M/S.valliammai Society v. The Director General Of Income-Tax (Investigation) New Income Tax Building

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:19.03.2010 CORAM: THE HON'BLE MR.JUSTICE P.JYOTHIMANI WRIT PETITION Nos.24214 to 24216 OF 2009and connected miscellaneous petitions. .. M/s.Valliammai SocietyNo.3 Veerasamy StreetWest MambalamChennai 600 033. .. Petitioner in all the W.Ps.,vs. 1.The Director General of Income-tax(Investigation) New Income Tax Building No.46 (Old No.108) Mahathma Gandhi Road Chennai 600 034. 2.The Assistant Commissioner of Income-tax, Central Circle I (3) No.46 (Old No.108) Mahathma Gandhi Road Chennai 600 034. .. Respondents in all the W.Ps., Writ Petitions filed under Article 226 of the Constitution ofIndia praying for issuance of Writs of; I Certiorari Calling for the records in F.No.2097(2)/08-09 dated22.10.2009 relating to the assessment year 2007-08 2008-09 respectivelyon the file of the 1st Respondent and quash the same (WP.Nos.24214/09and 24215/09 and; II Certiorarified Mandamus quashing the said proceedings in F.No.2097(2)/09-10 dated 21.10.2009 and directing the respondent to grantapproval to the petitioner under section 10(23C) (VI) for theassessment year 2009-10 (WP.No.24216/09 respectively. https://hcservices.ecourts.gov.in/hcservices/ For petitioner : Mr.M.Ramachandran,Sr.Counsel for Dr.Anitha Sumanth For respondents: Mr.K.Subramaniam Senior Central Government Standing Counsel. .. COMMON ORDER These writ petitions are directed against the orders of the firstrespondent withdrawing the approval under section 10(23C)(vi) of theIncome-tax Act, for the assessment year 2009-10 and issuing show causenotices in respect of 2007-08 and 2008-09 relating to the petitionerSociety. 2. The petitioner Society which is registered under the TamilNadu Societies Registration Act,1975 with the object of setting up andestablishing and administering educational institutions, bothengineering and medical colleges and hostels, is stated to have beenstarted not with profit motive. The petitioner Society had started SRMEngineering College and thereafter, many institutions under its controland the petitioner institutions are recognized as minorityinstitutions, as declared by the High Court and the petitioner Societyhas been regularly filing audit reports in the prescribed manner, aftercomplying with various statutory requirements of the Income-tax Act. 2(a). The petitioner is eligible for exemption in respect ofincome as per section 10(23C) of the Income-tax Act and application hasbeen made to the first respondent through the Commissioner of Income-tax for exemption under the said provision. It is stated that thepetitioner Society has been granted exemption up to 2008-09. 2(b). It is stated that for the year 2007-08, the first respondentby order dated 4.3.2008 accorded approval under the above saidprovision read with rule 2CA of the Income-tax Rules, 1962 and theapproval was subject to certain conditions which included that theaccumulated income has to be spent for the object of the Society andthe Society should not invest or deposit its funds otherwise than themodes specified under section 11(5) of the Income-tax Act and the saidapproval is not applicable to any income received by way of profit orgain of business and the Society should regularly file return and theapproval would be void if it is subsequently found that the same hasbeen obtained by fraud or misrepresentation, apart from various otherconditions. 2(c). For the year 2008-09, the petitioner applied for thecontinuance of the approval and the first respondent granted approvalin the order dated 30.10.2008 subject to the conditions as set out forthe year 2007-08. It is the case of the petitioner that the petitioner https://hcservices.ecourts.gov.in/hcservices/ 2(c). For the year 2008-09, the petitioner applied for thecontinuance of the approval and the first respondent granted approvalin the order dated 30.10.2008 subject to the conditions as set out forthe year 2007-08. It is the case of the petitioner that the petitioner https://hcservices.ecourts.gov.in/hcservices/ complied with the said conditions. The petitioner filed an applicationon 30.10.2008 before the Chief Commissioner of Income-tax/ DirectorGeneral of Income-tax seeking approval of exemption for the assessmentyear 2009-10 with all details. 2(d). By the impugned order dated 22.10.2009, the first respondentfound that the petitioner Society which was constituted with the objectof education is not fit for approval and accordingly, rejected theapplication for approval for the assessment year 2009-10. It is statedthat there was a search conducted in SRM Group on 12.8.2004 and certainC.Ds. and loose sheets in respect of accounts of various years werefound and seized and in respect of certain difference in the figuresbetween the C.Ds. and the returns relating to the assessment years1999-2000 to 2003-04, explanation was submitted by the petitioner,which was not accepted by the respondents and on the basis of legalpresumption, order came to be passed. 2(e). It is also stated that a reference was made to theCommissioner of Income-tax under section 263 of the Act in respect ofSRM Systems and Software Private Limited for the assessment year 2004-05, wherein it was held that the petitioner is not qualified forapproval under section 10(23C)(vi) read with Third Proviso. It was alsoheld that the petitioner does not exist solely for educationalpurposes. It is also stated that the respondents found that between31.3.2005 to 31.3.2007, the petitioner received deposits from variouspersons and also paid interest and that is construed to be a profit-oriented activity and therefore, the presumption has been drawn againstthe petitioner. 2(f). Though there was a detailed enquiry conducted by therespondents, it is the case of the petitioner that no discrepancy wasfound in respect of assessment year 2009-10, for which an applicationfor approval was made and the averments made were relating to the yearup to 2003-04 and not in respect of later years. It is based on thesaid rejection of the application for the year 2009-10, the respondentsproposed to withdraw the approval granted by the Director General inrespect of assessment years 2007-2008 and 2008-09 for the reason thatfor the assessment year 2009-10, the approval has been withdrawn. 2(g). It is stated that the rejection for the year 2009-10 withthe reason given is not relating to that year and not even relating to2007-08 and 2008-09 and the allegations are relating to 1999-2000 to2000-01 and 2003-04. 3. The said impugned order and show cause notices are challengedby the petitioner on various grounds that without any evidence ofcontravention of conditions by the petitioner, the orders have beenpassed; that as per section 10(23C), 13[th] Proviso, the violation must beonly in respect of the relevant year; that under the 3[rd] proviso, theprescribed authority must notice that there are violation of conditionsset out in respect of the assessment year for which the approval hasbeen sought for; that in respect of certain irregularities stated to have been found for the previous years, the rejection for theassessment year 2009-10 is not valid; that the petitioner has compliedwith various conditions set out in section 10(23C)(vi) as well asvarious provisos for the respective assessment years and therefore,there are absolutely no grounds for withdrawing the approval for theassessment year 2009-10 and also for issuing show-cause notice for theyears 2007-08 and 2008-09. have been found for the previous years, the rejection for theassessment year 2009-10 is not valid; that the petitioner has compliedwith various conditions set out in section 10(23C)(vi) as well asvarious provisos for the respective assessment years and therefore,there are absolutely no grounds for withdrawing the approval for theassessment year 2009-10 and also for issuing show-cause notice for theyears 2007-08 and 2008-09. 4. In the counter affidavit filed by the first respondent, it isdenied that the petitioner Society exists solely for educationalpurposes and the same has been discussed in detail in the impugnedorder. It is stated that the Society has been suppressing its receiptsand inflating its expenses and maintaining duplicate books of account.It is stated that the Society has been showing the receipt of hugedeposits from sundry persons and paying interest to them but, the sameis not supported by confirmation of identifiable creditors andtherefore, they are to be treated as illegal capitation fees chargedfrom the students in violation of the public policy and the charging ofcapitation fees is another way of earning profits. 4(a). It is stated that the search and seizure carried out on12.8.2004 resulted in discovery of various documents evidencing paymentto the Chairman and other members of the Society which is incontravention of section 13(1)(c) read with section 13(3) of the Actand certain amounts are stated to have been paid to ICICI Bank towardsrepayment of loan taken by the Chairman in his personal capacity, andadvances were made in the name of sister concerns including a firm ofchartered accountants and the same is in contravention of section 10(23C)(b) read with section 11(5) of the Act and the said CharteredAccountant of the assessee, by name, Shri K.S.Subramanian admitted thatbesides his fees, rest of the amounts were routed through his concern,M/s.K.S.& Co. for the personal benefits of the members of the Society. 4(b). It is stated that these are the business ventures and thesaid activities are with business motive and the Supreme Court hasheavily condemned any such practice in TMA Pai Foundation v. State ofKarnataka (AIR 2003 SC 355). It is also stated that SRM Engineeringcollege has been taken over by a separate Trust by name, SRM Instituteof Science and Technology under a Trust deed dated 30.6.2001 and thesaid institute which is distinct from the assessee society, has beengranted approval under section 10(23C)(vi) in the order dated26.10.2009. 4(c). It is stated that false accounts have been maintained andthe Society have not satisfied the conditions stipulated in section 10(23C)(vi) of the Act. It is stated that the approval granted to thepetitioner Society on 11.12.2002 for the assessment years 1999-2000 to2001-02 was given prior to the discovery of incriminating materialswhich were found during the search made on 12.8.2004 and theproceedings for rescinding of the notification are still pending. 4(d). It is stated that after the search, no approval was grantedunder section 10(23C)(vi) for any assessment year up to the assessment https://hcservices.ecourts.gov.in/hcservices/ year 2006-07 and the approval was granted only for the assessment years2007-08 and 2008-09 without appreciating the seized records andtherefore, a notice for withdrawal of approval for those two years wasissued under the impugned proceedings dated 22.10.2009 and such noticeis authorized as per section 10(23C), 13[th] Proviso. 4(d). It is stated that after the search, no approval was grantedunder section 10(23C)(vi) for any assessment year up to the assessment https://hcservices.ecourts.gov.in/hcservices/ year 2006-07 and the approval was granted only for the assessment years2007-08 and 2008-09 without appreciating the seized records andtherefore, a notice for withdrawal of approval for those two years wasissued under the impugned proceedings dated 22.10.2009 and such noticeis authorized as per section 10(23C), 13[th] Proviso. 4(e). It is stated that the conclusion arrived at by the firstrespondent based on the seized accounts is in consonance with the orderof the Income-tax Appellate Tribunal, Chennai Bench. It is stated thatthe assessee has failed to produce confirmation letters from three ofthe depositors viz., Subapriya, S.V.Pandurangan and P.Kalaiselvi. It isstated that the approval granted under section 10(23C) was not for aspecific assessment year, but from a particular assessment year onwardsfor an indefinite period subject to withdrawal as provided under 13[th]Proviso and therefore, the question of approval has to be decided onthe basis of past records of the assessee and the withdrawal order hasbeen passed only on the basis of tangible records and the same cannotbe said to be vague. 4(f). It is also stated that the assessee was never grantedapproval for the years 2003-04 to 2005-06 and for the year 2006-07, itwas denied ab initio because of late filing of application and theapproval was granted only for 2007-08 and 2008-09 and the proceedingsfor rescinding and withdrawal are pending by way of show-cause notice.It is reiterated that the disposal of application must be based on thepast records and not on the records relating to a particular year. 5. Mr.M.Ramachandran, learned senior counsel appearing for thepetitioner would reiterate that the consideration of exemption underthe said provision of the Act is based on the assessment of the saidyear and not on the past conduct and in the present case, thetransaction that is stated to have taken place nine years ago, is forthe purpose of refusal of renewal of concession and for withdrawal ofconcession for the years 2007-08 and 2008-09. It is also his contentionthat in view of the averment made in the counter affidavit filed by therespondents that the term, ‘capitation fees’ does not find a place inthe impugned order, the intention of the respondents is to deprive thepetitioner of such concession under one pretext or the other. 6. On the other hand, it is the contention of the learned seniorCentral Government standing counsel for Income-tax, Mr.K.Subramaniam,that the case of the petitioner is one relating to capitation feeswhich is a social evil to be curtailed and the Supreme Court hasheavily come down on the same in TMA Pai Foundation Case. It is hiscontention that when the department has found tangible, incriminatorymaterials against the petitioner Society, the petitioner is notentitled to continuation of such concession at all. It is hissubmission that the withdrawal or refusal of grant of such concessioncan only be based on the past conduct and he would rely upon variousjudgments in Dhansiram Agarwalla vs. Commissioner of Income-tax [(1993)201 ITR 192], Coimbatore Spinning & Weaving Co., Ltd., vs. Commissionerof Income-tax [(974) 95 ITR 375] to substantiate his contention that the past conduct can be taken into consideration. According to him, ifthe conditions of exemption are violated, certainly the petitioner isnot entitled for the grant of exemption for subsequent years and evenif a mistake has been committed earlier, such mistake cannot bepermitted to continue.7. I have heard the learned senior counsel for the petitioner andthe learned senior Central Government standing counsel for therespondent department and perused the records and given my anxiousthoughts to the issue involved in this case. the past conduct can be taken into consideration. According to him, ifthe conditions of exemption are violated, certainly the petitioner isnot entitled for the grant of exemption for subsequent years and evenif a mistake has been committed earlier, such mistake cannot bepermitted to continue.7. I have heard the learned senior counsel for the petitioner andthe learned senior Central Government standing counsel for therespondent department and perused the records and given my anxiousthoughts to the issue involved in this case. 8. It is an admitted case as it is seen in the counter affidavitfiled by the respondents that the petitioner Society was grantedapproval under section 10(23C)(vi) of the Income-tax Act for theassessment years from 1999-2000 to 2001-02 and a search operation waseffected by the department on 12.8.2004 and thereafter, approval wasgranted for the years 2007-08 and 2008-09. It is based on certainincriminating materials, it was concluded that the petitioner Societyviolated the conditions of approval, and the application for approvalfor the year 2009-10 was rejected by the first respondent andsimultaneously show-cause notice was issued by the first respondent forthe purpose of cancellation of approval granted for the years 2007-08and 2008-09 and the show-cause notice as well as the order of rejectionfor the said assessment years are challenged in these writ petitions. 9. The main grievance of the petitioner is that the approval hasto be granted for every assessment year based on the existing facts andin respect of earlier year, if any material has been found so as tocreate a doubt in the mind of the authority that the petitioner is notentitled for the approval which in effect is a privilege, the approvalgranted for that year can be cancelled and there cannot be apresumption that such mistake will continue in future years also. It isstated that it is not even the case of the respondent department thatany material, which is incriminating in nature, was found against thepetitioner Society in respect of the assessment years 2007-08, 2008-09and 2009-10 and it is on the basis of incriminating materials found inthe search made in the year 2004, which showed the adverse conduct ofthe petitioner, a presumption was drawn against the petitioner and onthe basis of such presumption, the impugned order came to be passedapart from the issuance of show-cause notice. Therefore, the issue tobe decided is, as to whether the approval granted under the saidprovision relating to every assessment year is to be passed on thebasis of conduct of the parties in that particular year or an inferencecan be drawn against the assessee based on the previous conduct of theassessee. 10. Section 10 of the Income-tax Act, in computing the totalincome of the previous year of any person, excludes certain incomeslike, (i) agricultural income; (ii) income of a member of a Hinduundivided family where such sum has been paid out of the income of thefamily; (iii) share income of a partner in the total income of the firmwhich is separately assessed; (iv) any income by way of interest on 10. Section 10 of the Income-tax Act, in computing the totalincome of the previous year of any person, excludes certain incomeslike, (i) agricultural income; (ii) income of a member of a Hinduundivided family where such sum has been paid out of the income of thefamily; (iii) share income of a partner in the total income of the firmwhich is separately assessed; (iv) any income by way of interest on securities or bonds or savings certificates of a non-resident; (v) thevalue of any travel concession or assistance received by or due to anindividual from his employer; (vi) the remuneration received by anindividual who is not a citizen of India as an official of an embassy,etc.; (vii) the remuneration received by an individual who is not acitizen of India as an employee of a foreign enterprise for servicesrendered by him during his stay in India; (viii) income chargeableunder the head, ‘salaries’ received by or due to any individual being anon-resident as remuneration for services rendered in connection withhis employment on a foreign ship; (ix) remuneration received as anemployee of the Government of a foreign State during his stay in India;(x) allowance or perquisites paid or allowed outside India by theGovernment to a citizen of India; (xi) any remuneration or fee receivedby a consultant out of the funds made available to an internationalorganization, etc. 11. In sub-section (23) of section 10, any income of anassociation or institution established in India, notified by theCentral Government, having regard to the fact that the association orinstitution has as its object the control, supervision, regulation orencouragement in India of the games of cricket, hockey, etc., does notform part of total income computed for the purpose of income-tax. Thesaid sub-section was subsequently omitted by the Finance Act, 2002 witheffect from 1.4.2003. Further, under sub-section (23A) of section 10,exemption is granted to the income from house property or any incomereceived for rendering any specific services of an association orinstitution established in India having as its object the control,supervision, regulation or encouragement of the profession of law,medicine, accountancy engineering or architecture or such otherprofession as the Central Government may specify in this behalf bynotification. 12. It was in that category relating to the exemption to theassessment, sub-section (23C) was introduced exempting the incomereceived by a person on behalf of the Prime Minister’s National ReliefFund, the Prime Minister’s Fund (Promotion of Folk Act), the PrimeMinister’s Aid to Students Fund, or the National Foundation forCommunal Harmony, etc. and in sub-section (23C), clause (vi) wasintroduced with effect from 1.4.1999 which is as follows: “Section - 10(23C)(vi). Any university or othereducational institution existing solely for educationalpurposes and not for purposes of profit, other than thosementioned in sub-clause (iiiab) or sub-clause (iiiad) andwhich may be approved by the prescribed authority.” 13. The authority, who is prescribed for such approval is theChief Commissioner or Director General. Rule 2CA which relates to theguidelines for approval in respect of clause (vi) of sub-section (23C)of section 10 which applies to the present facts of the case, is asfollows: “Rule 2CA. (1) The prescribed authority under sub-clauses(vi) and (via) of clause (23C) of section 10 shall be theChief Commissioner or Director General, to whom theapplication shall be made as provided in sub-rule (2). (1A) The prescribed authority under sub-clauses (vi) and(via) of clause (23C) of section 10 shall be the CentralBoard of Direct Taxes constituted under the Central Board ofRevenue Act, 1963 (54 of 1963) for applications receivedprior to 3[rd] day of April 2001: 13. The authority, who is prescribed for such approval is theChief Commissioner or Director General. Rule 2CA which relates to theguidelines for approval in respect of clause (vi) of sub-section (23C)of section 10 which applies to the present facts of the case, is asfollows: “Rule 2CA. (1) The prescribed authority under sub-clauses(vi) and (via) of clause (23C) of section 10 shall be theChief Commissioner or Director General, to whom theapplication shall be made as provided in sub-rule (2). (1A) The prescribed authority under sub-clauses (vi) and(via) of clause (23C) of section 10 shall be the CentralBoard of Direct Taxes constituted under the Central Board ofRevenue Act, 1963 (54 of 1963) for applications receivedprior to 3[rd] day of April 2001: Provided that in case of applications received prior to3[rd] day of April, 2001 where no order has been passed grantingapproval or rejecting the application as on 31[st] day ofMay,2007, the prescribed authority under sub-clauses (vi) and(via) of clause (23C) of section 10 shall be the ChiefCommissioner or Director General. (2) An application for approval shall be made in FormNo.56D by any university or other educational institution orany hospital or other medical institution referred to in sub-clause (vi) or sub-clause (via) of clause (23C) of section10. (3) The approval of the Central Board of Direct Taxes orChief Commissioner or Director General, as the case may be,granted before the 1[st] day of December, 2006 shall at any onetime have effect for a period not exceeding three assessmentyears.[Explanation.- For the purposes of this rule, “ChiefCommissioner or Director General” means the ChiefCommissioner or Director General whom the Central Board ofDirect Taxes may, authorise to act as prescribed authority,for the purpose of sub-clause (vi) or sub-clause(via) ofclause (23C) of Section 10, in relation to any university orother educational institution or any hospital or othermedical institution.]” 14. The proviso to the said rule which enables an application forapproval to be made in Form 56D, in column 7 mandates that the assesseeshould enclose the audited accounts and the balance sheet for the lastthree years and the said clause is as follows: “7. Enclose copies of audited accounts and balance sheetsfor the last three years along with a note on the examinationof accounts and on the activities as reflected in theaccounts and in the annual reports with special reference tothe appropriation of income towards objects of the universityor other educational institution or hospital or other medicalinstitution referred to in serial number 1.” 15. The said rule especially sub-rule (3) makes it clear that theapproval granted before the 1[st] December, 2006 at one time shall be https://hcservices.ecourts.gov.in/hcservices/ effected for the period of not exceeding three assessment years.Therefore, it is clear that the exemption granted once is not final orcontinuing one and it can always be revoked. 16. The various clauses of income referred to in section 10(23C)(vi) which are eligible for exemption are explained in various provisosindicating the manner of making application, etc. For the betterappreciation of the facts in issue it is desirable to extract theprovisos which are relevant for the purpose of this case, as follows: “Provided that the fund or trust or institution [or anyuniversity or other educational institution or any hospitalor other medical institution] referred to in sub-clause (iv)or sub-clause (v) [or sub-clause (vi) or sub-clause (via)]shall make an application in the prescribed form and mannerto the prescribed authority for the purpose of grant of theexemption, or continuance thereof, under sub-clause (iv) orsub-clause(v) [or sub-clause (vi) or sub-clause (via)]: 16. The various clauses of income referred to in section 10(23C)(vi) which are eligible for exemption are explained in various provisosindicating the manner of making application, etc. For the betterappreciation of the facts in issue it is desirable to extract theprovisos which are relevant for the purpose of this case, as follows: “Provided that the fund or trust or institution [or anyuniversity or other educational institution or any hospitalor other medical institution] referred to in sub-clause (iv)or sub-clause (v) [or sub-clause (vi) or sub-clause (via)]shall make an application in the prescribed form and mannerto the prescribed authority for the purpose of grant of theexemption, or continuance thereof, under sub-clause (iv) orsub-clause(v) [or sub-clause (vi) or sub-clause (via)]: [Provided further that the prescribed authority, beforeapproving any fund or trust or institution or any universityor other educational institution or any hospital or othermedical institution, under sub-clause (iv) or sub-clause (v)or sub-clause (vi) or sub-clause (via), may call for suchdocuments (including audited annual accounts) or othereducational institution or any hospital or other medicalinstitution, as the case may be, as it thinks necessary inorder to satisfy itself about the genuineness of theactivities of such fund or trust or institution or anyuniversity or other educational institution or any hospitalor other medical institution, as the case may be, and theprescribed authority may also make such inquiries as it deemsnecessary in this behalf:] Provided also that the fund or trust or institution [orany university or other educational institution or anyhospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) [or sub-clause (vi) or sub-clause (via)]- [(a) applies its income, or accumulates it forapplication, wholly and exclusively to the objects for whichit is established and in a case where more than fifteen percent of its income is accumulated on or after the 1[st] day ofApril, 2002, the period of the accumulation of the amountexceeding fifteen per cent of its income shall in no caseexceed five years; and] [(b) does not invest or deposit its funds, other than- (i) any assets held by the fund, trust or institution[or any university or other educational institution or anyhospital or other medical institution] where such assets formpart of the corpus of the fund, trust or institution [or any university or other educational institution or any hospitalor other medical institution] as on the 1[st] day of June, 1973;(ia) any asset, being equity shares of a public companyheld by any university or other educational institution orany hospital or other medical institution where such assetsform part of the corpus of any university or othereducational institution or any hospital or other medicalinstitution as on the 1[st] day of June,1998;] (ii) any assets (being debentures issued by, or onbehalf of any company or corporation), acquired by the fund,trust or institution [or any university or other educationalinstitution or any hospital or other medical institution]before the 1[st] day of March 1983; (iii) any accretion to the shares, forming part of thecorpus mentioned in sub-clause (i) [and sub-clause (ia), byway of bonus shares allotted to the fund, trust orinstitution [or any university or other educationalinstitution or any hospital or other medical institution]; (iv) voluntary contributions received and maintained inthe form of jewellery, furniture or any other article as theBoard may, by notification in the Official Gazette, specify,for any period during the previous year otherwise than in anyone or more of the forms or modes specified in sub-section(5) of section 11:] (iii) any accretion to the shares, forming part of thecorpus mentioned in sub-clause (i) [and sub-clause (ia), byway of bonus shares allotted to the fund, trust orinstitution [or any university or other educationalinstitution or any hospital or other medical institution]; (iv) voluntary contributions received and maintained inthe form of jewellery, furniture or any other article as theBoard may, by notification in the Official Gazette, specify,for any period during the previous year otherwise than in anyone or more of the forms or modes specified in sub-section(5) of section 11:] Provided also that the exemption under sub-clause (iv)or sub-clause (v) shall not be denied in relation to anyfunds invested or deposited before the 1[st] day of April, 1989,otherwise than in any one or more of the forms or modesspecified in sub-section (5) of section 11 if such funds donot continue to remain so invested or deposited after the 30[th]day of March, 1993]: [Provided also that the exemption under sub-clause (vi)or sub-clause (via) shall not be denied in relation to anyfunds invested or deposited before the 1[st] day of June, 1998,otherwise than in any one or more of the forms or modesspecified in sub-section (5) of section 11 if such funds donot continue to remain so invested or deposited after the 30[th]day of March,2001:] [Provided also that the exemption under sub-clause (iv)or sub-clause (v) [or sub-clause (vi) or sub-clause (via)shall not be denied in relation to voluntary contribution,other than voluntary contribution in cash or voluntarycontribution of the nature referred to in clause (b) of thethird proviso to this sub-clause, subject to the conditionthat such voluntary contribution is not held by the trust orinstitution [or any university or other educational institution or any hospital or other medical institution],otherwise than in any one or more of the forms or modesspecified in sub-section (5) of section 11, after the expiryof one year from the end of the previous year in which suchasset is acquired or the 31[st] day of March,1992, whichever islater:] Provided also that nothing contained in sub-clause (iv)or sub-clause (v) [or sub-clause (vi) or sub-clause(via)]shall apply in relation to any income of the fund or trust orinstitution [or any university or other educationalinstitution or any hospital or other medical institution],being profits and gains of business, unless the business isincidental to the attainment of its objectives and separatebooks of account are maintained by it in respect of suchbusiness: Provided also that any [notification issued by theCentral Government under sub-clause (iv) or sub-clause (v),before the date on which the Taxation Laws (Amendment) Bill,2006 receives the assent of the President, shall, at any onetime, have effect for such assessment year or years, notexceeding three assessment years] (including an assessmentyear or years commencing before the date on which suchnotification issued) as may be specified in thenotification:] [Provided also that where an application under the firstproviso is made on or after the date on which the TaxationLaws (Amendment) Bill, 2006 receives the assent of thePresident, every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under [sub-clause (iv)or sub-clause (v) or] sub-clause (vi) or sub-clause (via)shall be granted or an order rejecting the application shallbe passed within the period of twelve months from the end ofthe month in which such application was received. [Provided also that where an application under the firstproviso is made on or after the date on which the TaxationLaws (Amendment) Bill, 2006 receives the assent of thePresident, every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under [sub-clause (iv)or sub-clause (v) or] sub-clause (vi) or sub-clause (via)shall be granted or an order rejecting the application shallbe passed within the period of twelve months from the end ofthe month in which such application was received. Provided also that where the total income, of the fundor trust or institution or any university or othereducational institution or any hospital or other medicalinstitution referred to in sub-clause (iv) or sub-clause (v)or sub-clause (vi) or sub-clause (via), without giving effectto the provisions of the said sub-clauses, exceeds themaximum amount which is not chargeable to tax in any previousyear, such trust, hospital or other medical institution shallget its accounts audited in respect of that year by anaccountant as defined in the Explanation below sub-section(2) of section 288 and furnish along with the return ofincome for the relevant assessment year, the report of suchaudit in the prescribed form duly signed and verified by suchaccountant and setting forth such particulars as may beprescribed:] [Provided also that any amount of donation received bythe fund or institution in terms of clause (d) of sub-section(2) of section 80G [in respect of which accounts of incomeand expenditure have not been rendered to the authorityprescribed under clause (v) or sub-section (5C) of thatsection, in the manner specified in that clause, or] whichhas been utilised for purposes other than providing relief tothe victims of earthquake in Gujarat or which remainsunutilised in terms of sub-section (5C) of section 80G andnot transferred to the Prime Minister's National Relief Fundon or before the 31[st] day of March,2004 shall be deemed to bethe income of the previous year and shall accordingly becharged to tax. [Provided also that where the fund or trust orinstitution or any university or other educationalinstitution or any hospital or other medical institutionreferred to in sub-clause (iv) or sub-clause (v) or sub-clause(vi) or sub-clause (via) does not apply its incomeduring the year of receipt and accumulates it, any payment orcredit out of such accumulation to any trust or institutionregistered under section 12AA or to any fund or trust orinstitution or any university or other educationalinstitution or any hospital or other medical institutionreferred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be treated asapplication of income to the objects for which such fund ortrust or institution or university or educational institutionor hospital or other medical institution, as the case may be,is established: Provided also that where the fund or institutionreferred to in sub-clause (iv) or trust or institutionreferred to in sub-clause (v) is not notified by the CentralGovernment [or is approved by the prescribed authority, asthe case may be,] or any university or other educationalinstitution referred to in sub-clause (vi) or any hospital orother medical institution referred to in sub-clause (via), isapproved by the prescribed authority and subsequently thatGovernment or the prescribed authority is satisfied that- (i) such fund or institution or trust or any universityor other educational institution or any hospital or othermedical institution has not- (A) applied its income in accordance with theprovisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordancewith the provisions contained in clause (b) of the thirdproviso; or (ii) the activities of such fund or institution or trust (i) such fund or institution or trust or any universityor other educational institution or any hospital or othermedical institution has not- (A) applied its income in accordance with theprovisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordancewith the provisions contained in clause (b) of the thirdproviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or anyhospital or other medical institution- (A) are not genuine; or (B) are not being carried out in accordance withall or any of the conditions subject to which it was notifiedor approved, it may, at any time after giving a reasonable opportunity ofshowing cause against the proposed action to the concernedfund or institution or trust or any university or othereducational institution or any hospital or other medicalinstitution, rescind the notification or, by order, withdrawthe approval, as the case may be, and forward a copy of theorder rescinding the notification or withdrawing the approvalto such fund or institution or trust or any university orother educational institution or any hospital or othermedical institution and to the Assessing Officer:] [Provided also that in case the fund or trust orinstitution or any university or other educationalinstitution or any hospital or other medical institutionreferred to in the first proviso makes an application on orafter the 1[st] day of June, 2006 for the purposes of grant ofexemption or continuance thereof, such application shall be[made on or before the 30[th] day of September of the relevantassessment year] from which the exemption is sought:] [Provided also that any annonymous donation referred toin section 115BBC on which tax is payable in accordance withthe provisions of the said section shall be included in thetotal income:] [Provided also that all pending applications, on whichno notification has been issued under sub-clause (iv) or sub-clause (v) before the 1[st] day of June, 2007, shall standtransferred on that day to the prescribed authority and theprescribed authority may proceed with such applications underthose sub-clauses from the stage at which they were on thatday;]” 17. The first proviso prescribes that application should be madein the prescribed form for grant of exemption or for continuance ofexemption, which means that such application should be made for everyassessment year. 18. Under the third proviso, when an institution covered undersection 10(23C)(vi) applies its income or accumulates it forapplication, wholly to the objects for which it is established and in acase where 15% of its income is accumulated on or after 1.4.2002, theamount exceeding 15% shall not be accumulated beyond five years.Further, the said proviso makes it clear that such institution shallnot deposit or invest its funds other than 5 circumstances mentioned 17. The first proviso prescribes that application should be madein the prescribed form for grant of exemption or for continuance ofexemption, which means that such application should be made for everyassessment year. 18. Under the third proviso, when an institution covered undersection 10(23C)(vi) applies its income or accumulates it forapplication, wholly to the objects for which it is established and in acase where 15% of its income is accumulated on or after 1.4.2002, theamount exceeding 15% shall not be accumulated beyond five years.Further, the said proviso makes it clear that such institution shallnot deposit or invest its funds other than 5 circumstances mentioned therein, during the previous year otherwise than in any one or more ofthe forms or modes specified in section 11(5) of the Income-tax Actwhich prescribes the modes of investing or depositing the moneysincluding the investment in saving certificates as defined in theGovernment Saving Certificates Act, 1959, the deposit in any accountwith the Post Office Savings Bank, any scheduled bank or co-operativesociety engaged in carrying on business of banking, investment in unitsof the Unit Trust of India established under the Unit Trust of IndiaAct, 1963, investment in any security for money created and issued bythe Central or State Government, investment in debentures issued by oron behalf of any company or corporation guaranteed by the CentralGovernment or State Government, investment or deposit in any publicundertaking, deposit or investment in any bonds issued by a financialcorporation which is engaged in providing long term finance forindustrial development in India, deposit or investment in any bondsissued by a public company with the main object of carrying on thebusiness of providing long term finance for construction or purchase ofhouses in India for residential purposes, deposit or investment inbonds issued by a public company with the main object of carrying onthe business of providing long term finance for urban infrastructure inIndia, investment in immovable properties, deposit with IndustrialDevelopment Bank of India established under Industrial Development Bankof India Act, 1964 or any other modes of investment as prescribed. Rule17C prescribes various modes of investment in that regard. 19. The 8[th] proviso relied on by the learned senior counsel for thepetitioner to substantiate his contention that the conduct only inrespect of only three assessment years should be taken intoconsideration for granting exemption is not applicable to the facts ofthe present case for the reason that the said proviso relates to theexemption to be granted to the charitable purposes or trust orinstitution wholly for public religious purposes whereas in the presentcase, the issue involved relates to University or other educationalinstitutions. However, it is true that in respect of trust orcharities, the notification issued by the Government therefor beforethe date of Taxation Laws (Amendment) Bill, 2006 received the assent on13.7.2006 would have the effect for such assessment year or years, notexceeding three assessment years. 20. The 9[th] proviso makes it clear that after coming into effect ofthe Taxation Laws (Amendment) Bill, 2006 on 13.7.2006, any applicationmade in respect of grant of exemption shall be either granted orrejected within the period of 12 months from the end of the month fromwhich such application was made. That relates to the grant ofexemption. 21. The 11[th] proviso says that in cases where the institution doesnot apply its income during the year of receipt and accumulates it, anypayment or credit out of such accumulation to any trust or institutionregistered under Section 12AA or to any fund or trust or institution oruniversity or other educational institution or any hospital or other 20. The 9[th] proviso makes it clear that after coming into effect ofthe Taxation Laws (Amendment) Bill, 2006 on 13.7.2006, any applicationmade in respect of grant of exemption shall be either granted orrejected within the period of 12 months from the end of the month fromwhich such application was made. That relates to the grant ofexemption. 21. The 11[th] proviso says that in cases where the institution doesnot apply its income during the year of receipt and accumulates it, anypayment or credit out of such accumulation to any trust or institutionregistered under Section 12AA or to any fund or trust or institution oruniversity or other educational institution or any hospital or other medical institution, etc., that shall not be treated as an applicationof income