GANDHI COLLEGE OF PHARMACY,KARNAL vs. ACIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Sh. N. K. Saini, AM and Sh. C. M. Garg, JM ITA No. 3476/Del/2012 : Asstt. Year : 2004-05 Gandhi College of Pharmacy, Vs ACIT, Near ITI Chowk, G. T. Road, Circle, Karnal Karnal (APPELLANT) (RESPONDENT) PAN No. AAATG5629D Assessee by : Sh. Ved Jain, Adv., & Ashish Goel, CA Revenue by : Sh. Amrit Lal, Sr. DR Date of Hearing : 02.12.2016 Date of Pronouncement : 03.02.2017 ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 19.03.2012 of ld. CIT(A), Karnal. 2. Following grounds have been raised in this appeal: “1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of A.O. in holding that the assesses is not eligible for exemption under Section 10(23C)(iiiad) of the Act.

2 ITA No. 3476/Del/2012 Gandhi College of Pharmacy (ii) That the above said action has been confirmed despite the assessee complying all the conditions for being eligible to claim exemption under Section 10(23C) (iiiad) of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in assessing the income of the appellant at Rs. 18,93,376/- as against NIL income returned by the appellant. 4. The appellant craves leave to add, amend or alter any of the grounds of appeal.” 3. From the above grounds, it is gathered that the only grievance of the assessee in this appeal relates to the confirmation of addition of Rs.18,93,376/- made by the AO by holding that the assessee was not eligible for exemption u/s 10(23C)(iiiad) of the Income Tax Act, 1961 (hereinafter referred to as the Act).

3 ITA No. 3476/Del/2012 Gandhi College of Pharmacy Act. Later on, the ld. CIT, Karnal vide order dated 24.04.2008 passed u/s 263(1) of the Act, directed the AO to make the assessment de novo by observing that the assessment order dated 27.12.2006 was erroneous and prejudicial to the interest of the revenue. The AO thereafter asked the assessee to show cause and explain as to why exemption claimed u/s 10(23C)(iiiad) of the Act be not disallowed since the copy of trust deed was filed unsigned, unwitnessed and unregistered.

4 ITA No. 3476/Del/2012 Gandhi College of Pharmacy a) the assessee must be a University or other educational institution existing solely for educational purposes; b) not for purposes of profits. c) Aggregate annual receipts of such university or educational not exceed the amount of annual receipts as prescribed under rule 2BC(1) which is Rs. 1.00 Crores. In the case of assessee the aggregate annual receipts during the F.Y. 2004-05 was Rs.81,11,290.00 which is within the limits prescribed. There is no allegation in the assessment order for A.Y. 2003-04 dated 20.12.2005 that the income of the assessee has been diverted or used by its members or their family/associates. Nor any such allegation is alleged in present notice. Hence it can be safely be argued that the activities of the institution is carried our without any motive to earn profits and income resultant is a mere surplus which is being accumulated for furtherance of aims & objects of the institution, which are predominantly educational. The assessee must be a university or other educational institution existing solely for educational purposes. The assessee is an institution imparting two year diploma course of pharmacy & medical lab technology, it is recognized by All India Council for Technical Education, New Delhi and Pharmacy Council of Haryana. Regular classes is being held and relationship of teacher & taught is present. The institution came into existence since 1986. It is pertinent to mention here that during the assessment proceedings for A.Y. 2003-04 & 2004-05 no other activities other than providing education is not earned out by the assessee, nor it has been held that the assessee had pursued

5 ITA No. 3476/Del/2012 Gandhi College of Pharmacy any other objects other than education. Hence the assessee is an institution existing solely for the purpose of education. The word 'Institution’ is not defined tinder the Income Tax Act. In the Oxford English Dictionary, Vol. V at P. 354, the word 'Institution' is defined to mean "an establishment, organization, or association, instituted for the promotion of some objects, specially one of public or general utility, religious, charitable, educational, etc". Lord Machaghten in Mayor & Co. of Machester V. Mc Adam (1896) AC 300: (1896) 3TC 491, 497 (HL) reproduced in CIT Vs. Radha Swami Satsang Sabha (1954) 25 ITR 472 (ALL) " It means, I suppose, an undertaking formed to promote some defined purpose, having in view, generally the institution of education of the public. It is the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle". Hence the assessee is an 'institution' within the above definition. And with institution does not mean a Trust or society registered under their respective legislation. Therefore, the assessee fulfils all the conditions laid down U/S 10(23C)(iiiad) of the Act for claim of exemption of income. Which was rightly being allowed to the assessee previously. c) Hon'ble Supreme Court in Aditanar Educational Institution etc. Add CIT (1997) 224 ITR 310(SC) has held that "The language of Section 10(22) is plain and clear and the availability of exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for the purposes of profits. "After meeting the expenditure, if any surplus results incidentally from the activity lawfully carried on by the educational institution, it will not cej.se to be are

6 ITA No. 3476/Del/2012 Gandhi College of Pharmacy existing solely for educational purposes since object is not are to make profits." In view of law laid down by Hon'ble Supreme Court, the exemption has to be evaluated each year, which is being done by your good self in A.Y. 2004-05 since the exemption has to be evaluated each year, on the basis of facts & circumstances of the case. The Hon'ble Supreme Court in Addl. CIT Vs. Surat Art Silk Cloth Manufacturer Association (1980) 121 ITR 1(SC) held as under:- "When the purpose of a trust or institution is advancement of an object of general public utility, it is that object itself and not its accomplishment or carrying out which must not involve the carrying of any activity for profits." Merely there is an increase in assets & fees or there is profit cannot be held as reason for disallowing claim for exemption U/S 10(23C)(iiiad) of the Act. d) That your good self assessment order dated 27.12.2006 for A.Y. 2004-05 has taken a possible view which is permissibly under the act and the view is being taken after considering facts of the case, .books of accounts, regular teachings/class room education, affiliation with Central & State Government bodies and final accounts of the assessee. e) Reliance is also placed on the following decision in the matter. i) City Mountessori School Vs. ACIT (1999) 64 TTJ (All) 475 ii) Arvind Bhartiya Vidyalaya Samiti Vs. ITO (2005) 94 TTJ (JP) 614.

7 ITA No. 3476/Del/2012 Gandhi College of Pharmacy iii) Ajit Gupta Vs. ITO (2007) 108 TTJ (Del) 301 iv) Triveni Engineering Ltd. Vs. DCIT (2004) 87 TTJ (Del.) 93 v) Aquel Charities (Aquel Sewa Sang) Vs. ITO (1988) 31 TTJ (Del) 160. vi) Birla Vidhya Vihar Trust Vs. CIT (1982) 136 ITR 445 Cal. vii) ACIT Vs. Rajasthan State Text Book Board (2000) 244 ITR 667 (Raj) viii) CIT Vs. Lagan Kala Upvan (2003) 259 ITR 489 (Del) ix) CIT Vs. Vidya Vikas Vihar (2004) 265 ITR 489 (Bom) x) Gujarat State Co.Op. Union Vs. CIT (1992) 195 ITR 279 (Guj.) f) That under the Act, the institution claiming exemption of income under section 10(23C)(iiiad) of the Act was required to file their return mandatorily w.e.f. A.Y. 2006-07. In the case of assessee neither any notice U/S 142(1) or 147/148 of the Act was issued for compliance. The return was filed voluntarily as self compliance, without any requirement under the law. Which proves genuineness on part of the assessee and its activities i.e. education. g) That the without prejudice to our above said contention the institution assessee above was also got registered on 22.01.2007 as charitable trust with all corpus fund and assets accumulated as on that date (copy enclosed). As per trust deed "none of the objects of the trust shall' at any time involve carrying on of any activity for profits; income or the assets of the Trust fund shall not be applied or transferred in whole or in part for any purpose other than charitable and or educational purposes; the income or assets of the trust shall not be applied or used for the benefit of the authors of

8 ITA No. 3476/Del/2012 Gandhi College of Pharmacy the Trust, or any person who makes substantial contribution or donations to the trust or any trustee or manager of this Trust and in the event of dissolution of the Trust the trust fund or surplus of the funds shall not be transferred to the trustees in any manner. However the same shall be transferred to a like minded trust duly approved by not less than ¾ of the trustees present at the meeting. Therefore, the assessee has also completed the requirement of a registered body under a statute, on which much impetus was given by the then Ld. AO and Ld. CIT(A) in proceedings relating to AY 2003-04, though not necessary. It is also pertinent to mention here that the Income Tax Act has no where provided that for claim of exemption under section 10(23C)(iiiad) the educational institution has to be a registered body under Societies . Registration Act or Indian Trust Act under any act. In view of above it is requested that, no addition is called for disallowance of exemption U/S 10(23C)(iiiad) of the Act, as proposed in the notice in view of the facts of the case and law on the subject.” 6. The AO after considering the submissions of the assessee observed that for the assessment year 2003-04, it was held that the assessee’s society solely exited for the purpose of profit and the exemption claimed u/s 10(23C)(iiiad) of the Act at Rs.3,04,893/- was denied. The AO also reproduced relevant para of the said assessment order in para 5 of the assessment order dated 06.08.2009, for the cost of repetition, the same is not reproduced herein. He further observed that appeal of the assessee filed against the order dated 24.04.2008 of the ld. CIT, Karnal was dismissed by the ITAT vide order dated

9 ITA No. 3476/Del/2012 Gandhi College of Pharmacy 12.06.2009 in ITA No. 2185/Del/2008. The AO also observed that during the course of assessment proceedings for the assessment year 2003-04, the assessee vide its reply dated 22.12.2006 admitted that no trust deed was executed, however, it ran under a management committee which was committed for the cause of education and had basic object of imparting education without any motive to earn profit and that it had not applied for the registration u/s 12A or 80G of the Act since the income was exempt u/s 10(23C)(iiiad) of the Act. The AO further observed that the copy of trust deed filed by the assessee was unsigned, unwitnessed and unregistered which revealed that Mr. Kapur Singh and some of his relatives managed an organization, named, Sh. Satya Sain Farming Matroli and that a sum of Rs.1.25 lakh was saved from the farming venture between 1972 and 1980 which was distributed as charity, stipend and scholarship. Later on, it was resolved by the trustees, on 03.03.1983 to start an institution for imparting education, both technical and vocational with the name of Sh. Satya Sain Educational and Vocational Trust-Matroli (Karnal), but the founder of the trustees did not set apart any money for the purpose of trust. Therefore, in the absence of any transfer of money on the trust by the founder, no trust could have come into existence. The AO also observed that in the present case, it appears that it was resolved to adopt Gandhi College of Pharmacy for management and control under the trust but it was not known as to whom the aforesaid

10 ITA No. 3476/Del/2012 Gandhi College of Pharmacy college belonged prior to its adoption by the assessee trust and that the trust deed did not contain any clause regarding non-distribution of profit to the founder of the trustees and also did not contain any clause as to how the assets would be disposed off in case of dissolution of the trust. He, therefore, held that the trust did not exist for charitable purposes. Accordingly, the AO did not accept the contention of the assessee and rejected the reply by observing as under: “7(ii) As regards para (b) of reply, the provisions of section 10(23C)(iiiad) prohibits exemption to educational institution existing solely for the purpose of profit. In the case of the assessee, out of gross receipt of Rs.8111290/- net surplus inclusive of Endowment fund is shown at Rs.1893376/- which is 23% of gross receipts. Similar is the position for Assessment Year 2003-04 where on gross receipts of Rs. 8545052/- surplus of Rs. 3048937/- has been shown and percentage of profit is 35%. The assessee has advanced the following amounts to the trustees of the trust which clearly proves that the trustees have complete control over the financial affairs of the alleged society/trust. Dharam Vati 600000/- Shamsher Singh 200000/- Lalit Mann 200000/- The above figures of profit proves beyond doubt that the assessee is earning sustained profits and diverting the funds of the trust for personal benefits of the trustees. The definition of institution defined in the judgement relied upon by the assessee merely defines the word institution. There is nothing in the alleged trust deed, preventing the application

11 ITA No. 3476/Del/2012 Gandhi College of Pharmacy of profits or assets of the trust for the benefits of founder or anyone claiming through them the trustees. In the year under consideration, as mentioned above, assets worth Rs.10 lacs have been diverted to the alleged trustees. The trust deed does not mention against non-application of profit or assets for the benefit of founder to trustees. There is also no clause in the trust deed regarding non-distribution of assets in case of dissolution of the trust. In view of these facts it is evident that the trust existed solely for the purposes of profit and is not eligible for exemption u/s 10(23C)(iiiad) of I.T. Act. 7(iii) In para (c) of the reply, the assessee has relied upon the judgement of Hon'ble Supreme Court in the case of Aditanar Educational Institution etc. Vs Add CIT (1997) 224 ITR 310(SC). Firstly this judgement was rendered on the provisions of section 10(22) whereas the case of the assessee falls u/s 10(23C)(iiiad). Secondly, the Hon'ble Apex Court has held that exemption has to be evaluated each- year. In the year under consideration, the assessee trust has declared profits more than 15% of gross receipts and has advanced the funds of the trust to the alleged Trustees; which confirms that the funds can be used at the discretion of the 'trustees and the Trust exist for the purpose of profit. 7(iv) Regarding para (d) of assessee's reply, as already mentioned above the assessment order dated 27.12.2006 for A.Y. 2004-05 has been cancelled u/s 263 and after cancellation and confirmation by ITAT, the asstt. order for 2004-05 ceases to exit. Thus, the assessee cannot rely upon any findings given in the asstt. order for 2004-05. 7(v) The case laws relied upon by the assessee in para (e) of reply were rendered on the provisions of sec, 10(22) of I.T.

12 ITA No. 3476/Del/2012 Gandhi College of Pharmacy Act, whereas the assessee is claiming exemption u/s 10(23C(iiiad). Section 10(22) of I.T. Act did not limit the gross receipts as prescribed under I.T. Rules for being eligible for exemption under sec. 10(23C)(iiiad) the assessee has to be established that the institution does not exist for the purpose of profit. In the assessee's case, the assessee has advanced funds of the trust to the trustees which are a clear indication that the trust exist for profit. The case laws relied upon by the assessee is not applicable to the facts of the assessee's case. 7(vi) As regards para (f) of reply, that return of Income was filed voluntarily, that does not alter the factual position of the case and does not automatically grant exemption to the trust. 7(vii) In regard to contentions mentioned in para (g) of reply, registration of trust on 22.01.2007 cannot correct the happenings earlier to that date. Hence, this ground is also not of any help to the assessee.” 7. The AO also mentioned that in the case of M/s Queens Education Society Vs CIT, the Hon’ble Uttaranchal High Court has held that the institution existing for the purpose of profit was not eligible for exemption u/s 10(23C)(iiiad) of the Act. He, therefore, by following the ratio laid down in the said case and considering this fact that the ITAT for the assessment year 2003-04 in the case of the assessee has held that the assessee trust existed for the purpose of profit and was not eligible for exemption u/s 10(23C)(iiiad) of the

13 ITA No. 3476/Del/2012 Gandhi College of Pharmacy Act, made the addition of Rs.18,93,376/- which was the excess of the income over expenditure.

14 ITA No. 3476/Del/2012 Gandhi College of Pharmacy further submitted that the assessee is running a college of pharmacy which is duly approved by the Pharmacy Council of India as per Notification dated 24.05.2002. A reference was made to page nos. 34 to 40 of the assessee’s paper book. It was further stated that All India Council for Technical Education also granted approval vide letter dated 13.08.2002 and that the assessee is also registered and accredited institution of Directorate of Technical Education, Haryana and the admissions are made in terms of the policy of the said Directorate. A reference was made to page nos. 42 to 68 of the assessee’s paper book which are the copies of the admission brochure from Directorate of Technical Education, Haryana. The ld. Counsel for the assessee further submitted that the assessee is maintaining regular books of accounts and had received fee of Rs.74,24,840/- for the year under consideration, there was excess of income over expenditure of Rs.7,00,876/- and the assessee being eligible for exemption u/s 10(23C)(iiiad) of the Act claimed exemption and that the assessment was completed by the AO u/s 143(3) of the Act vide order dated 27.12.2006. Thereafter, the said order was revised by the ld. CIT on the ground that the AO had not carried out necessary inquiry before granting exemption vide order dated 24.04.2008. Against the said order, the assessee preferred an appeal to the ITAT wherein vide order dated 12.06.2009, the action of the ld. CIT was sustained for completing the assessment by the AO after proper

15 ITA No. 3476/Del/2012 Gandhi College of Pharmacy inquiry and the reassessment proceedings. It was further stated that the assessee submitted all the details as called for by the AO and it was submitted that there being no other activities then the educational activity, therefore, the income of the assessee would be exempt u/s 10(23C)(iiiad) of the Act. However, the AO did not grant exemption inter alia by relying on the judgment of Hon’ble Uttarakhand High Court in the case of Queens Educational Society Vs CIT and thereafter the ld. CIT(A) instead of examining the issue as directed by the ITAT in a summarily manner dismissed the appeal of the assessee by holding that the exemption u/s 10(23C)(iiiad) of the Act was not available, in spite of the fact that the assessee had clarified each of the issue on the basis of which the assessment was reopened and the findings recorded against it vide revisionary order passed by the ld. CIT u/s 263 of the Act as well as by the ITAT in the preceding year. It was also stated that the AO wrongly held that there was no transfer money as required for the formation of the trust deed because a sum of Rs.1.25 lakh had been contributed as corpus and Rs.60,000/- was contributed by the 6 trustees thereby making the capital of the trust at Rs.1.85 lakh and on the said basis, the registration had been granted later on u/s 12AA of the Act. It was pointed out that for creation of trust there need not be a formal trust deed and even the trust can be oral and that the intention of the author is sufficient to create a trust. A reliance was placed on the decisions of the Hon’ble

16 ITA No. 3476/Del/2012 Gandhi College of Pharmacy Allahabad High Court in the case of CIT Vs Sant Baba Mohan Singh reported at 118 ITR 1015 and the Hon’ble Bombay High Court in the case of CIT Vs Trustees of Shri Cutchi Lohana Panchtade Mahajan Trust reported at 98 ITR 448.

17 ITA No. 3476/Del/2012 Gandhi College of Pharmacy dated 21.12.2006 and 27.12.2006 (copies of which are placed at page nos. 76 to 78) which clarified that the advances were given for the purpose of purchase of equipment.

18 ITA No. 3476/Del/2012 Gandhi College of Pharmacy the exemption claimed u/s 10(23C)(iiiad) of the Act needs to be allowed. It was also pointed out that when the receipts exceeded Rs.1 Crore, registration u/s 12AA of the Act has been granted to the assessee. The reliance was placed on the following case laws: � Queen’s Educational Society Vs CIT reported at 275 CTR 449 � Visvesvaraya Technological University Vs ACIT (2016) 4 TMI 874 – SC � Pinegrove International Charitable Trust & Ors. Vs Union of India & Ors. (2010) 327 ITR 0073 13. In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the assessee did not furnish any trust deed and even it was not registered u/s 12AA of the Act and a trust to be eligible for exemption is required the registration u/s 12AA of the Act, which the assessee did not have, moreover, the assessee charged the fee and during the year under consideration there was increase in the fee charged from students and the assessee was making profit, it was run for the purpose of profit making. Therefore, the exemption u/s 10(23), 11, 12 of the Act was not available to the assessee and the ld. CIT(A) rightly confirmed the action of the AO in denying the exemption to the assessee u/s 10(23C)(iiiad) of the Act.

19 ITA No. 3476/Del/2012 Gandhi College of Pharmacy present case, the first allegation of the AO while denying the exemption u/s 10(23C(iiiad) of the Act was that there was no written trust deed. In this regard, it is relevant to point out that the Hon’ble Allahabad High Court in the case of CIT Vs Sant Baba Mohan Singh (supra) held that a charitable trust may be created by words sufficient to show the intention, so long as there is a clear manifestation of intention to create a charitable or religious trust and there is a formal vesting of ownership of the property. A similar view has been taken by the Hon’ble Bombay High Court in the case of Trustees of Shri Cutchi Lohana Panchtade Mahajan Trust reported at (1975) 98 ITR 448 (supra) wherein it has been held that “a charitable trust need not be created by a formal document and where the statements in the conveyance deed clearly showed that the property is to be held under legal obligation for charitable purpose, the income of such property is exempt u/s 4(3)(i) of the Act”. In the present case also the trustees and the author had manifested a sum of Rs.1.85 crore as corpus fund of the trust for fulfillment of its aims and objects. Therefore, even if the trust deed was unsigned and not witnessed as pointed out by the AO, the benefit of exemption cannot be denied to the assessee. In the present case, while denying the exemption u/s 10(23C)(iiiad) of the Act to the assessee, the AO relied on the decision of the Hon’ble Uttarakhand High Court in the case of Queens Educational Society Vs CIT. The said judgment has been overruled by the Hon’ble

20 ITA No. 3476/Del/2012 Gandhi College of Pharmacy Supreme Court vide order dated 16.03.2015 reported at 275 CTR 449. In the instant case, it is not in dispute that the assessee is running a college of pharmacy which is duly approved by the Pharmacy Council of India as per Notification dated 24.05.2002 (copy of which is placed at page no. 36 of the assessee’s paper book). The assessee is also registered and accredited institution of Directorate of Technical Education, Haryana which is evident from page no. 45 of the assessee’s paper book which is the copy of the list of the institution affiliated for the session 2002-03 to the Technical Education, Haryana and the name of the assessee is appearing at serial no. 9 of the said list. Therefore, it is clear that the assessee is running a college of pharmacy and as such engaged in the educational activities. The assessee has received fee of Rs.74,24,840/- as mentioned in the income and expenditure account for the year ending 31st March, 2004 (copy of which is placed at page no. 4 of the assessee’s paper book). From the aforesaid facts, it is clear that the assessee is an educational institution which is duly recognized and registered, it has applied his income for the purposes of education and had not distributed any profit. Therefore, the assessee is eligible for exemption u/s 10(23C)(iiiad) of the Act. And as the gross receipts of the assessee are less than Rs.1 crore, so it is not required to get the approval from the income tax authority for claiming the exemption u/s 10(23C)(iiiad) of the Act. In our opinion, for getting the

21 ITA No. 3476/Del/2012 Gandhi College of Pharmacy exemption under the said section, there is no condition that a registration u/s 12AA of the Act is required. In the instance case, as we have pointed out earlier that the AO while disallowing the claim of the assessee heavily relied on the decision of the Hon’ble Uttarakhand High Court in the case Queens Educational Society Vs CIT which has been overruled by the Hob’ble Apex Court vide order dated 26.03.2015 reported at 275 CTR 449 wherein their lordships in paras 24 & 25 held as under: “24. The view of the Punjab and Haryana High Court has been followed by the Delhi High Court in St. Lawrence Educational Society (Regd.) v. CIT & Anr. (2011) 53 DTR (Del) 130. Also in Tolani Education Society v. Dy. DIT (Exemptions) and Ors. [2013] 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Cloth Mfrs. Association Case (Supra) and Aditanar Educational Institution case (Supra) as follows: "…..The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the

22 ITA No. 3476/Del/2012 Gandhi College of Pharmacy balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education. Education has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met." 25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief CIT's orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttarakhand High Court, it is clear that these orders cannot stand. Consequently, Revenue's appeals from the Punjab and Haryana High Court's judgment dated 29.1.2010 and the

23 ITA No. 3476/Del/2012 Gandhi College of Pharmacy judgments following it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act.” 15. We, therefore by considering the totality of the facts as discussed hereinabove and keeping in view the ratio laid down by the Hon’ble Apex Court in the aforesaid referred to case of Queens Educational Society Vs CIT (supra) are of the view that the ld. CIT was not justified in confirming the action of the AO for denying the exemption u/s 10(23C)(iiiad) of the Act to the assessee. Accordingly, the impugned order is set aside and the AO is directed to allow the claim of the assessee for exemption u/s 10(23C)(iiiad) of the Act.

24 ITA No. 3476/Del/2012 Gandhi College of Pharmacy 16. In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 03/02/2017)

Sd/- Sd/- (C. M. Garg) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03/02/2017 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR