IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No. 7268 of 2009 Date of Decision: January 29, 2010 Sant Baba Sunder Singh Canadian Charitable Trust, Barnala …Petitioner Versus Central Board of Direct Taxes and others …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Pankaj Jain, Advocate, for the petitioner. Mr. S.K. Garg Narwana, Advocate, and Ms. Urvashi Dhugga, Advocate, for the respondents. 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. Challenge in this petition filed under Article 226 of the Constitution is to the order dated 13/15.4.2009 (P-3), passed by the Chief Commissioner of Income Tax, Chandigarh-respondent No. 2 rejecting the application of the petitioner for grant of exemption under Section 10(23C)(vi) of the Income-tax Act, 1961 (for brevity, ‘the Act’). 2. Brief facts of the case are that the assessee-petitioner is a Trust, which was formed on 22.3.1996 and registered under the Societies Registration Act, 1860, vide Registration Certificate No. CWP No. 7268 of 2009 316 of 1998-99, dated 8.6.1998. Its main objectives are imparting of education, educational activities and providing home for orphans, widows and gaushala etc. It is claimed that the assessee-petitioner had been granted exemption under Section 10(23C)(vi) of the Act in respect of the assessment years 2003-04 to 2007-08. 3. An amendment was carried out in the Finance Act, 2006 w.e.f. 1.6.2006 whereby XIVth proviso (un-numbered) was added to Section 10(23C) of the Act. The assent of the President to the said amendment was granted on 13.7.2006. As per the amendment, the assessee was required to file the application at any time during the financial year immediately preceding the assessment year for which the exemption was to be sought. On 23.9.2008, the assessee- petitioner filed an application seeking exemption under Section 10(23 (vi) of the Act in respect of Financial Year 2007-08 in Form No. 56D along with various documents. The return of income in respect of Assessment Year 2008-09 was filed by the assessee-petitioner on 24.9.2008. 4. On 3.3.2009, the respondent department sent a communication to the assessee-petitioner confronting it how the application under Section 10(23C)(vi) of the Act for grant of exemption was maintainable because in view of the above amendment the same could have been filed on or before 31.3.2008. On 12.3.2009, the assessee-petitioner responded to the communication dated 3.3.2009(P-2). On 13/15.4.2009, the Chief Commissioner of Income-tax, Chandigarh-respondent No. 2 passed an order rejecting the claim of the assessee-petitioner for grant of 2 CWP No. 7268 of 2009 exemption under Section 10(23C)(vi) of the Act in respect of Financial Year 2007-08. The Chief Commissioner has noticed that the gross receipt of the assessee-petitioner during the relevant assessment year exceeded Rs. 1 crore and it was required to apply for exemption under Section 10(23C)(vi) within the financial year for which exemption is being claimed. The prescribed authority has no discretion to waive off this statutory requirement as contemplated under the un-numbered fourteen proviso to Section 10(23C)(vi). In that regard, reliance has been placed on the judgment of this Court rendered in the case of Young Scholars Educational Society (Regd.) Barnala v. CCIT, Chandigarh and others (CWP No. 17179 of 2008, decided on 27.11.2008, Annexure R-1). A perusal of the impugned order further shows that after comparison of the receipts with the profits of the assessee-petitioner during the Assessment Years 2005-06 to 2006-07, the Chief Commissioner of Income Tax came to the conclusion that it has earned profits ranging from 22.51% to 43.61% during those year, which is against the provisions of Section 10(23C)(vi). In respect of Assessment Year 2008-09 the net profits comes out to be 46.15% before claiming depreciation, which is a notional expenditure with no actual outgoing from the receipts. The Chief Commissioner has also referred to para 3 of the Trust Deed of the assessee-petitioner which contains its main aims and objects. After considering the reply furnished by the assessee-petitioner to the letter dated 3.3.2009, it has been concluded that the assessee has not filed any proper explanation regarding the other objects as contained in the trust deed. Keeping in view 3 CWP No. 7268 of 2009 inclusion of other objections in the trust deed, an inference has been drawn that the trust funds may be utilized for other purposes. Therefore, the application of the assessee-petitioner for grant of exemption under Section 10(23C)(vi) of the Act has not been found to be maintainable. The Chief Commissioner has also placed reliance on the judgment of Uttarakhand High Court rendered in the case of CIT v. M/s Queens’ Educational Society (ITA No. 103 of 2007) and CIT v. M/s St. Pauls Sr. Secondary School (ITA No. 104 of 2004), decided on 24.9.2007 (P-4). 5. We have heard learned counsel for the parties and perused the paper book with their able assistance. It would be first profitable to refer to the relevant provisions of the Act. In the Finance Act, 2006, proviso was added to Section 10(23C) of the Act w.e.f. 1.6.2006 and the assessee-petitioner was required to move an application at any time during the financial year immediately preceding the assessment year from which the exemption was sought. The relevant proviso of sub-clause (vi) and (via) of clause (23C) of Section 10 of the Act are reproduced as under:- Proviso I “Provided that the fund or trust or institution or any university or other educational institution or any hospital or 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 manner to the prescribed authority for the purpose of grant of the exemption, or continuance thereof, under 4 CWP No. 7268 of 2009 sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via).” Proviso IX “Provided also that where an application under the first proviso is made on or after the day on which the Taxation Laws (Amendment) Bill, 2006 receives assent of the President, every notification under the sub clause (iv) or sub clause (v) or sub clause (vi) or sub clause (via) shall be passed within the period of twelve months from the end of the month in which the application was received.” Proviso XIV “Provided also that in case the fund or institution or any university or other educational institution or any hospital or other medical institution referred to in the first proviso makes an application on or after the 1st Day of June, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be made at any time during the financial year immediately preceding the assessment year from which the exemption is sought.” 6. It is also necessary to refer to the Circular No. 14 of 2006, dated 28.12.2006, issued by the Central Board of Direct Taxes (for brevity, ‘CBDT’) and the relevant portion of the same is extracted as under:- “6. Providing a time limit for grant/continuance of exemption for certain charitable and religious 5 CWP No. 7268 of 2009 trusts and institutions and certain educational and medical institutions. 6.1 Section 10(23C)(iv), (v), (vi) and (via), a fund, trust or institution or university or other educational institution or hospital or other medical institution is required to make an application for grant of exemption under the said clauses to the prescribed authority. 6.2 A new proviso has been inserted in Section 10 (23C) to provide that such application made on or after June 1, 2006 shall be made at any time during the financial year immediately preceding the assessment year from which the exemption is sought. 6.3 Applicability – Assessment year 2007-08 onwards.” (emphasis added) 7. It is well settled that the circulars issued by the CBDT are binding on the revenue authorities. In that regard reliance is placed on the judgments of Hon’ble the Supreme Court rendered in the cases of P.R. Prabhakar v. Commissioner of Income Tax, Coimbatore, [2006] 284 ITR 548; Union of India v. Azadi Bachao Andolan, (2004) 10 SCC 1; and Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd., (2004) 3 SCC 488. 8. It is conceded position that the assessee-petitioner has filed the application on 23.9.2008 seeking exemption under Section 6 CWP No. 7268 of 2009 10(23C)(vi) in respect of assessment year 2008-09, which could have been filed during the financial year 2007-08 i.e. on or before 31.3.2008. It is, thus, evident that the application by the assessee- petitioner has been filed after the prescribed period and the Chief Commissioner of Income Tax has rightly rejected the same being not maintainable. 9. As a sequel to the above discussion, we find no ground to interfere with the impugned order passed by the Chief Commissioner of Income Tax. There is no merit in the instant petition warranting its admission. Accordingly, the writ petition fails and the same is dismissed. (M.M. KUMAR) JUDGE (JASWANT SINGH) January 29, 2010 JUDGE Pkapoor 7