Population Services International Vs CIT (ITAT Delhi)
ITAT Delhi held that approval granted under section 10(23C)(iv) of the Income Tax Act cannot be withdrawn on the allegation of violation of certain compliance conditions, once the threshold conditions is duly satisfied.
Facts- The assessee was granted registration u/s. 12A of the Act on 06.12.1991 and u/s. 80G of the Act on 20.09.2007. The assessee was granted approval u/s. 10(23C)(iv) by the Central Board of Direct Taxes (CBDT) vide notification issued on 31.01.2007 and such approval was renewed in subsequent assessment years. In course of scrutiny assessment, AO while verifying the information gathered and available on record, was of the view that the assessee has violated the conditions of approval granted under section 10(23C)(iv) of the Act.
On the basis of observations, AO sent a proposal for withdrawal of approval granted u/s. 10(23C)(iv) of the Act. Accepting the proposal of AO, learned CIT (Exemption) granted approval for special audit and the special audit was entrusted to a chartered accountant firm.
Learned CIT(Exemption) issued a show-cause notice to the assessee to explain, why the approval granted u/s. 10(23C)(iv) of the Act should not be revoked.
After considering the submissions of the assessee, observations of AO and the Special Audit Report, learned CIT (Exemption) observed that the assessee could not come with a satisfactory explanation to reconcile the difference in the figures of foreign contribution as per the FCRA Account in Form FC-4 and as declared in the income and expenditure account. Further, he observed, though, the assessee claims itself to be a non-profit and non-Government organization, it is indulging in business activity with a profit motive and not doing any charitable work. Thus, learned CIT (Exemption) ultimately concluded that the assessee is not involved in charitable activity as defined u/s. 2(15) of the Act. Hence, the approval granted under section 10(23C)(iv) was required to be withdrawn. Accordingly, he did so, while referring to various provisions of section 10(23C) of the Act. Being aggrieved, the assessee is before us.
Conclusion-
Once the assessee satisfies the threshold conditions of section 10(23C)(iv) of the Income Tax Act, the approval granted cannot be withdrawn, that too, with retrospective effect, alleging violation of certain compliance conditions.
The Departmental Authorities have failed to differentiate between the threshold conditions and compliance conditions. The compliance conditions have to be examined in each assessment year and, in case, there is any violation in compliance conditions in any assessment year, assessee’s claim of exemption for the said assessment year can be rejected. However, that cannot be a reason to revoke the approval granted under section 10(23C)(iv) of the Act. One more factor which needs consideration is, till date, assessee’s registration under section 12A of the Act as a charitable institution subsists. In fact, approval granted under section 80G of the Act is still continuing. These facts reflect the dichotomy in the stand of the revenue. For the purpose of section 12A and 80G of the Act the assessee is recognized as charitable institution, whereas, for the purpose of section 10(23C)(iv) assessee loses its charitable status. This approach of the revenue is unacceptable.
FULL TEXT OF THE ORDER OF ITAT DELHI
Captioned appeal has been filed by the assessee assailing the order dated 16.03.2021 passed by learned Commissioner of Income Tax (Exemption), Delhi, revoking the approval granted under section 10(23C)(iv) of the Income-tax Act, 1961 (in short ‘the Act’).
2. Briefly the facts, as culled out from the records are, the assessee is a society registered under the Societies Registration Act, 1860, w.e.f, 18.06.1980. The main objects of the assessee include the following:
