COMMISSIONER OF INCOME TAX (EXEMPTION) vs. DIGNITY EDUCATION SOCIETY

Facts

The Revenue (Commissioner of Income Tax (Exemption)) has appealed against an order of the Income Tax Appellate Tribunal (ITAT), Raipur Bench. The ITAT had allowed the appeal of the assessee, Dignity Education Society, and directed the CIT(E) to grant approval under Section 80G(5) of the Income-tax Act, 1961. The assessee had applied for exemption under Section 80G. The Joint Commissioner and Assessing Officer recommended against approval, citing that the Society ran a college, generated surplus fees, and was not involved in other activities mentioned in Form 10G. The CIT(E) rejected the application on 26-12-2018. The assessee challenged this before the ITAT, which reversed the CIT(E)'s order.

Held

The High Court held that the substantial question of law is answered in favour of the assessee and against the Revenue. The Court relied on the decision of the Gujarat High Court in Hiralal Bhagwati v. Commissioner of Income-Tax, which was approved by the Supreme Court in Assistant Commissioner of Income Tax v. Surat City Gymkhana. The principle established is that once registration under Section 12A(a) (now 12AA) of the IT Act is granted, the grant of benefit under Section 80G of the IT Act cannot be denied. The Supreme Court in Surat City Gymkhana held that once an application under Section 12A of the IT Act is granted, there is no need for further enquiry regarding the parties to the lis, whether it is for charitable purposes or otherwise. Therefore, since the assessee was registered under Section 12AA, its application under Section 80G(5) deserved to be allowed. The ITAT had rightly noticed this legal position and directed the CIT(E) to grant approval. The tax appeal was dismissed.

Key Issues

1. Whether, in the attending facts and circumstances of the case, the Income Tax Appellate Tribunal (ITAT) was correct in holding that the Commissioner of Income Tax (E) was not justified in rejecting the application of the respondent for grant of benefit of exemption under Section 80G(5) of the Act of 1961 and issuing direction to grant of exemption as sought for by the respondent society? Assessee's Contention: The assessee argued that since it had already been granted registration under Section 12AA of the IT Act, which was operational, the ITAT was justified in setting aside the CIT(E)'s order and directing the grant of approval under Section 80G. The assessee relied on the fact that its Section 12AA registration was operational. Revenue's Contention: The Revenue submitted that the ITAT was unjustified in allowing the appeal and directing the CIT(E) to grant approval under Section 80G, alleging that the ITAT's finding was perverse to the record.