Case Law Details

Case Name : Bhole Bhandari Charitable Trust Vs CIT (ITAT Chandigarh)
Appeal Number : IT Appeal No. 140 (CHD.) OF 2012
Date of Judgement/Order : 17/05/2012
Related Assessment Year :
Courts : All ITAT (4274) ITAT Chandigarh (105)

ITAT CHANDIGARH BENCH ‘A’

Bhole Bhandari Charitable Trust v/s.  CIT

IT APPEAL NO. 140 (CHD.) OF 2012

MAY 17, 2012

ORDER

H.L. Karwa, Vice-President – This appeal filed by the assessee is directed against the order of CIT-I, Ludhiana dated 5.12.2011 passed u/s 80G(5) of the Income-tax Act, 1961 (in short ‘the Act’) read with Rule 11AA(5) of Income-tax Rules, 1962.

2. In this appeal, the assessee has raised the following grounds:-

 1.  That the Learned CIT-I, Ludhiana has erred in law and on facts by rejecting the permission granted to the assessee being a Charitable Trust U/s 80G(5) of the Income Tax Act, 1961 read with rules without making an objection on the registration granted Under Section 12 AA of the Act.

 2.  That the learned CIT-I, Ludhiana has erred in law and on facts by not considering the reply of assessee in his order and suo-moto rejected the permission granted to the assessee for being a Charitable Trust u/s 80G of Income Tax Act, 1961.

 3.  That the learned CIT-I, Ludhiana has erred in law and on facts in withdrawal of exemption u/s 80G without fulfilling the requirements of the law such as issuance of show cause notice, compliance of circular dated 27-10-2010 etc.

 4.  That the learned CIT-I, Ludhiana has erred in law and on facts by withdrawal of exemption granted u/s BOG on rejecting the amendment in the trust after the lapse of 9 years on the basis of which the exemption was granted to the assessee.

 5.  That the submissions made during the course of hearing have not been considered by the Commissioner of Income Tax-l, Ludhiana at all and has withdrawn the exemption U/S 80G merely on the basis of conjectures and surmises.

 6.  That the learned CIT-I, Ludhiana has erred in law and on facts by not considering the facts that the trust deed has appointed the independent trustees and trustees have contributed the corpus in the Trust by way of moveable property and unilaterally withdrawal the exemption.

 7.  That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off.

3. The only grievance of the assessee in this appeal relates to renewal of exemption u/s 80G(5) of the Act.

4. Briefly stated, the facts of the case are that the assessee Trust was established on 17.1.2002 and had been granted registration u/s 12A as well as exemption u/s 80G. The last time exemption was granted vide order No.CIT-I/Ludhiana/Tech/80-G/9/2008-09/2008-09/2162 dated 25.6.2008 for the period from 1.4.2008 to 31.3.2011 relating to assessment year’s 2009-10, 2010-11 and 2011-12. The assessee preferred an application for renewal of exemption u/s 80G on 25.4.2011. Subsequently, the assessee vide its application dated 31.5.2011, withdrew its application dated 25.4.2011 stating as under:-

“Kindly refer tour application dated 25.04.2011 receipt No. 391, for approval of donation u/s 80G(5)(vi).

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In this regard, it is submitted that we have now come to know that the Finance bill 2009, has omitted section 80G(5)(vi) w.e.f. 1.10.2009. Moreover, the Board has issued a Circular No. 7/2010 dated 27.10.2010 clarifying in para 5 that existing approvals expiring on or after 1.10.2009, shall be deemed to have been extended in perpetuity unless specifically withdrawn. In our case approval was granted for the period 1.4.2008 to 31.3.2011.

Hence you are requested to consider our application as withdrawn as statutorily no such approval is required after 1.10.2009.

Sorry for inconvenience caused to you

Thanks & regards

For Bhole Bhandari Charitable Trust

Sd/-

President”

5. The Ld. CIT did not grant approval u/s 80G(5) of the Act and rejected the application moved by the assessee, observing as under:-

“10. In this regard reply filed by the assessee has been considered. The last sub para of para 5 as quoted supra makes the situation clear that registration is perpetuity would be applicable to those trusts or institutes who had received the registration u/s 80G subsequent to 1.10.2009. In this case the last registration was granted on 25.6.2008. Hence, perpetuity is not applicable in the case of the appellant Trust. Also, the Commissioner has power u/s 12AA (1)(b)(ii) to withdraw the approval if he is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objections of the institution or fund. I have discussed above in detail, why there would be problems in carrying out the genuine charitable activities. This has been discussed in detail in paras, 5, 6, 7, 8, 9,10 and 11. Hence, exemption u/s 80G(5) of the Income-tax Act, 1961 cannot be allowed to the applicant Trust and Application is hereby rejected.’

6. Now the assessee is in appeal before the Tribunal. Shri Sudhir Sehgal, Ld. Counsel for the assessee submitted that earlier as per provisions contained in clause (vi) to sub-section (5) of Section 80G, the approval was to be granted by the CIT in accordance with rules prescribed in Rule 11AA and as per the proviso to Section 80G(5)(vi), the approval was to be renewed from time to time. However, considering the hardship, the Legislature in all its wisdom has sought to omit this proviso on 1st October, 2009. Therefore, now approval once granted shall be continue to be valid in perpetuity. In the instant case, the approval was granted by the CIT upto 31.3.2011, therefore, in view of the aforesaid omission of the proviso to Section. 80G(5)(vi), the approval once granted shall continue to be valid in perpetuity. He further submitted that even if the assessee by ignorance or inadvertently filed an application for renewal, the CIT was required to decide the same in accordance with the amended provisions. Shri Sudhir Sehgal, Ld. Counsel for the assessee also submitted that the assessee withdrew the application dated 25.4.2011 vide its application dated 31.5.2011. In that view of the matter, CIT was not justified in holding that exemption u/s 80G(5) of the Act cannot be allowed to the assessee’s trust. According to Shri Sudhir Sehgal, the conclusion drawn by the CIT is contrary to law and, therefore, not tenable.

7. Shri Sudhir Sehgal also submitted that the issue is squarely covered in favour of the assessee and against the Revenue by the decision of ITAT, Lucknow ‘A’ Bench in the case of Association for Advocacy and Legal Initiatives v. CIT [2011] 130 ITD 573/11 taxmann.com 24 (Luck). While deciding a similar issue, the ITAT Lucknow ‘A’ Bench held as under:-

“10. We have considered the submissions of both the parties and carefully gone through the material available on record. In the instant case, it is not in dispute that the assessee-trust is registered with the Sub-Registrar, Lucknow, having registration under section 12AA of the Act also which has been granted by the ld. Commissioner of Income-tax, Lucknow vide order dated 10-2-2010. The assessee was also granted approval under section 80G(5)(vi) of the Act with effect from 10-3-2000 which was valid till 31-3-2003 and later on renewal of the approval under the said section was granted vide order dated 9-9-2003 from 1-4-2003 to 31-3-2006, again vide order dated 7-12-2006 from 1-4-2006 to 31-3-2008 and finally vide order dated 16-9-2008 from 1-4-2008 to 31-3-2010 by the ld. Commissioner of Income-tax-I, Lucknow. The copies of the said orders are placed at pages 41, 40 and 39 respectively of the assessee’s paper book. Earlier as per provisions contained in clause (vi) to sub-section (5) of section 80G, the approval was to be granted by the ld. Commissioner of Income-tax in accordance with Rules prescribed in Rule 12AA of the Income-tax Rules, 1962 and as per the proviso to section 80G(5)(vi) of the Act, the approval was to be renewed from time to time. However, considering the hardship, the Legislature in all its wisdom has sought to omit this proviso on 1-10-2009 vide its Finance (No. 2) Act, 2009. Therefore now approval once granted shall continue to be valid in perpetuity. In the instant case, the approval was granted to the assessee up to 31-3-2010, therefore, in view of the aforesaid omission of the proviso to section 80G(5)(vi) of the Act vide Finance (No. 2) Act, 2009, the approval once granted shall continue to be valid in perpetuity. The memo explaining the provisions in Finance (No. 2) Bill, 2009 as reported in 314 ITR 193 (St.) at page 194 reads as under :-

“This amendment will take effect from 1st day of April, 2009 and shall accordingly, apply in relation to assessment year 2009-10 only.

Further as per clause (vi) of sub-section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rules, 1962. The proviso to this clause provides that any approval granted under this clause shall have effect for such assessment year or years, not exceeding five assessment years, as may be specified in the approval.

Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine manner.

Therefore, it is proposed to omit the proviso to clause (vi) of sub-section (5) of section 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund.

This amendment will take effect from 1st day of October, 2009. Accordingly, existing approvals expiring on or after 1st October, 2009 shall be deemed to have been “extended in perpetuity unless specifically withdrawn. However, in case of approvals expiring before 1st October, 2009, these will have to be renewed and once renewed these shall continue to be valid in perpetuity, unless specifically withdrawn.”

11. From the above it is crystal clear that the approval once granted under section 80G(5)(vi) of the Act shall continue in perpetuity. It is also noticed that the CBDT issued its Circular No. 5 being “Explanatory circular for Finance (No. 2) Act, 2009” and para 29.7 of the said Circular reads as under :-

“29.7 Applicability. -This amendment has been made applicable with effect from 1st October 2009. Accordingly, existing approvals expiring on or after 1st October, 2009 will be deemed to have been extended in perpetuity unless specially withdrawn. However, in case of approvals expiring before 1st October, 2009, these will have to be renewed and once renewed these shall continue to be valid in perpetuity, unless specifically withdrawn.”

12. The aforesaid Circular is in favour of the assessee and even if the assessee by ignorance or inadvertently filed an application for renewal, the CIT was required to decide the same in accordance with the amended provisions. As regards to the contention of the ld. D.R. that the provisions contained in section 293C of the Act enables the CIT to withdraw approval is concerned, it is noticed that the said section has been inserted by the Finance (No. 2) Act, 2009 with effect from 1-10-2009 i.e., from the date on which provisions of section 80G(5)(vi) has been withdrawn, the provisions contained in section 293C read as under :-

“293C. Where the Central Government or the Board or an income-tax authority, who has been conferred upon the power under any provision of this Act to grant any approval to any assessee, the Central Government or the Board or such authority may, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision, withdraw such approval at any time :

Provided that the Central Government or Board or income-tax authority shall, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the assessee concerned, at anytime, withdraw the approval after recording the reasons for doing so.”

13. From the proviso attached to the section 293C of the Act, it is crystal clear that even if any Income-tax Authority wants to withdraw approval, he shall issue a show-cause notice against the proposed withdrawal to the assessee concerned and after giving a reasonable opportunity of being heard shall withdraw approval after recording reasons for doing so. The use of the word “shall” in the aforesaid proviso makes it mandatory for Commissioner of Income-tax to issue a show-cause notice to the assessee against the proposed withdrawal of approval granted under section 80G(5) of the Act. However, in the present case no such show-cause notice has been issued to the assessee. Therefore, we do not see any merit in this contention of the ld. CIT that the provisions contained in section 293C of the Act enables the ld. Commissioner of Income-tax to withdraw approval. We, therefore, considering the totality of the facts as discussed hereinabove are of the view that the ld. Commissioner of Income-tax was not justified in withdrawing approval once granted because the Legislature in all its wisdom has sought to omit this proviso to section 80G(5)(vi) of the Act and after omission of the said proviso, the approval once granted shall continue to be valid in perpetuity unless and until a show-cause notice is issued by the concerned CIT showing his intention to withdraw already granted such approval. However, in the instance case, the CIT without issuing any such notice has withdrawn approval. We, therefore, set aside the impugned order of the ld. Commissioner of Income-tax and accordingly approval under section 80G(5) of the Act already granted to the assessee shall continue unless and until the concerned authority takes appropriate action in accordance with law.

14. In the result, appeal is allowed”

8. Respectfully, following the decision of the ITAT, Lucknow Bench in the case of Association for Advocacy and Legal Initiatives (supra), we set aside the impugned order of Ld. CIT and hold that approval u/s 80G(5) of the Act already granted to the assessee shall continue unless and until the concerned authority takes appropriate action in accordance with law.

9. In the result, the appeal is allowed.

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4 responses to “Approval u/s.80G(5) to continue unless withdrawn as per law”

  1. T R Nagat says:

    ITO Wants an undertaking from the assesses/Donee/charitable institutions that the exemption granted under section 80G in perpetuity has not been withdraw. Now tell me whose duty is to examine whether the exemption under section 80g has been withdrawn in the specific F Y

  2. Paresh says:

    If the registration of 80G is expired before 2007 what is the legal procidure and can we enjoy for the 80G examptions

  3. A.Maria James says:

    Dear sir,
    Our organisation “Rural Uplift Centre” was recognised under 80G of The Income Tax Act 1961, on 30th of January 2013. At the end of the order, the CIT mentioned that “The trust could apply thereafter(after 31st of March 2014) for renewal with notes on activities carried out on them” Is there a need to renew the recognition of 80G.

    A.Maria James,
    Rural Uplift Centre.

  4. gopi krishna says:

    Excellent report you have inserted in this site. Very useful information for all the trusts and societies who are enjoying 80G approvals by the Income tax dept. Once again thank you very much.

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