IN INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA.No.2913/Ahd/2015 Asstt. Year: 2013-2014 Dharmaj Kelvani Mandal Chief CIT, Ayakar Bhavan Post Box NO.31 Vs Vadodara. Dharmaj Anand 388 430. PAN : AAATD 1986 G (Appellant) (Respondent) Assessee by : Shri Deepak R. Shah, AR Revenue by : Shri Jagdish, CIT-DR Date of Hearing : 23/08/2016 Date of Pronouncement: 07/10/2016 ORDER PER RAJPAL YADAV, ACCOUNTANT MEMBER Assessee is in appeal before Tribunal against order of Chief Commissioner of Income-tax dated 29.9.2014. 2. Grievance of assessee is that ld.CCIT has erred in rejecting application moved by assessee under section 10(23C)(vi) of Income Tax Act for Asstt.Year 2013-14. 3. Registry has pointed out that appeal is time barred by 311 days. In order to explain delay, affidavit of Shri Haresh V. Patel, trustee of appellant trust has been filed. In this affidavit, it has been deposed that ld.CIT ITA No.2913/Ahd/2015 2 has rejected application of assessee vide order dated 29.9.2014 and appeal bearing ITA No.2930/Ahd/2014 was filed before Tribunal on 10.10.2014. This appeal was dismissed by Tribunal on 10.4.2015 being not maintainable. At that point of time, no appeal was provided against order passed under section 10(23)(c)(vi) of Income Tax Act. Therefore, assessee has filed Special Civil Application No.10233 of 2015 before Hon ble Gujarat High Court. This application was filed on 9.6.2015 i.e. immediately after withdrawal of appeal from Tribunal. During pendency of this appeal, there has been amendment in Income Tax Act whereby clause (f) to Section 253(1) has been added. By virtue of this amendment appeal has been provided before Tribunal against order of prescribed authority passed under section 10(23)(c)(vi) of Act. assessee has withdrawn SCA from Hon ble High Court and filed present appeal before Tribunal on 16.10.2015. On strength of these details, it has been pleaded that appeal is not time barred, rather, there is procedural delay. After going through record, we find that assessee was always vigilant. It has wrongly availed remedy of appeal before Tribunal in 2014, but after disposal of appeal, being not maintainable, it went to Hon ble High Court by way of SCA. All these steps have been taken within period of limitation that was available for filing appeal. These steps indicate that assessee was always serious and vigilant in safeguarding its right. There is no dilatory strategy by assessee in prosecuting litigation. Considering above facts and circumstances, we condone delay of 311 days in filing appeal before Tribunal and proceed to decide appeal on merit. 4. ld.counsel for assessee, at very outset, submitted that assessee-trust came into existence on 1.1.2015. It was registered under Bombay Public Trust Act, 1950 on 29.10.1954. First page of Registration ITA No.2913/Ahd/2015 3 has been placed on page no.1 of paper book. Copy of trust deed has also been placed on pageno.1 to 9. trust has applied for registration under section 12A(a) of Act on 18.2.1999. Registration has been granted to trust vide order dated 25.8.1999. This registration has been granted w.e.f. 1.4.1998. assessee has also been granted registration under section 80G of Act. Copies of these registration certificates are available at page nos.103 and 104 of paper book. assessee filed application in form No.56D on 29.9.2011 seeking issuance of exemption certificate under section 10(23)(c) (vi). stand of assessee was that it has been existing solely for educational purpose and it fulfilled all other requisite conditions. Ld.CIT has made reference to object clause of trust deed and observed that under clauses (b) and (c), applicant trust is empowered to collect funds and accept funds and it can manage other institutions. Therefore, it cannot be construed that assessee solely existing for educational purpose. This application of applicant-trust has been rejected. ld.counsel for assessee while impugning order of CCIT contended that ld.CCIT has made reference to decision of Hon ble Supreme Court in case of Dharamposhanam, 114 ITR 463. ld.CCIT has made reference to last paragraphs of this judgment, but failed to note complete paragraphs. He has just picked up few lines and drew inference contrary to proposition laid down in this decision. He further contended that ld.CCIT noted that in main object of trust under clause (2)(c) of Trust deed it has been provided that Trust can manage any public institution of village. But it is only ancillary object. It has never been acted upon by assessee. Hon ble Supreme Court in case of Dharamposhanam (supra) has also observed that if there is evidence, pointing out to conclusion that assessee has not carried out any other activity, as mentioned in ancillary object, but exclusively carried out agriculture activity, then status of assessee will be decided by ignoring ITA No.2913/Ahd/2015 4 existence of such ancillary objects. He emphasised that ld.CIT(A) has made reference to few lines from judgment of Hon ble supreme Court and used them out of context. He took us through complete paragraph which read as under: It has been urged on behalf of appellant that what should be taken into consideration is activity actually conducted by assessee, and not what is open to it under provisions of its Memorandum of Association. We do not agree. Wheth er trust is for charitable purposes falls to be determined by reference to all objects for which trust has been brought into existence. See Tennent Plays, Ltd. v. Commissioner of Inland Revenue(3) and Incorporated Council of Law Reporting for England and Wales v. Attorney- General and Commissioners of Inland Revenue(4). In Rex v. Special Commissioners of Income-Tax(5), it was pointed out by Court of Appeal in England that if settlor reserves to himself power of appointment under which he might appoint to non- charitable purposes, trust cannot claim exemption even though power of appointment is in fact exercised in favour of charitable object. It would be different case where one or more of objects mentioned in Memorandum of Association although included therein were never intended to be undertaken. If there is evidence pointing to that conclusion clearly Court will ignore object and proceed to consider case as if it did not exist in Memorandum. In C.I.T. Kerala v. Dharmodayam Co. (Supra), it was that basis on which this Court proceeded when it observed that assessee had never engaged itself in any industry or in any other activity of public interest. On aforesaid considerations, we endorse final conclusion of High Court and hold that it rightly answered question referred to it in several references in negative, in favour of respondent and against appellant. These appeals are dismissed with costs, limited to one set only. 5. Apart from above, he made reference to following decisions and contended that in all these decisions, it has been considered that if assessee has not undertaken other objects mentioned in object clause of trust-deed, and only working for education, then exemption under section 10(23C)(vi) will not be denied to assessee. i) C.P. Vidya Niketan Inter College Shikshabn Society, 359 ITR 322 (All) ii) Hardayal Charitable & Education Trust, 355 ITR 0534 (All) ITA No.2913/Ahd/2015 5 iii) Vanita Vishram Trust, 327 ITR 121 (Bom) iv) Geetanjali Education Society, 339 ITR 333 (Kar) 6. On other hand, ld.DR contended that present appeal is not maintainable before Tribunal, because power to grant approval under section 10(23C)(vi) has been conferred upon Commissioner w.e.f 15.11.2014. He made reference to Rule 2CA and Form No.56D of Income Tax Rules,1962. Prior to this, CCIT was authorized to grant such approval. After conferment of power upon Commissioner, amendment has been made in section 253 of Income Tax Act, whereby, clause (f) has been appended w.e.f. 1.6.2015. In present case, impugned order was passed by CCIT and therefore, it is not amenable to appeal before Tribunal. He made reference to decision of Hon ble High Court of Orissa in case of Orissa Trust of Technical Educational Vs. CCIT, 178 TAXMAN 363 (Ori.). He placed on record copy of Hon ble High Court. 7. We have duly considered rival contentions and gone through record carefully. Section 253 of Income Tax Act provides right to assessee to file appeal before Tribunal against orders mentioned therein. It is pertinent to take note of this section. It reads as under: 253. (1) Any assessee aggrieved by any of following orders may appeal to Appellate Tribunal against such order (a) . .. .. [(f) order passed by prescribed authority under sub-clause (vi) or sub-clause (via) of clause (23C) of section 10] 8. In appeal to Tribunal under section 253(1) of Act, any assessee aggrieved by any of following orders may appeal to Appellate Tribunal against such orders. ITA No.2913/Ahd/2015 6 9. Order passed by prescribed authority under sub-clause (vi) and sub- clause (via) of clause (23C) of Section 10. bare perusal of above provision would indicate that appeal has been provided against order of prescribed authority passed under section 10(23C)(vi). prescribed authority can be Commissioner or Chief Commissioner or any other Authority. If Legislature has no intention to provide appeal against order passed by Chief Commissioner of Income Tax, then that could have been specifically provided in clause. It could be provided that appeal would lie to Tribunal against order passed by Commissioner or any other prescribed authority below rank of Commissioner. But no such procedure has been provided. As far as decision relied upon by ld.DR is concerned, that is not applicable on facts of present case. In that case, assessee has filed application to Chief Commissioner for seeking approval under section 10(23C). These were applicable for F.Y.1998- 99 to 2005-06. ld.Chief Commissioner kept application pending, and ultimately rejected them by order dated 2.2.2007. assessee alleged that when applications were made to Chief Commissioner he was not empowered to grant approval. It was CBDT which alone could grant approval. Therefore, CCIT was not competent to reject or allow application of assessee. In that context, Hon ble Court has held that CCIT has no power to adjudicate applications. Admittedly, in present case, no such fetter has been imposed upon Tribunal. No doubt order was passed by CCIT and when he passed order, appeal to Tribunal was not provided. But Tribunal has power to condone delay for entertaining any appeal and power of Tribunal has not been restricted against impugned order. ld.DR cannot draw any benefit from this decision, and appeal is maintainable before Tribunal. ITA No.2913/Ahd/2015 7 10. As far as merit of case is concerned, we find that following clause of Trust-deed has been considered by Prescribed Authority: "(a) To spread amongst people of Dharmaj primary, secondary, higher, commercial, industrial as well as agricultural education and to employ suitable means for spread of intellectual, physical and moral education in town. b) to collect funds, to accept Trust funds, to execute them, and to whatsoever is necessary for accomplishment of abovementioned aims. c) To manage any public Institution of village." 11. ld.prescribed authority was of opinion that under clause (b) and (c), assessee could entertain any other objects than education. Therefore, assessee is not entitled for approval under section 10(23C)(vi) of Act. This situation has been considered in judgement relied upon by ld.counsel for assessee. It is pertinent to make reference to observations of Hon ble Allahbad High Court in case of C.P. Vidya Niketan Inter College Shikshan Society Vs. UOI, 40 taxmann.com 76. It reads as under: 23. In present case petitioner society is registered charitable society with Registrar of Societies and is also registered under Section 12A with its objects of establishing, running and maintaining educational institutions. It has school by name of C.P. Vidya Niketan Inter College. At present society does not have any activity other than running and maintaining educational institutions. other objects and purposes in 'Smriti Patra' may, if such objects are undertaken, may constitute such purpose, to be other than educational purpose, but at present it cannot be said nor there is any allegation or material either brought before Chief Commissioner of Income Tax, Ghaziabad or referred to in counter affidavit, which may be other than education. There are adequate safeguards, that if activities other than educational activities are undertaken, exemption may be withdrawn, but in absence of any such allegation it cannot be said merely on enumeration of activities, which are all primarily connected with education and charity that society does not exist ITA No.2913/Ahd/2015 8 solely for purpose of imparting education. case in hand is quite similar to that of Vanita Vishram Trust v. Chief Commissioner of Income Tax & Anr. (Supra), and satisfies tests laid down in American Hotel and Lodging Association Educational Institute (Supra) as well as view taken by this Court in Ewing Christian College Society (Supra) in which it was held that where it is not disputed that society runs educational institution, and is not for purposes of making profit, merely because object of society is also to serve church and nation would not mean that educational institution not existing solely for educational purpose. 24. In facts and circumstances, we are of opinion that as of now petitioner society running educational institution by name of C.P. Vidya Niketan Inter College at Kaimganj, Distt. Farrukhabad imparts education to students from Class VI to XII, in absence of any allegation or material, object clause providing for other charitable activities, would not disentitle society from approval under Section 10 (23C) (vi) of exemption. proviso added to Section 10 (23C) (vi), specially Proviso 2, 3, 12 and 13, give sufficient powers to check abuse of exemption. mere possibility, therefore, that society may in future pursue activities, which are not charitable, or closely connected with education for making profit, would not constitute grounds to reject approval under Section 10 (23C) (vi). 25. On question of satisfaction of Prescribed Authority of conditions of Second Proviso to Section 10 (23C) (vi), we are of view that Chief Commissioner of Income Tax did not give sufficient opportunity to petitioner, to place documents relevant to enquiry before rejecting application. contents of paragraph 9 of writ petition that hearing proceeded on same day on 27.5.2011, when petitioner was required to produce audit report under Rule 16CC in Form 10BB, and petitioner was granted time to furnish same within three days, has not been specifically denied in counter affidavit. reply is rather argumentative. We also find that there was no hurry to close enquiry in as much as rejection of application will visit serious consequence on petitioner in as much as having exceeded aggregate receipts over and above Rupees One crore, income of society in absence of exemption under Section 10 (23C) (vi) would not qualify for exemption. ITA No.2913/Ahd/2015 9 12. Similarly, Hon ble Allahabad High Court has again considered in case of CIT Vs. Hardayal Charitable & Education Trust, 46 taxmann.com 16 (All). observation of Hon ble High Court reads asunder: 6. Before Tribunal, it was sought to be asserted on behalf of Department that assessee does not exist solely for educational purposes since in its Memorandum, it is permitted to follow, what Tribunal described, certain generalised objects which go beyond educational activities. In this regard, Tribunal relied upon decision of this Court in Neeraj Janhitkari Gramin Sewa Sansthan v. Chief CIT [2014] 360 ITR 168/[2013] 218 Taxman 61/36 taxmann.com 105 (All.), in holding that where society is pursuing only educational objects and no activity is carried out, application for approval under sub-clause (6) of section 10(23C) cannot be rejected on ground that object clause may contain several other objects apart from educational objects. Tribunal held that there may be certain dormant objects which have never been pursued in reality by assessee and mere existence thereof in Memorandum constituting assessee would not be sufficient to decline exemption. 7. In determining as to whether assessee is entitled to benefit of clause (iiiad) of section 10(23C), following requirements must be fulfilled: firstly assessee should be university or educational institution; secondly, assessee must not exist solely for purposes of profit; thirdly aggregate annual receipts must not exceed amount as prescribed. amount prescribed is Rs.1 crore. assessee cannot be held not to exist solely for educational purposes merely on basis that object clause under which assessee is constituted contains certain generalised objects, so long as assessee had carried on no other activity save and except conducting education. This principle had been laid down in judgment of Bombay High Court in VanitaVishram Trust v. Chief CIT [2010] 327 ITR 121/192 Taxman 389 (Bom.). This view has been followed by Division Bench of this Court in C.P. VidyaNiketan Inter College Shikshan Society v. Union of India [2013] 359 ITR 322/213 Taxman 139/40 taxmann.com 76 (All.) and Neeraj Janhitkari Gramin Sewa Sansthan (supra). 8. In present case, it has never been contention of revenue either before CIT(A) or before Tribunal that assessee had carried on any activity other than education. Assessing Officer, it may be noted, relied on prospectus of assessee which made ITA No.2913/Ahd/2015 10 reference to business carried on by Private Limited Company in same "group" as assessee. These observations which are extracted in order of Assessing Officer are from order passed by CIT-II, Agra on 23 August 2011 rejecting request of assessee for registration under section 12AA. This view was, however, as noted earlier, reversed in judgment of Division Bench of this Court dated 15 March 2013 against which no challenge has been preferred by revenue before Supreme Court. But that apart, it must be noted that assessee is trust and not Private Limited Company. trust admittedly does not carry on any other business save and except conducting education. 9. Finally, it may be necessary to note that entitlement of assessee to exemption under section 10(23C) was dealt with by CIT(A). We find no reason or justification to hold that CIT(A) ought to have remitted proceedings before Assessing Officer. material to arrive at such conclusion was before CIT(A). only objection which was raised on behalf of revenue has been found to be untenable. 13. Hon ble Karntaka High Court has also got occasion to consider issue. Hon ble Karnataka High Court has made reference to decision of Hon ble Allahabad High Court in case of C.P. Vidya Niketan Inter College Shikshan Society (supra) and concurred with this. finding recorded by Hon ble Karnataka High Court is also worth note. 10. After making these observations, Supreme Court set aside order passed by Central Board of Direct Taxes and remitted matter for fresh consideration in accordance with law and while doing so, clarified that, in that case, appellant had fulfilled, threshold pre-condition of actual existence of educational institution underSection 10(23C) (vi) and therefore, on that count, Central Board of Direct Taxes, would not reject approval application made by appellant therein. 11. From bare perusal of observations made by Supreme Court in American Hotel's case, what appears to us, is that Assessing Officer while considering case, such as one in hand, has to closely analyse activities of Institute, objects of Institute, its sources of income and utilization. In that case, Supreme Court considered its activities as reflected in paragraph quoted above and therefore, ITA No.2913/Ahd/2015 11 while remanding matter, made it clear that appellant had fulfilled threshold pre-condition of actual existence of educational institution underSection 10(23C) (vi) with further direction to Central Board of Direct Taxes not to reject approval application on that ground. Two of objects in that case as reflected in judgment were also to offer National Council lowest possible prices for products and services sold to or utilized by schools under umbrella of Government of India and so also to utilize Indian Authors whenever possible in development of customized programmes. Supreme Court, despite these objects/activities, held that institution in American Hotel was involved only in educational activities, perhaps on ground that it was not carrying on those activities. 12. Sri. Shankar, learned counsel appearing for appellant at outset, invited our attention to judgment of Allahabad High Court in C P Vidya Niketan Inter College Shikshan Society -vs- Union of India and others (2013) 359 ITR 322 (All) (for short C P Vidyaniketan') and submitted that after considering judgment of Supreme Court in American Hotel, High Court held that where it is not disputed that society runs educational institution and is not for purposes of making profit, merely because object of Society is also to serve church and nation would not mean that educational institution not existing solely for educational purpose. This observation was made by High Court after referring to judgments in C P Vidya Niketan and American Hotel. Bombay High Court in Vanita Vishram Trust -vs- Chief Commissioner of Income-Tax and another (2010) 327 ITR 121 (Bom) after considering provision contained in Section 10(23C)(vi) of Act observed that though objects clause contained varied objects including management and development of moveable and immoveable properties, statement of fact before Court, which was not disputed, was that only activity carried out by Trust ever since its inception was conduct of educational institutions. Institution, in that case, had history of over 80 years during course of which only activity was of conducting educational institution. 13. In present case, it is not in dispute that society has been conducting primary and secondary school in State of Karnataka since 2002. Nor is there any dispute before us that save and except for conducting school, society has carried on any other activities since then. Without expressing any opinion whether object, as reflected in ITA No.2913/Ahd/2015 12 Clause 3(b) and 3(h) of Memorandum of Association, are related to education, it is clear that save and except educational activity assessee did not/do not carry on any other activity is fact, which is not in dispute. In other words, though activities as reflected in Clause 3(b) and 3(h), may constitute purpose, other than educational purpose, but, during relevant assessment year, it is not case of revenue nor is there any material to show, that society was running any activities other than educational activity. In this view of matter, we are of considered opinion that view taken by Tribunal is not correct and deserves to be set aside. There are adequate safeguards that if activities other than educational activities are undertaken by society, exemption granted can be withdrawn. Merely, because there exists object, which is not related to educational activities, in our opinion, is not sufficient to deny exemption/benefit of Section 10(23C)(iiiad)of Act. In short, in absence of any allegation or material against society showing that they are involved in any other activities than educational activities, in our opinion, it cannot be denied exemption under Section 10(23C)(iiiad). In circumstances, we answer both substantial questions of law in favour of assessee and against revenue. 14. In light of above, if we examine facts of present case, then it would reveal that assessee trust came to existence in 1954. It is running educational institutions. It has been registered under Section 12AA of Act since 25.8.1998. It is also enjoying exemption under section 80G. Thus, department has never doubted about genuineness of activities of trust and purpose of its existence. While rejecting application of Trust under section 10(23C), ld.CCIT has not pointed out any specific aspect. He only harboured belief that assessee might have some ancillary activities not associated with education. This is only hypothetical observation. In all these decisions, it has been propounded that if assessee has not taken other objections mentioned in trust deed, and exclusively carried out activities of education, then approval under section 10(23C) will not be denied. Respectfully following these decisions, we allow appeal of assessee and direct prescribed authority to grant approval ITA No.2913/Ahd/2015 13 under section 10(234C)(vi) of Income Tax Act to assessee for Asstt.Year 2013-14. 15. In result, appeal of assessee is allowed. Order pronounced in Court on 7th October, 2016 at Ahmedabad. Sd/- Sd/- (ANIL CHATURVEDI) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 07/10/2016 Dharmaj Kelvani Mandal v. Chief CIT, Vadodara