American School Of Bombay ... vs Union Of India & Ors.
2015 Latest Caselaw 5903 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Judgment delivered on: 13.08.2015

+       W.P.(C) 2186/2014 and CM No. 4561/2015

AMERICAN SCHOOL OF BOMBAY EDUCATION TRUST
(THROUGH ITS TRUSTEES) & ORS.       .... Petitioners

                             versus

UNION OF INDIA & ORS.                                             ..... Respondents

Advocates who appeared in this case:

For the Petitioners          : Mr Porus Kaka, Sr Advocate with Mr Divyesh Chawala, Mr Jay
                               Savla, Mr Jas Sanghavi, Ms Ankita Jain and Mr Rajpal Singh
For the Respondent No. 1      : Ms Niti Jain for Mr Anuj Aggarwal
For the Respondent Nos.2 to 5 : Mr Rohit Madan with Mr Amol Sinha, Mr Zoheb Hussain and
                                Mr Akash Vajpai


CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA

                                 JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1. This writ petition is directed against the order dated 29.10.2013 passed

by the Central Board of Direct Taxes on an application for grant of approval

for exemption under Section 10 (23C)(vi) of the Income-tax Act, 1961

(hereinafter referred to as the said Act) for assessment years 1999-2000,

2000-01 and 2001-02. By virtue of the impugned order dated 29.10.2013,

the application of the petitioner has been rejected.

2. This case has had a long history. We need not go into all the details.

Only a few facts are necessary. First, the assessments for the years in

question had been completed but have been set aside by the Income Tax

Appellate Tribunal and have been restored to the file of the Assessing

Officer for de novo assessment after the decision of the CBDT on the

application for exemption. Second, on an earlier occasion the CBDT had

rejected the application for grant of approval and the petitioner had

approached this court by way of a writ petition which was decided on

20.01.2011. In that order it was specifically indicated that the order dated

07.06.2011 passed by the CBDT is set aside and the question of approval

was to be re-examined by the CBDT in the light of the Supreme Court

decision in the case of American Hotel and Lodging Association

Educational Institution v. CBDT: 301 ITR 86 (SC). The said decision of

the Supreme Court has been relied upon by another Division Bench of this

court in Digember Jain Society For Child Welfare v. Director General of

Income-Tax (Exemptions): 329 ITR 459 (Delhi), where it has been held

that by virtue of the Supreme Court decision in American Hotel and

Lodging Association (Supra) it has been clarified that the amended

provisions of Section 10(23C)(vi) are analogous to Section 10(22). It has

also been indicated by the Division Bench that when an application for

exemption is moved by any trust, fund, university or other educational

institutions, the threshold conditions which are to be examined at the stage of

grant or rejection of exemption are (i) actual existence of an educational

institution and (ii) approval of the prescribed authority for the purposes of

grant of exemption for which the applicant has to move an application in the

standardized form in terms of the first proviso to Section 10(23C)(vi). The

Division Bench also clarified after interpreting the Supreme Court decision

in American Hotel and Lodging Association (Supra) that insofar as the

third proviso is concerned, the same relates to application of funds and that

would be a matter which would arise for consideration at a later stage. In

other words, the third proviso prescribes a monitoring condition rather than a

condition for grant of or rejection of approval. The Division Bench further

clarified that it is only in the event that the conditions stipulated in the third

proviso are not fulfilled, after the grant of exemption, that the prescribed

authority is empowered to withdraw the approval earlier granted after

complying with the procedure mentioned therein.

There is also a recent decision of the Supreme Court in the case of M/s

Queen's Educational Society v. Commissioner of Income Tax which also

reiterates the propositions settled in American Hotel and Lodging

Association (Supra).

3. Third, we may also take note of the fact that despite the setting aside

of the assessment orders as noted above by the Income Tax Appellate

Tribunal, the Assessing Officer, without waiting for the decision of the

CBDT, passed fresh assessment orders which ultimately were set aside by

the Bombay High Court by an order dated 12.11.2013. In the course of those

proceedings the Bombay High Court had given specific directions that the

CBDT should decide the issue of grant of approval under Section

10(23C)(vi) without being influenced by the assessment orders.

4. We have heard the learned counsel for the parties. On going through

the impugned order, we find that the CBDT has not paid heed to the

directions given by this court as well as by the Bombay High Court. If one

were to look at the contents of paragraph 13, it would immediately become

apparent that the CBDT has been clearly influenced by the findings of the

Assessing Officer in the assessment orders for the assessment years 1999-

2000 to 2001-02. Those assessment orders have been set aside and have

been restored to the file of the Assessing Officer as we have already

indicated above. This fact is also noted by the CBDT in the following

manner:-

"The mere fact that the said three assessment orders have been restored back to the file of the AO by the ITAT, Mumbai on a technical ground, with the direction to decide the issue de novo after disposal of the assessee's application seeking exemption under Section 10(23C)(vi) by the CBDT does not in any manner nullify the findings of the Assessing Officer for the given three assessment years based on the accounts of the assessee."

We are unable to understand as to how could the CBDT have made such a

remark that even though the assessment orders had been set aside the

findings would still hold good. Be that as it may, the fact remains that the

CBDT has looked at the assessment orders while examining the application

for grant of approval which was prohibited by the Bombay High Court by

virtue of its directions given in the writ petition which the petitioner had filed

before the said court.

5. Apart from this, we also find that the direction given by this court has

not been followed by the CBDT in the sense that it has not decided the case

in terms of the decision of the Supreme Court in American Hotel and

Lodging Association (Supra). That decision is clear and has also been

applied by this court in Digember Jain Society (Supra). Yet the CBDT has

taken a view that the decision of the Supreme Court in American Hotel and

Lodging Association (Supra) was rendered on its peculiar facts and did not

lay down any general principles of law or procedure. Once again, we are

unable to understand as to how the CBDT could have even made such a

remark when this court had directed that the decision of the Supreme Court

in American Hotel and Lodging Association (Supra) would have to be

taken into account while deciding the application. There are several other

lacunae in the impugned order which we need not advert to. The errors

mentioned above are sufficient for us to conclude that the impugned order

deserves to be set aside. It is set aside.

6. The only question that survives before us is whether we remit the

matter to the CBDT once again for it to decide the question of approval or on

the basis of available material, we direct the CBDT to grant the approval.

We have noted that in Digember Jain Society (Supra) this court had in fact

issued a mandamus directing the revenue to grant exemption to the petitioner

therein under Section 10(23C)(vi) of the said Act. The court, while doing so,

also directed that the concerned authority would be free to incorporate

stipulations and conditions in terms of the third proviso. We find that it is an

admitted fact in the present case that the petitioner exists solely for

educational purposes and not for the purposes of profit. These are the only

requirements for grant of approval and, therefore, in the same manner as in

the case of Digember Jain Society (Supra) we issue a writ of mandamus

directing the respondents to grant approval to the petitioner under Section

10(23C)(vi) of the said Act for the Assessment years 1999-2000 to 2001-02.

However, we are making it clear that as the assessments for the three years in

question are open, the Assessing Officer can certainly go into the question as

to whether the conditions stipulated in the third proviso and the 13 th proviso

to Section 10(23C)(vi) of the said Act have been met and appropriate orders

can been passed by the Assessing Officer in accordance with law. The writ

petition is allowed to the aforesaid extent. There shall be no order as to

costs.

BADAR DURREZ AHMED, J

SANJEEV SACHDEVA, J AUGUST 13, 2015 SU