Hindustan Institute Of Technology And Science Rep. By Its President v. The Chief Commissioner Of Income Tax -Iii

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 25.10.2019CORAMTHE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition Nos.9510 and 9511 of 2011, 5030 and 5031 of 2013 and 8201 of 2012and M.P.Nos.1 and 1 of 2011,1 and 1 of 2013 and 1 of 2012 Hindustan Engineering Training Centre,rep. By its President40, GST RoadSt. Thomas MountChennai – 600 016. ...Petitioner in W.P.Nos.9510 of 2011 and 5030 of 2013 Hindustan Institute of Technology and Sciencerep. By its President40, GST RoadSt. Thomas MountChennai – 600 016. ...Petitioner in W.P.Nos.9511 of 2011 8201 of 2012 and 5031 of 2013Vs 1. The Chief Commissioner of Income Tax -III 121, Mahatma Gandhi road, Chennai – 600 034. 2. The Director of Income Tax (Exemptions) 121, Mahatma Gandhi road, Chennai – 600 034. 3. The Deputy Director of Income Tax (Exemptions) II 121, Mahatma Gandhi road, Chennai – 600 034. ... Respondents in the above W.P.s W.P.No.9510 of 2011:Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus to call for records of the petitioner on the file ofthe respondent to quash the impugned order dated 30.9.2010issued in C.No.CC III/6/10(23C)/2010-11 in refusing/rejectingthe renewal of recognition sought for in terms of section 10(23C)(vi) of the Income Tax Act, 1961 for the assessment year2010-2011 and consequently direct the respondent to grant suchrecognition as prayed for. https://hcservices.ecourts.gov.in/hcservices/ W.P.No.9511 of 2011: Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus to call for records of the petitioner on the file ofthe respondent to quash the impugned order dated 28.9.2010issued in C.No.CC III/7/10(23C)/2010-11 in refusing/rejectingthe renewal of recognition sought for in terms of section 10(23C)(vi) of the Income Tax Act, 1961 for the assessment year2010-2011 and consequently direct the respondent to grant suchrecognition as prayed for. Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus to call for records of the petitioner on the file ofthe respondent to quash the impugned order dated 27.10.2011issued in C.No.CC III/7/10(23C)(vi)/11-12 in refusing/rejectingthe renewal of recognition sought for in terms of section 10(23C)(vi) of the Income Tax Act, 1961 for the assessment year2011-2012 and consequently direct the respondent to grant suchrecognition as prayed for. Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus to call for records of the petitioner on the file ofthe respondent to quash the impugned order dated 26.9.2012issued in C.No.CCIT III/10(23C)/10/12-13 in refusing/rejectingthe renewal of recognition sought for in terms of section 10(23C)(vi) of the Income Tax Act, 1961 for the assessment year2012-2013 and consequently direct the respondent to grant suchrecognition as prayed for. Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus to call for records of the petitioner on the file ofthe respondent to quash the impugned order dated 26.9.2012issuedinC.No.CCITIII/10(23C)(vi)/9/12-13inrefusing/rejecting the renewal of recognition sought for interms of section 10 (23C)(vi) of the Income Tax Act, 1961 forthe assessment year 2012-2013 and consequently direct therespondent to grant such recognition as prayed for. For Petitioner in the above W.Ps : Mr.A.S.SriramanFor Respondent in the above W.Ps : Mrs.Hema Muralikrishnan --------------- C O M M O N O R D E R Prayer: PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus to call for records of the petitioner on the file ofthe respondent to quash the impugned order dated 26.9.2012issuedinC.No.CCITIII/10(23C)(vi)/9/12-13inrefusing/rejecting the renewal of recognition sought for interms of section 10 (23C)(vi) of the Income Tax Act, 1961 forthe assessment year 2012-2013 and consequently direct therespondent to grant such recognition as prayed for. For Petitioner in the above W.Ps : Mr.A.S.SriramanFor Respondent in the above W.Ps : Mrs.Hema Muralikrishnan --------------- C O M M O N O R D E R This batch of five Writ Petitions have been filed by twoPetitioners, viz., i) Hindustan Engineering Training Centre(W.P.Nos.9510 of 2011 and 5030 of 2013 relating to AssessmentYears (A.Y.) 2010-11 and 2012-13) and ii) Hindustan Institute ofTechnology and Science (W.P.Nos.9511 of 2011, 8201 of 2012 and5031 of 2013 relating to A.Y. 2010-11, 2011-12 and 2012-13). 2. In all Writ Petitions, the petitioners challenge ordersof rejection of the applications filed by them seeking approvalin terms of section 10(23c)(vi) of the Income Tax Act, 1961 (inshort 'Act'). 3. The petitioner is a society established under theprovisions of the Tamil Nadu Societies Registration Act, 1975.The objects of the Society as at present are as follows:'a) To provide for instruction and training insuch branches of learning as it may deem fit with aview to impart eduction at Diploma, Under Graduate,Post Graduate and above higher levels.b) To provide for research and for theadvancement of and dissemination of knowledge.c) To undertake extra mural studies, extensionprogrammes and field outreach activities to contributeto the development of institution like instruction,training and conduct of courses at various levels inthe field of Engineering, Technology, Aviation,Management, Arts and Science, Medical, Dental,Paramedical,Nursing,PharmaceuticalSciences,agriculture, Veterinary, Hospitality Management,Travel Tourism, legal studies, oriental/ancient Arts &Science, Indian Philosophy, heritage, Arts & Culturaletc. in India and abroad asper rules and norms. d) To do all such other acts and things as may benecessary or desirable to further the objects of theInstitution. e) To take over any institution, institution ortrust having objects similar to that of theinstitution in the advancement of its objects.f) To impart training and instructions inpractical professional areas' 4. The petitioner has set up and manages severalUniversities, Schools and Educational campuses in differentparts of the Country and sought an approval for exemption interms of Section 10(23C)(vi) of the Act for the income earnedtherefrom. 5. As far as W.P.No.9511 of 2011 is concerned, theapplication came to be rejected by the Commissioner of IncomeTax (R3) who notes in the narration that a survey under Section133A of the Act had been conducted in the petitioners' premisesduring which various incriminating documents had been found.However, he clarifies that since the issues arising therefromwere still under investigation, no adverse inference had beendrawn in that regard. 6. The reason for rejection of the exemption claimed is thatone of the objects contained in the Memorandum of Association(MOA) was, according to R3, of the nature of 'general publicutility' and not 'education'. This, he states, is contrary tothe stipulation of Section 10(23C) which requires that theentity seeking exemption exists solely for educational purposes.The offending clause of the MOA, i.e., clause 3(c) includes'undertaking extra mural studies, extension of programs andfield outreach activities to contribute to the development ofsociety' as an object. 6. The reason for rejection of the exemption claimed is thatone of the objects contained in the Memorandum of Association(MOA) was, according to R3, of the nature of 'general publicutility' and not 'education'. This, he states, is contrary tothe stipulation of Section 10(23C) which requires that theentity seeking exemption exists solely for educational purposes.The offending clause of the MOA, i.e., clause 3(c) includes'undertaking extra mural studies, extension of programs andfield outreach activities to contribute to the development ofsociety' as an object. 7. Despite objections raised by the petitioner to the effectthat the clause did not, militate against the grant of exemptionclaimed, and, in any event, has not been pursued in reality, thepetitioner was held to be ineligible for the grant of approvalas sought. 8. This issue is common to W.P.No.8201 of 2012 as well. 9. A specific query was put to learned counsel as to what an'extra mural course' entailed and the petitioner has circulateda guideline issued by the University Grants Commission for thepurpose of declaring an Institution as a 'Deemed University'under Section 3 of the University Grants Commission Act. SerialNo.4(a) thereof states:- '4(a) For the purpose of recognition as a universityan institution should generally be: (i) Engaged in teaching programmes and researchin chosen fields of specialisation which areinnovative and of very high academic standards at theMaster's (or equivalent) and/or research levels. Itshould also have a greater interface with societythough extra mural, entension and field actionrelated programmes.' 10. The contention of the petitioner is the aforesaid was aprescribed guideline, though not a mandatory one and hence thepetitioner following prudence, included the same in its objectsas well. He reiterates the position that, in fact, no extramural courses have been conducted by the University at any pointin time. This factual submission is recorded. Be that as itmay, if at all it does come to the notice of the AssessingAuthority that the petitioner was, in fact, engaging inactivities that are outside the scope of education, the Officer https://hcservices.ecourts.gov.in/hcservices/ is always at liberty to address the same in the course ofassessment. 11. The scope of enquiry when granting approval in terms ofSection 10(23C)(vi) of the Act has been considered by theSupreme Court in two Judgments, viz., i) Queen's EducationSociety V. Commissioner of Income Tax (372 ITR 699) and ii)American Hotel and Lodging Association, Educational Institute V.CBDT (301 ITR 86). 12. The Bench has specifically noted the distinction betweensatisfaction in regard to prima facie conditions required forthe grant of approval and the monitoring conditions relating toapplication/accumulation/deployment of income as well as othercompliances. The Bench has stated that the grant of approvalwould only require a satisfaction of the Officer in regard tothe existence of the University and the avowed objects. Thequestion of whether the Society has, in fact, complied with thestatutory provisions strictly is a matter of assessment andwould be dealt with by the Assessing Officer in the course ofassessment itself. 12. The Bench has specifically noted the distinction betweensatisfaction in regard to prima facie conditions required forthe grant of approval and the monitoring conditions relating toapplication/accumulation/deployment of income as well as othercompliances. The Bench has stated that the grant of approvalwould only require a satisfaction of the Officer in regard tothe existence of the University and the avowed objects. Thequestion of whether the Society has, in fact, complied with thestatutory provisions strictly is a matter of assessment andwould be dealt with by the Assessing Officer in the course ofassessment itself. 13. I am thus of the view that, the respondent has, in theimpugned orders adopted a view that is premature and WritPetitions in W.P.Nos.9511 of 2011 and 8201 of 2012 are allowed. 14. Coming to W.P.Nos.5030 and 5031 of 2013, the AssessingAuthority rejects the exemption granted on the ground that theapplication in Form 56D was filed on 30.09.2011, as beingrelevant to Assessment Year 2012-13 and not for financial year2010-11 as mentioned in the application. He also states that noevidence was filed by the petitioner to the effect that thiserror was subsequently corrected. Before the Commissioner, thecontention of the petitioner was that there was a clericalmistake in relation to the year mentioned and the applicationwould relate to year ending 31.03.2012 only. 15. In any event, even while holding the petitioners'applications not maintainable, the respondent considers the sameon merits. According to him, the 14[th] proviso to Section 10(23C)requires that the application for approval be made on or before30[th] of September of the relevant assessment year from whichexemption is sought. Since 'assessment year' is defined underSection 2(9) of the Act to mean the period of 12 monthscommencing from 1[st] day of April every year, the claim wouldhave, according to the respondent, to be made only between01.04.2012 and 30.09.2012. The present application was made on30.09.2011 and thus, according to him, was not maintainable. 16. I disagree. The 14[th] proviso to Section 10(23) wasamended by Finance (No.2) Act, 2009 with effect from01.04.2009. The notes and clauses to the Finance Bill (see 314ITR 130 (ST.)) state that the insertion of the proviso was topermit applications to be filed upto 30[th] September of the relevant assessment year, instead of restricting the date to31[st] of March of the financial year. The purpose was thus toexpand the time for filing till 30.9.2012 and not restrict it toonly the six months between 1.4.2012 and 30.9.2012. In thepresent case, the application has been filed in November, 2011itself and in the light of the object of the amendment noticedabove, the application is well within time. W.P.Nos.5030 and5031 of 2013 are allowed. 17. In W.P.No.9510 of 2011, the impugned order rejects thepetitioners' claim upon consideration of clauses (c) and (d) ofthe MOA, wherein the petitioner deals with the acquisition orlease of immovable properties as well as investment of funds inthe equity of any company or any other organisation that,according to the respondent, establish that the society did notexist solely for 'educational purpose' as required under Section10(23C). The clauses are extracted below for betterappreciation: '(c) To acquire properties both movable andimmovables. (d) To invest funds of the society in the equityof any company or any other organisation and advancefunds for the promotion and advancement of any of themain or further object herein, or further objects asrecorded in the Articles of Association.' '(c) To acquire properties both movable andimmovables. (d) To invest funds of the society in the equityof any company or any other organisation and advancefunds for the promotion and advancement of any of themain or further object herein, or further objects asrecorded in the Articles of Association.' 18. The purpose of the aforesaid clauses is, in my view,only to enable the acquisition of assets by the petitioner.This does not, in my view, lead to the inference that theSociety is engaging in other commercial ventures apart fromdissemination of education. As stated elsewhere, the monitoringof the activities of the petitioner is a matter of assessment bythe Assessing Officer and the Commissioner has, in my view,overstepped in assuming that the mere mention of the aforesaidtwo activities disentitles the petitioner to the approval andexemption sought. 19. The impugned order is set aside and W.P.No.9510 of 2011is allowed. The respondent is directed to issue the approvals,as sought for within a period of four weeks from date of issueof this order. No costs. Consequently, the above connectedMiscellaneous Petitions are closed. Sd/- Assistant Registrar(CS III) To 1. The Chief Commissioner of Income Tax -III 121, Mahatma Gandhi road, Chennai – 600 034. 121, Mahatma Gandhi road, Chennai – 600 034. 2. The Director of Income Tax (Exemptions) 121, Mahatma Gandhi road, Chennai – 600 034. 121, Mahatma Gandhi road, Chennai – 600 034. 3. The Deputy Director of Income Tax (Exemptions) II 121, Mahatma Gandhi road, Chennai – 600 034. 121, Mahatma Gandhi road, Chennai – 600 034. +1cc to M/s.Hema Muralikrishnan , Advocate SR.No. 89722 +2ccs to Mr.S.Sridhar , Advocate SR.No. 89708 89707 Writ Petition Nos.9510 and 9511 of 2011, 5030 and 5031 of 2013 and 8201 of 2012and M.P.Nos.1 and 1 of 2011,1 and 1 of 2013 and 1 of 2012A.SK(06/02/2020)