2019 (10) TMI 254 - AT - Income Tax

High Court Upholds Tribunal Decision on Deemed Registration under Income-tax Act

The High Court upheld the Tribunal's decision favoring the assessee due to the delay in passing the Commissioner's order, granting deemed registration ... Exemption u/s 80G - Period of limitation for CIT to grant registration - CIT has either to grant approval or reject approval within a period of six months from the end of the month in which such application was made - HELD THAT:- At the material time, the period of six months was to be reckoned from the date on which the application was made. In case the order refusing or granting approval is not passed within a period of six months, then the moot question arises as to whether the passing of order belatedly would be considered as valid. AR fairly submitted that even if the issue on merits is now decided against the assessee, still the registration would be saved by virtue of the order passed by the Tribunal on the limitation issue, which attained finality. We are convinced with the submission advanced on behalf of the assessee that even if the issue on merits is to be decided against the assessee, but the same cannot come into play unless the initial hurdle of limitation is crossed. Once the Tribunal has held that the certificate u/s. 80G(5) was deemed to have been granted on the expiry of period of six months from the date on which application was filed coupled with period of delay of 19 days attributable to the assessee, naturally the assessee gets entitled to registration u/s.80G without considering the merits as discussed by the CIT in his order passed beyond the stipulated period. We, therefore, hold that the order passed by the Tribunal granting deemed registration u/s. 80G(5) sans merits, still holds the field. - Decided in favour of assessee. Issues involved:1. Recognition u/s. 80G of the Income-tax Act, 19612. Delay in passing the order by the Commissioner3. Maintenance of accounts and utilization of grant4. Eligibility for exemption u/s. 11 and 80G5. Tribunal's decision on limitation issue6. High Court's consideration of questions raisedRecognition u/s. 80G of the Income-tax Act, 1961:The appeal pertains to the rejection of the assessee's application for recognition u/s. 80G of the Income-tax Act, 1961 by the Commissioner. The Commissioner found infirmities in the maintenance of accounts by the assessee, misutilization of grants, irregularities reported by the Auditor, and loans given to certain persons. Consequently, the Commissioner rejected the application, leading to the appeal before the Tribunal.Delay in passing the order by the Commissioner:The Tribunal noted that the Commissioner's order was passed beyond the prescribed period under Rule 11AA of the I.T. Rules. The Tribunal held that the certificate u/s. 80G(5) was deemed to have been granted to the assessee due to the delay in passing the order, thereby favoring the assessee on the limitation issue.Maintenance of accounts and utilization of grant:The Commissioner observed that the grant received by the assessee was misutilized for purposes other than the project, violating section 11(1) of the Act. Additionally, irregularities in account maintenance and loans given to specific individuals led to the rejection of the application for exemption u/s. 11 and 80G.Eligibility for exemption u/s. 11 and 80G:The Tribunal, in the first round, held that the CIT's order was beyond the stipulated period, deeming the certificate u/s. 80G(5) granted to the assessee. The High Court, considering questions on merits, restored the matter for fresh consideration, not addressing the limitation issue decided in favor of the assessee.Tribunal's decision on limitation issue:The Tribunal's decision on the limitation issue favored the assessee, granting deemed registration u/s. 80G(5) due to the delay in passing the order. The High Court, having only the issue on merits before it, did not address the limitation issue already decided in favor of the assessee.High Court's consideration of questions raised:The High Court, in its judgment, restored the matter for fresh consideration based on the questions raised on merits. The Tribunal's decision on the limitation issue, granting deemed registration, was upheld, emphasizing that the registration would stand even if the issue on merits was decided against the assessee.This comprehensive analysis of the judgment covers the issues involved, the Tribunal's and High Court's decisions, and the legal implications concerning recognition u/s. 80G of the Income-tax Act, 1961.