COMMISSIONER OF INCOME TAX I LDH vs. BHOLA BHANDARI CHARITABLE TRUST

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ITA/238/2012HC Punjab & HaryanaPHHC01099314201230 January 2013Bench: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT's order setting aside the CIT's order was based on sound reasoning. The assessee had a valid exemption on October 1, 2010, when Section 80G of the Act was amended to remove the requirement for periodic renewal of exemptions. This statutory provision was clarified by CBDT Circulars No. 5 of 2010 and 7 of 2010. The Court reasoned that once the statute granted perpetuity to exemptions under Section 80G(5), such exemption could not be withdrawn without issuing a show-cause notice in accordance with the statutory provisions and prescribed legal procedure. Therefore, the Court found no substantial question of law arising for consideration.

What were the facts?

The Revenue, Commissioner of Income Tax-I, Ludhiana, appealed under Section 260A of the Income Tax Act, 1961, against an order dated 17.05.2012 passed by the Income Tax Appellate Tribunal (ITAT). The ITAT had set aside an order passed by the Commissioner of Income Tax (CIT). The assessee, Bhola Bhandari Charitable Trust, Ludhiana, had been granted exemption under Section 80G(5) of the Act. This exemption was valid until March 31, 2011. The assessee filed for renewal on April 25, 2011, but withdrew the application on May 31, 2011. Despite this, the CIT withdrew the exemption on December 5, 2011. The ITAT's decision was based on CBDT Circular No. 5 of 2010, which stated that existing exemptions granted under Section 80G as of October 1, 2010, would continue in perpetuity.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was justified in setting aside the CIT's order by relying on the assessee's contention that approval granted under Section 80G(5) of the Income Tax Act continues in perpetuity as per Circular No. 5/2010? (Question of law and fact, concerning Section 80G(5) and CBDT Circular No. 5/2010). 2. Whether, on the facts and circumstances, the ITAT was justified in not appreciating that the CIT was within his rights to withdraw the exemption upon finding that the trust's activities were not charitable, even though the assessee's petition could not be rejected considering the guidelines in para 5 of Circular No. 7/2010 dated 27.10.2010? (Question of law and fact, concerning the CIT's power to withdraw exemption and CBDT Circular No. 7/2010). Assessee's contentions: The assessee argued that once approval under Section 80G(5) was granted, it continues in perpetuity as per CBDT Circular No. 5/2010. The amendment to Section 80G of the Act, effective from October 1, 2010, dispensed with periodic renewal of exemptions, a position clarified by Circulars 5/2010 and 7/2010. Revenue's contentions: The Revenue contended that the CIT was justified in withdrawing the exemption if the trust's activities were found to be non-charitable, and that the ITAT erred in not appreciating this power, despite the guidelines in Circular No. 7/2010.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80G(5),Section 80G

AI-generated summary — verify with the full judgment below

ITA No. 238 of 2012 (O&M) -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 238 of 2012 (O&M) Date of decision: 30.01.2013 Commissioner of Income Tax-I, Ludhiana ...Appellant versus Bhhola Bhandari Charitable Trust, Ludhiana ..Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. Rajesh Katoch, Advocate for the appellant. HEMANT GUPTA, J. (Oral) The Revenue is in appeal under Section 260A of the Income Tax Act, 1960 (for short 'the Act') against the order dated 17.05.2012 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A', Chandigarh (for short 'the Tribunal) in ITA No. 140/CHD/2012 holding that the approval once granted to the assessee under Section 80G(5) of the Act shall continue in perpetuity as per circular No. 5 dated 03.06.2010 issued by Central Board of Direct Taxes (for short 'CBDT'). Our attention has been drawn to circular No. 7 of 2010 issued by CBDT wherein the circular issued earlier has been clarified and reiterated. The Revenue has claimed the following substantial questions of law:- “(i) Whether on the facts and circumstances of the case, Hon'ble the ITAT was justified in setting aside the order of CIT relying upon the assessee's version that the approval once granted u/s 80(G)(5) of I.T Act shall continue in perpetuity as per Circular No. 5/2010?

ITA No. 238 of 2012 (O&M) -2- (ii) Whether on the facts and circumstances of the case, Hon'ble the ITAT was justified in not appreciating that the CIT was well within his right to withdrawn the exemption on finding that the activities of the trust were not charitable even though the petition of the assessee could not be rejected keeping in view the guidelines as mentioned in para 5 of Circular No. 7/2010 dated 27.10.2010?” The assessee was granted exemption under Section 80(G) of the Act being the charitable trust. Such exemption was valid up to the financial year 2010-11 ending 31st March 2011. The assesee filed an application for renewal of exemption on 25.04.2011 which was withdrawn on 31.05.2011. It appears such request was withdrawn as by Finance Act No. 02 of 2009 and the Circular No. 5 of 2010, it was made explicit that the existing exemptions granted Section 80(G) of the Act as on 1.10.2010 would continue till perpetuity. But still the Commissioner of Income Tax withdrew the exemption vide order dated 05.12.2011. It is said order which has since been set aside by the Tribunal. We find that the order of the Tribunal setting aside the order of Commissioner of Income tax is based on sound reasoning. The asseesse had valid exemption on 1.10.2010 when the provisions of Section 80G of the Act were amended so as to dispense the periodic renewal of the exemptions. Such statutory provisions were clarified by Circular No. 5 of 2010 and Circular No.7 of 2010 issued by CBDT. Once the statute has given perpetuity to the exemptions granted under Section 80(G)(5) of the Act, the same could not be withdrawn without issuing show cause notice in terms of the statutory provisions in the manner prescribed by law.

ITA No. 238 of 2012 (O&M) -3- In view of the said fact, we do not find that any substantial question of law arises for consideration. Dismissed. (HEMANT GUPTA) JUDGE ( RITU BAHRI ) JUDGE January 30, 2013 G.Arora/Vimal

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