2012 (11) TMI 172 - AT - Income Tax

Tribunal grants appeal in income tax case, approves perpetuity of Section 80G approval

The Tribunal allowed the appeal filed by the assessee, vacating the order of the Director of Income-tax (Exemptions) rejecting the renewal application ... Application for renewal of exemption u/s 80G(5)(vi) of Income-tax Act - Indian Plumbing Association is a society registered under the Society Registration Act - association is registered u/s 12A of the Income Tax Act - Held that;- As assessee’s existing approval was expiring on or after the 1st day of October, 2009, the same shall be deemed to have been extended in perpetuity unless specifically withdrawn - there is no material on record according to which it can be said that the approval granted to the assessee u/s 80G (5) was specifically withdrawn - approval granted to the assessee u/s 80G will act in perpetuity unless it is specifically withdrawn - appeal filed by the assessee is allowed. Decision in the case of Babu Hargovind Dayal Trust vs. ITAT [2011 (2) TMI 1199 - ALLAHABAD HIGH COURT] followed. Issues Involved:1. Rejection of application for renewal of exemption under Section 80G(5)(vi) of the Income-tax Act, 1961.2. Interpretation of the amendment to Section 80G(5)(vi) effective from 1st October 2009.3. Validity and perpetuity of approval under Section 80G(5)(vi) post-amendment.4. Compliance with procedural requirements and submission of necessary documents by the assessee.5. Allegations of non-charitable activities by the assessee.Detailed Analysis:Issue 1: Rejection of application for renewal of exemption under Section 80G(5)(vi) of the Income-tax Act, 1961The appeal is directed against the order passed by the Director of Income-tax (Exemptions) [DIT (E)] dated 1st September 2011, which rejected the application for renewal of exemption under Section 80G(5)(vi). The DIT (E) held that there was no element of charity in the activities of the society, which were carried out purely on commercial lines, thus falling under the proviso to Section 2(15) of the IT Act, 1961, as amended by the Finance Act, 2008.Issue 2: Interpretation of the amendment to Section 80G(5)(vi) effective from 1st October 2009The assessee argued that as per the amendment effective from 1st October 2009, any exemption granted up to 31st March 2010 should be deemed to have been extended in perpetuity unless specifically withdrawn. This interpretation is supported by Board Circular No. 7/2010 dated 27th October 2010 and the decision of the Hon'ble Allahabad High Court in the case of Babu Hargovind Dayal Trust vs. ITAT (2011) 199 Taxman 138 (All).Issue 3: Validity and perpetuity of approval under Section 80G(5)(vi) post-amendmentThe Tribunal noted that the amendment to Section 80G(5)(vi) removed the proviso that limited the validity of approval to five assessment years. The CBDT Circular No. 7/2010 clarified that approvals granted up to 1st October 2009 would continue to be valid in perpetuity unless specifically withdrawn. The Tribunal also referenced the decision in Educate India Society vs. DIT (E), where it was held that the approval once granted shall continue to be valid in perpetuity.Issue 4: Compliance with procedural requirements and submission of necessary documents by the assesseeThe assessee had submitted an application for renewal on 31st March 2011 along with necessary documents, including Form 10G, copies of previous approvals, registration under Section 12A, and audited balance sheets. However, the DIT (E) rejected the application due to the non-appearance of the assessee in response to notices and perceived lack of documentary evidence of charitable activities.Issue 5: Allegations of non-charitable activities by the assesseeThe DIT (E) argued that the activities of the assessee were not charitable and were carried out on commercial lines. However, the Tribunal found that the assessee was already registered under Section 12A as a charitable institution and had been granted approval under Section 80G previously. There was no evidence that the approval had been specifically withdrawn.Conclusion:The Tribunal concluded that the rejection of the renewal application by the DIT (E) was not justified. The approval under Section 80G(5)(vi) should be deemed to continue in perpetuity unless specifically withdrawn. The appeal filed by the assessee was allowed, and the order of the DIT (E) was vacated. The approval granted to the assessee under Section 80G will continue in perpetuity as per the amended provisions and the CBDT Circular.