Delhi High Court Council For The Indian School, ... vs Director General Of Income Tax on 23 May, 2014 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 23.05.2014 + W.P.(C) 2184/2013 COUNCIL FOR THE INDIAN SCHOOL, CERTIFICATE EXAMINATIONS ..... Petitioner versus DIRECTOR GENERAL OF INCOME TAX ..... Respondent Advocates who appeared in this case: For the Petitioner : Mr M.P. Rastogi with Mr K.N. Ahuja. For the Respondent : Mr Sanjeev Sabharwal, Sr. Standing Counsel with Ms Ruchi Bhatia, Jr. Standing Counsel. HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE VIBHU BAKHRU JUDGMENT VIBHU BAKHRU, J 1. The present writ petition has been filed under Article 226/227 of the Constitution of India, by the Council for the Indian School Certificate Examinations. The petitioner has challenged the order dated 07.06.2012 (hereinafter referred to as "impugned order") passed by the Director General of Income Tax (Exemptions), (hereinafter referred to as "DGIT(E)"), refusing to grant exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the AY 200809 onwards, to the petitioner. W.P.(C) 2184/2013 Page 1 of 41 2. The Petitioner is a society registered under the Societies Registration Act XXI of 1860, (Punjab Amendment) Act, 1957 as extended to the Union Territory of Delhi. The petitioner is recognised and listed as a body conducting public examinations under the Delhi School Education Act, 1973. 3. The Petitioner had applied for the approval under Section 10(23C)(vi) of the Act for AY 19992000 to 200102 to Central Board of Direct Taxes (hereinafter referred to as "CBDT"). The CBDT, by order dated 31.10.2006, rejected the Petitioner's application holding that the Petitioner was not an educational institution but was an examination body which conducts examinations for ICSC and ISC and therefore, could not be granted the exemption as an educational institution under Section 10(23C)(vi) of the Act. 4. The Petitioner states that it had also filed applications for approval under Section 10(23C)(vi) of the Act for AY 200203 to 200405 and 2005 06 to 200708 which have not been disposed of so far. 5. The Petitioner had filed an application for approval under Section 10(23C)(vi) of the Act, for the AY 200809 to 201011, with the Respondent on 23.11.2007. By an order dated 08.10.2008, the respondent dismissed the application on the ground that the Petitioner is not an educational institution but an examination body conducting examinations for ISCE and ISC. 6. The petitioner filed a writ petition being W.P.(C) No. 4716/2010 in this court challenging the said order dated 08.10.2008. The said writ W.P.(C) 2184/2013 Page 2 of 41 petition was disposed of by an order dated 20.03.2012, passed by a division bench of this court, whereby it was held that the petitioner is an educational institution as contemplated under Section 10(23C)(vi) of the Act and the matter was remanded to the respondent to pass an order in accordance with law. 7. In compliance of the order of this Court dated 20.03.2012, the Respondent considered the matter and passed the impugned order dated 07.06.2012, whereby the respondent declined to grant the approval under section 10(23C)(vi) of the Act, inter alia, on the ground that the petitioner had failed to justify its claim that it did not exist for the purposes of profit. The respondent further held that the petitioner had conducted its affairs in a systematic manner to earn profits and the same were diverted in a clandestine manner. The Respondent further noticed that the Auditor had in its report, in respect of the Balance sheet of the petitioner relevant for the Financial Year 200809 (AY 200910), pointed out that there were lapses while awarding the contract to M/s Ratan J. Batliboi Architects Pvt. Ltd. (hereinafter referred to as "RJBAPL") for installing IT enabled services and was thus unable to form an opinion on whether the accounts showed a true and fair view. Submissions of the Petitioner 8. The Petitioner submits that it is a society established to promote education which includes the promotion of science, literature, the fine arts and the diffusion of useful knowledge by conducting school examinations. W.P.(C) 2184/2013 Page 3 of 41 9. Petitioner stated that up to the AY 199899, the income of the Petitioner was exempt under Section 10(22) of the Act, which fact was within the knowledge of the Revenue (Inco