the society consists of 7 persons to whom the management of the society has been entrusted i.e. Founder Members, Patrons, Advisors and Life Members and the rules and regulations specifically provide that the Founder Manager Sri Jagdish Gandhi and the Founder Director Smt.Bharati Gandhi will remain Founder Director for life and after them their nominees or heirs will be the Founder Members and the constitution of the society does not permit any profit of the institution to be diverted to any individual or organization. In the light of above discussions and by considering and analysing the totality of facts and circumstances of the case, we....