2024 (12) TMI 321 - HC - Income Tax

Section 12AA registration automatically entitles charitable institutions to Section 80G(5) approval benefits confirmed

Commissioner of Income Tax (Exemption), Bhopal Versus Dignity Education Society, Raipur.

The HC upheld ITAT's decision directing CIT(E) to grant Section 80G(5) approval to the assessee. The court held that since the assessee was already ... Rejecting the application for grant of benefit of exemption u/s 80G (5) - assessee’s application u/s 12AA was granted and is continuing in operation - HELD THAT:- In view of the decision rendered in Hiralal Bhagwati [2000 (4) TMI 14 - GUJARAT HIGH COURT] approved by the Supreme Court in Surat City Gymkhana’s case [2008 (4) TMI 16 - SUPREME COURT] we have no hesitation to hold that since the respondent assessee stands registered as charitable institution u/s 12AA the only corollary is, its application under Section 80G (5) of the IT Act also deserves to be allowed which the 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). As such, the substantial question of law is answered in favour of the assessee. Issues:1. Legality, validity, and correctness of the judgment & order passed by the Income Tax Appellate Tribunal.2. Rejection of application for exemption under Section 80G of the Income-tax Act.3. Grant of approval to the assessee under Section 80G of the IT Act.4. Interpretation of the law based on previous judicial decisions.Analysis:The High Court addressed the legality, validity, and correctness of the judgment & order passed by the Income Tax Appellate Tribunal (ITAT) in response to the Revenue's appeal questioning the rejection of the assessee's application for exemption under Section 80G of the Income-tax Act. The ITAT had allowed the appeal filed by the assessee, directing the appellant to grant approval to the assessee under Section 80G (5) of the IT Act. The substantial question of law formulated for consideration was whether the ITAT was correct in holding that the Commissioner of Income Tax was not justified in rejecting the application for exemption under Section 80G (5) of the Act of 1961 and issuing a direction to grant the exemption.The factual backdrop revealed that the assessee had applied for exemption under Section 80G of the IT Act, but the application was rejected by the Commissioner of Income-tax (Exemption). The ITAT, however, reversed this decision and granted the application under Section 80G, directing the Commissioner to approve the assessee under Section 80G. The Revenue contended that the ITAT's decision was unjustified, while the assessee argued that since they had already been granted application under Section 12AA of the IT Act, the ITAT's decision was justified.The High Court considered previous judicial decisions, specifically the Gujarat High Court's ruling in Hiralal Bhagwati v. Commissioner of Income-Tax and the Supreme Court's decision in Assistant Commissioner of Income Tax v. Surat City Gymkhana. These cases established that once registration under Section 12A of the IT Act is granted, the benefit under Section 80G cannot be denied. The Supreme Court clarified that there is no need for further inquiry into the charitable purposes once registration under Section 12A is granted. Therefore, the High Court concluded that since the assessee was registered as a charitable institution under Section 12AA, their application under Section 80G deserved to be allowed. The substantial question of law was answered in favor of the assessee, and the tax appeal was dismissed, with each party bearing its own costs.