THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH vs. M/S ADESH WELFARE SOCIETY, MUKTSAR (PAN: AAATA5812E)

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ITA/119/2018HC Punjab & HaryanaPHHC01118955201810 January 2019Author: MR. JUSTICE AJAY KUMAR MITTAL,MRS. JUSTICE MANJARI NEHRU KAUL5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court found no merit in the revenue's appeal. It noted that the assessee's Section 12AA registration was continuing and that its previous Section 80G registration had not been withdrawn, although it had expired. The Tribunal had observed that the assessee's assessment for AY 2012-13 allowed benefits under Section 11, and its return for AY 2016-17 declared 'Nil' income claiming exemption under Section 11. There was no violation by the assessee warranting withdrawal of its 12AA registration. The Court agreed with the Tribunal that once established as a charitable institution for 80G registration, it cannot be denied again. The Tribunal's reliance on the Circular dated 27.10.2010, which deemed registrations expiring on or after 1.10.2009 as extended in perpetuity, was considered valid. The High Court held that no illegality or perversity could be pointed out by the revenue and no substantial question of law arose. Therefore, the appeal was dismissed.

What were the facts?

The assessee, M/s Adesh Welfare Society (Regd.), Muktsar, is registered under Section 12AA of the Income Tax Act, 1961. It was previously granted approval under Section 80G, which lapsed on March 31, 2009. The assessee filed an application for fresh approval under Section 80G(5)(vi) on July 28, 2016. The Commissioner of Income Tax (Exemptions), Chandigarh, rejected this application on January 31, 2017. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which, by an order dated September 26, 2017, directed the CIT(E) to grant registration under Section 80G from the date of application. The revenue has appealed this ITAT order to the High Court.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the ITAT erred in directing registration under Section 80G instead of remanding for re-examination, considering the Allahabad High Court's judgment in CIT Vs. A.R. Trust regarding ITAT's powers in 12AA matters? 2. Whether the ITAT's holding that the CIT gave invalid reasons for rejecting the 80G approval was perverse, given the CIT's findings on the assessee generating large surpluses and accumulating funds, thus lacking rationale for further income? 3. Whether the ITAT erred in relying on the assessee's 12AA registration and ignoring the statutory condition that it's a pre-condition for 80G approval, as per the Delhi High Court's judgment in M/s Kirti Chand Tarawati Charitable Trust vs. Director of Income Tax (Exemption)? 4. Whether the ITAT misinterpreted 'approval' under Section 80G(5), equating it with 'registration' and insisting on registration as the keyword? 5. Whether the ITAT's order was perverse and contrary to the evidence? Assessee's arguments: The judgment does not record specific arguments made by the assessee before the High Court. However, it notes the assessee's reliance on a Circular dated 27.10.2010, stating that existing approvals expiring on or after October 1, 2008, were deemed extended in perpetuity unless withdrawn. The assessee also pointed out that its 12AA registration continued and its assessment for AY 2012-13 allowed benefits under Section 11. Revenue's arguments: The revenue argued that the ITAT lacked the power to direct registration, citing the Allahabad High Court's judgment. It contended that the CIT had valid reasons for rejection, including the assessee's large surpluses and accumulated funds. The revenue also argued that 12AA registration is merely a pre-condition for 80G approval and that the ITAT misinterpreted 'approval' as 'registration'.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80G,Section 80G(5),Section 80G(5)(vi),Section 12AA,Section 11,Section 143(3)

AI-generated summary — verify with the full judgment below

ITA-119-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-119-2018 Date of Decision: 10.1.2019 The Commissioner of Income Tax (Exemptions), Chandigarh ....Appellant. Versus M/s Adesh Welfare Society (Regd.), Muktsar ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Denesh Goyal, Senior Standing Counsel, for the appellant. *** AJAY KUMAR MITTAL, J.

1.

This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 26.9.2017 (Annexure A-2) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 102/(Asr)/2017, claiming the following substantial questions of law:- I. Whether on the facts and circumstances of the case, the Hon'ble ITAT has erred in directing the registration to be accorded instead of reverting it back for re-examination following the spirit of judgment by the Hon'ble Allahabad High Court in Trust as per which the Hon'ble ITAT does not have GURBACHAN SINGH 2019.02.25 11:28 integrity of this document

ITA-119-2018 -2- powers to direct registration even though the averred decision was in respect of 12AA matters? II. Whether on the facts and in the circumstances of the case the Hon'ble ITAT is not perverse in holding that the CIT has not given valid reasons while not granting approval to the applicant and thereby directing to grant approval u/s 80G to the applicant whereas the CIT had given clear findings about the real purpose that the applicant had consistently generated large scale surpluses and has accumulated large amounts of investible funds in the shape of FDRs and cash and therefore, there was no rationale for another source of income? III. Whether on the facts and circumstances of the case the ITAT has erred in placing reliance on the fact of the assessee having 12AA registration and by ignoring the statutory condition that 12AA registration is merely a pre-condition for entities to be eligible for approval u/s 80G(5) and that the procedure involves examination of the real purpose as laid down by the Hon'ble Delhi High Court in the case of M/s Kirti Chand Tarawati Charitable Ors. [(1999) 152 CTR (Del) 322]? IV. Whether on the facts and circumstances of the case the Hon'ble ITAT has misinterpreted the term GURBACHAN SINGH 2019.02.25 11:28 integrity of this document

ITA-119-2018 -3- 'approval' as envisaged in Section 80G(5) and taken 'registration' to be conterminous with 'approval' by insisting on registration as the keyword in the entire text of its order? V. Whether on the facts and circumstances of the case, the order of the Appellate Tribunal is contrary to the evidence and material on the record of the case and therefore, perverse?

2.

A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee-society is registered under Section 12AA of the Act and was set up to run various educational institutions. The assessee was granted approval under Section 80G of the Act vide order dated 1.9.2014. The said approval had lapsed on 31.3.2009. According to the assessee, as per Circular dated 27.10.2010, 'the existing approvals expiring on or after Ist October, 2008, shall be deemed to have been extended in perpetuity unless specifically withdrawn.' An application was filed for approval under Section 80G(5)(vi) of the Act on 28.7.2016. The Commissioner of Income Tax (E), Chandigarh vide order dated 31.1.2017 (Annexure A-1) rejected the application of the assessee for grant of approval under Section 80G of the Act. Feeling aggrieved by the order, Annexure A-1, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 26.9.2017 (Annexure A-2) allowed the appeal and directed the CIT(E) to allow the registration under Section 80G of the Act to the assessee from the date of application. Hence, the present appeal by the revenue.

3.

After hearing learned counsel for the revenue, we do not find GURBACHAN SINGH 2019.02.25 11:28 integrity of this document

ITA-119-2018 -4- any merit in the appeal.

4.

The assessee was registered under Section 12AA of the Act which still continues. It was granted registration under Section 80G of the Act on 1.9.2004 and the said registration had not been withdrawn. The said registration had expired on 31.3.2009. Thereafter, the assessee filed an application for grant of approval under Section 80G(5)(vi) of the Act on 28.7.2016. The Tribunal had noticed that the assessment of the assessee for the assessment year 2012-13 was completed under Section 143(3)of the Act wherein the benefit under Section 11 of the Act was allowed to the assessee. The assessee had filed its return of income for the assessment year 2016-17 on 8.10.2016 declaring its income as 'Nil' by claiming exemption under Section 11 of the Act for whole of the income. There was no violation on the part of the assessee which could lead to the withdrawal of registration under Section 12AA of the Act. Further, once the assessee was established as charitable institution by the revenue authorities at the time of granting registration under Section 80G of the Act, it cannot be denied registration under Section 80G of the Act. It was recorded by the Tribunal that as per Circular dated 27.10.2010, the registration was deemed to have been extended in perpetuity had the registration expired on or after 1.10.2009, but due to technical reason, the registration under Section 80G of the Act was not deemed to have been extended. Accordingly, the Tribunal vide order dated 26.9.2017 (Annexure A-2) directed the CIT(E) to allow the assessee registration under Section 80G of the Act from the date of application.

5.

No illegality or perversity could be pointed out by learned counsel for the revenue in the findings recorded by the Tribunal which may warrant interference by this Court. No question of law, much less, GURBACHAN SINGH 2019.02.25 11:28 integrity of this document

ITA-119-2018 -5- substantial question of law arise in the appeal.

6.

Accordingly, finding no merit in the appeal, the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE January 10, 2019 (MANJARI NEHRU KAUL) gbs JUDGE Whether Speaking/Reasoned Yes/No Whether Reportable Yes/No GURBACHAN SINGH 2019.02.25 11:28 integrity of this document

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