TaxTMI 
TaxTMI 
TaxTMI 
Chain of judgments under study
AND OTHER JUDGMENTS referred in the above for in depth study and understanding.
Provisions referred and relevant:
Section 12AA and section 80G as stood from time to time.
Facts and dispute:
The assesse trust was duly registered u.s. 12AA and carrying activities of running a college.
In the assessment order for Assessment Year 2016-17 the ld. AO has granted benefit of registration u/s 12AA and there was no adverse finding in the assessment order.
The facts and circumstances remained similar that the trust was running a college, charging fees, and was also having some surplus.
While considering application for grant of registration and benefits of S.80G the Ld. CIT(E) considered the following aspects:
a. report of inspector of income tax which shows some local administrative deficiencies like a. not found a sign board
b. non availability of audited accounts,
c. In view of above JCIT and AO have recommended not to grant certificate u.s. 80G (5).
d. Ld. CIT(E) also observed that the trust has generated sufficient cash surplus in FY .2014-15, 2015-16 and 2016-17.
For above reasons Ld. CIT(E) refused to grant certificate u.s. 80G (5).
Therefore, assessee preferred appeal before the Tribunal with the following grounds of appeal:
“1. That learned CIT erred in rejecting application for grant of approval u/s 80G of the Income-tax Act, 1961 of the society without considering the facts and circumstances of the case properly and judicially and without properly appreciating the materials furnished before him to prove that society is genuine and is engaged in charitable activities.
2. The appellant reserves the right to add, amend, or alter any ground or grounds of appeal at the time of hearing.”
We find only first ground of appeal was effective because the ground of appeal was not amended and any new ground was also not preferred.
Contentions before Tribunal and order of Tribunal:
Assesee relied on facts including fact of assessment order without any adverse comment of Ld. AO.
Reliance was also placed on some judgments and it was contended that once Registration u.s. 12AA is granted and assessee is holding such valid registration ( not revoked) there is no reason for not granting benefit of section 80G because all requirements are fully complied with.
Some deficiencies noticed at local places of activities of the assessee Trust and cash surplus generated out of fees charged are not sufficient ground to deny grant of certificate u.s.80G, particularly so when Trust was found eligible for certificate u.s. 12AA which was in force.
From order of Tribunal:
Tribunal had considered, referred and also reproduced some portions from orders and judgment relied on by assessee and found them applicable and binding. In para 13 of the order of Tribunal, final conclusion are drawn which are analyzed as follows:
Tribunal heard both the parties,
Tribunal perused materials available on record. The order of the Co-ordinate Bench and arguments of ld. AR of the assessee.
Tribunal held that the assessee is eligible for approval of 80G of the Act since their 12AA registration is granted and continue.
Even the assessment proceedings for A. Y. 2016-17 completed with out any adverse observation on the issue and the activities of the trust are in accordance with the condition prescribed.
Therefore, following the decision of Co-ordinate Bench Tribunal set aside the order of ld. CIT(E) and directed ld. CIT(E) to grant an approval to the assessee u/s 80G of the Act.
Thus, the appeal of the assessee was allowed.
Appeal of Revenue before High Court:
Revenue preferred appeal before the High Court against order of Tribunal. The question of law proposed in application are not available. However, the appeal was admitted by formulating the following substantial question of law: -
“Whether in the attending facts and circumstances of the case, the Income Tax Appellate Tribunal (ITAT) was correct in holding that the Commissioner of Income Tax (E) was not justified in rejecting the application of the respondent for grant of benefit of exemption under Section 80G (5) of the Act of 1961 and issuing direction to grant of exemption as sought for by the respondent society?”
Observation of author:
From the substantial question of law so formulated, it appears that there was no dispute on facts as found by the Tribunal, though the phrase ‘ in the attending facts and circumstances of the case’ is part of the question admitted ( SQL). And in the course of hearing counsels of revenue contended as to finding recorded being perverse to records.
Honorable High Court considered records and arguments of both sides and observed and decided issue in favor of assessee. The observations and order vide para 7 on wards of the judgment are summarized and analyzed below:
The bench of High Court heard learned counsel for the parties and considered their rival submissions made and went through the record with utmost circumspection.
It is undisputed that the assessee’s registration and grant of certificate under Section 12AA of IT Act is continuing in operation.
And based on this learned ITAT accepted the appeal of the assessee and directed the CIT(E) to grant approval under Section 80G of the IT Act.
The issue involved stands decided in favour of assessee vide Hiralal Bhagwati Versus Commissioner Of Income-Tax - 2000 (4) TMI 14 - GUJARAT High Court which has been approved to be the correct law by a decision of the Supreme Court vide Asstt. Commissioner of Income Tax, Surat Versus Surat City Gymkhana - 2008 (4) TMI 16 - Supreme Court.
In Hiralal Bhagwati (supra ) it was held that once the registration under Section 12A (a) of the IT Act is granted, the grant of benefit under Section 80G of the IT Act cannot be denied.
High Court discussed the judgment of Supreme Court in case of Surat City Gymkhana and reproduced relevant portions. On reading of the same it is noticed that the judgment in Hiralal Bhagwati was not challenged so it attained finality and it was so held by the Supreme Court in Surat City Gymkhana (Supra.)
High Court concluded and orderd vide para 12 which is analyzed below:
The decision rendered by the Gujarat High Court in Hiralal Bhagwati (supra) has been approved by the Supreme Court in Surat City Gymkhana’s case (supra).
we have no hesitation to hold that since the respondent assessee stands registered as charitable institution under Section 12AA of the IT Act, the only corollary is, its application under Section 80G (5) of the IT Act also deserves to be allowed .
The learned ITAT has rightly noticed to be the correct legal position and directed the CIT(E) to grant approval to the assessee under Section 80G (5) of the IT Act.
The substantial question of law is answered in favour of the assessee and against the Revenue and accordingly, the tax appeal deserves to be and is hereby dismissed leaving the parties to bear their own cost(s).
Analysis of judgment / order of the Supreme Court:
The matter was represented by counsels of Revenue/ Petitioner only.
No one appeared on behalf of assessee.
The matter was heard on representations of Revenue/ Petitioner.
Delay in filing of appeal was condoned.
Vide para 3 order was passed as follows (High lights added):
“ 3. In the peculiar facts and circumstances of the case, we are not inclined to interfere with the well-reasoned order passed by the High Court. Hence, the Special Leave Petition is dismissed.”
Observations of author:
The case was heard and Supreme Court found the order of High Court as well reasoned.
Though the Supreme Court has stated ‘ we are not inclined to interfere. ..’
This can be considered as approval by the Supreme Court for the reasons that :
Matter was heard at all stages and Revenue represented its case before Tribunal,High Court and the Supreme Court.
Facts found by Tribunal were not challenged as perverse or say were not found perverse when SQL was formulated.
The matter is covered by earlier judgment of Supreme Court which was relied and applied by the High Court.
Question of law has not been kept open by the Supreme Court.
Order of High Court is found to be well –reasoned, hence the SLP was dismissed.
Therefore, in fact the order of Supreme Court is to the effect of approval of judgment of High Court.
Request to their lordships of the Supreme Court:
It is humble request to the honorable judges that matters be decided finally by speaking orders and practice of keeping question of law open be avoided. This will reduce litigation and pendency of cases before the Supreme Court and lower courts.
When question of law is kept open litigation continues.
When speaking order is not passed, litigation continues.
In fact, when matter has been represented and argued by counsels of appellant, before the Supreme Court and High Court, there is no reason to keep question of law open.
Other contentions which could be raised/ considered:
Besides various contentions as raised by assessee the author want to add as follows:
Grant of certificate u.s 80G is basically meant for giving some relief to donors by allowing some deductions for donations paid by them to registered institutions.
Institutions require regular addition in corpus and other funds for the reason that some cash surplus even if generate, are not enough to meet requirement for repairs, renewals and replacement of assets. Furthermore, activities of such institutions are based on lot of fixed expenses which increases with inflation and new requirements. Therefore, certificate u.s. 80G is in fact a handy tool required to run charitable institutions with compelling requirements of capital expenditure and to meet additional costs due to inflation and new requirements arising due to various developments, technologies, now system and new plant and machinery and other infrastructure needed to keep updated in activities.
Therefore, when an institution is carrying such activities and is found eligible for certificate u.s. 12AA, the certificate u.s 80G should be allowed, liberally and preferably as a consequence of registration u.s. 12AA without any need to make another application and to pass separate order to grant such certificate. The provisions can be integrated suitably.
If that be done, there will be ease of doing activities and less litigation.
Work of tax department will also be reduced.