Case Law Details
CIT (Exemption) Vs Dignity Education Society (Supreme Court of India)
The dispute concerned whether an assessee society, already registered under Section 12AA of the Income-tax Act, was entitled to approval under Section 80G(5). The assessee had applied in Form 10G for approval, and the tax authorities sought documents to verify its objects and activities. A report by the Joint Commissioner and Assessing Officer recommended rejection on the ground that the assessee ran a college, generated surplus from student fees, and was not engaged in any additional activities mentioned in the application. Relying on this report, the Commissioner of Income Tax (Exemption) rejected the application under Section 80G(5)(vi).
Read High Court Order in this case: Existing 12AA Registration Valid Basis for Section 80G Approval: Chhattisgarh HC
The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which reversed the Commissioner’s order and directed that approval under Section 80G be granted. The Revenue challenged this decision before the Chhattisgarh High Court, which admitted the appeal to consider whether the ITAT was correct in holding that rejection of the application was unjustified.
The High Court reviewed the matter and noted that the assessee’s registration under Section 12AA was undisputed and continued to operate. The ITAT had relied on this fact to hold that approval under Section 80G could not be denied. The High Court observed that the legal issue was settled by the Gujarat High Court’s decision in Hiralal Bhagwati v. CIT, which held that once registration under Section 12A(a) is granted, the benefit of Section 80G cannot be denied on grounds relating to public utility. The Gujarat High Court reasoned that registration under Section 12A(a) entitles the assessee to statutory benefits unless the registration itself is absent.
The Supreme Court had approved this legal position in Assistant Commissioner of Income Tax v. Surat City Gymkhana. In that case, two questions were raised—one relating to whether trust benefits extended only to club members constituted “general public utility,” and the second regarding whether Section 12A registration prevented further probing into objects of the trust. The Supreme Court held that the second question was already concluded by the Hiralal Bhagwati judgment, and since the Revenue had not challenged that judgment, the legal position stood final. Consequently, once registration under Section 12A is granted, no further inquiry is required to reassess charitable purpose when considering Section 80G approval.
Applying these principles, the High Court held that because the assessee held a valid and continuing registration under Section 12AA, it was entitled to approval under Section 80G(5). The ITAT had correctly applied this settled legal position, and the Commissioner was not justified in rejecting the application. As a result, the substantial question of law was answered in favour of the assessee and against the Revenue, and the tax appeal was dismissed.
The matter then reached the Supreme Court through a Special Leave Petition filed by the Revenue. The Supreme Court condoned the delay, heard the matter, and in view of the “peculiar facts and circumstances” declined to interfere with the High Court’s well-reasoned judgment. The Special Leave Petition was dismissed, and all pending applications were disposed of.
The combined effect of the Supreme Court and High Court rulings is that once an institution is registered under Section 12AA, approval under Section 80G(5) ordinarily cannot be denied unless the registration itself is revoked. The Revenue cannot reassess or question the charitable nature or public utility of the institution at the 80G approval stage once the statutory registration under Section 12AA exists and continues in force.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. Heard.
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.
4. Pending application(s), if any, shall stand disposed of.
Author Bio
