Laura Entwistle & Ors. vs Uoi &Ors.
2011 Latest Caselaw 342 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      W.P.(C) 10579/2009

       LAURA ENTWISTLE & ORS.               ..... Petitioner
                      Through Mr. Porus Kaka, Sr. Advocate with
                              Mr. Divesh Chawla, Mr. Jay Savla,
                              Advocates.
               versus

       UOI &ORS.                                    ..... Respondent
                          Through      Mr. Baldev Malik, Advocate for R-
                                       1 to 3.
                                       Ms. Suruchi Aggarwal, Advocate
                                       for R-4.
       CORAM:
       HON'BLE THE CHIEF JUSTICE
       HON'BLE MR. JUSTICE SANJIV KHANNA
                     ORDER

% 20.01.2011

The petitioner, an educational institution, involved in imparting

education and solely working for education purposes, invokes jurisdiction

of this Court under Article 226 of the Constitution of India. The petitioner

had applied for grant of approval under Section 10(23C) (vi) of the

Income Tax Act, 1961 (Act for short) for providing exemption, on 12th

November, 1999. The second respondent vide order dated 7th June, 2001,

Annexure P-17, rejected the same by passing the following order:-

"It is observed from the Auditor's report that the RBI's permission under section 31(1) of the Foreign Exchange Regulation Act, 1973 to acquire the land on

lease from Mumbai Metropolitan Religion Development Authority (MMRDA) at a consideration of Rs.7,608,516/- has not obtained to the School. The school has filed and returns of income for the first time with DDIT (E) (2) Mumbai for the year 1999-2000 under section 10(22) of the Income Tax Act. The School has not filed the returns of income tax the earlier years. The returns filed for A.Y 1999-2000 is Form No.3 and not in form No.3A which is for charitable trust claiming Benefit of section 11/12 of the Act. It is also not registered u/s 12A of the Income Tax Act 1961. The donations received are transferred to the Income & Expenditure account over the estimated useful life of the respective assets. The propose of the donation is not mentioned in the Foreign Inward Remittance Certificates (FIRC's).

3. In view of the above, I am directed to say that the American school of Bombay does not fulfill the requirement of section 10(23C)(vi) of the Income Tax Act 1961. It is therefore, regretted that our request for approval u/s 10(23C)(vi) of the Income Tax Act 191 cannot be acceded to."

2. An application for review was filed, which did not meet with

success.

3. Mr. Porus Kaka, learned senior counsel for the petitioners

submitted that the grant of approval, as prayed for, related to three

assessment years, namely, 1999-2000, 2000-2001 and 2001-2001 and the

same has been rejected by the order impugned in an extremely mechanical

manner and without affording any opportunity of hearing to the petitioner-

institution. It is also urged by him that it is obligatory on the part of the

second respondent to scrutinize the activities of the petitioner-institution

in an objective manner but in the case at hand, the said exercise was

carried out and the order has been passed in an extremely laconic manner.

Mr. Kaka, learned senior counsel submitted that the decision in the case of

American Hotel & Lodging Association Educational Institute Vs.

Central Board of Direct Taxes and Ors (2008) 301 ITR 86 (SC) has laid

down the procedure as well as the criteria by which the approval/benefit is

to be granted. It is submitted that for the subsequent years the same

authority has granted approval.

4. Ms. Suruchi Aggarwal, learned counsel for the Revenue in support

of the order passed by the second respondent submitted that the order

reflects reasons and, therefore, the same does not warrant interference. It

is contended by her that if the factual matrix is scrutinized, there can be

no trace of doubt that the approval has been rightly rejected. It is her

further submission that an application for review was not maintainable

and, therefore, it was necessary on the part of the assessee-petitioner to

approach this Court at earliest point of time, if so advised.

5. First, we shall advert to the issue with regard to the maintainability

of the application for review and delay. On a scrutiny of the application, it

is noticed that the same was made in 2001 and was rejected by the second

respondent in December, 2008. We have been apprised that the

assessment orders have been framed in respect of the assessment years

and tax has been levied and installments have been fixed by the

authorities. Needless to say, if the approval is granted, the same will

certainly enure to the benefit of the assessee-petitioner. Thus, the issue as

regards the maintainability of the review is kept open.

6. In the aforesaid factual backdrop we have examined the order

impugned dated 7th June, 2001. On a perusal of the order passed by the

second respondent, it is not perceivable whether any opportunity of

hearing was afforded to the assessee-petitioner. On a query made by us, it

is accepted by the learned counsel for the Revenue that in cases of this

nature opportunity of hearing is granted. What documents petitioner could

have produced, what arguments could have been addressed and how the

second respondent could have proceeded and impact thereof, are the

questions, which cannot be entered into and adverted to at this stage in the

absence of the factual delineation in a proper perspective. True it is, as

submitted by the learned counsel for the Revenue that certain institutions

cannot be granted approval under Section 10(23C) (vi) of the Act but the

said statement cannot be dwelled upon as there is no appropriate finding

by the second respondent after affording opportunity of hearing to the

petitioner. In the absence of the same, if we allow ourselves to say so, the

statement on behalf of the Revenue clearly cannot be appreciated. We are

of the considered opinion that the order dated 7th June, 2001 passed by the

second respondent, Annexure P-17, deserves to be quashed and the matter

to be remitted for reconsideration and accordingly we so direct. The

second respondent shall consider the matter after affording an opportunity

of hearing to the petitioner and decide the issue on the anvil of the

decision rendered by the Apex Court in American Hotel & Lodging

Association Educational Institute (Supra). Needless to say, the said

respondent shall fix a date of hearing and it would be obligatory on the

part of the petitioner to cooperate and produce documents, which are

required to get the lis decided.

7. In view of the order passed by us, the challenge to the other orders

is totally immaterial for the simple reason when the infrastructure

becomes extinct, the super-structure cannot remain.

8. The writ petition is allowed to the extent indicated above. There

shall be no order as to costs.

CHIEF JUSTICE

SANJIV KHANNA, J.

JANUARY 20, 2011/NA