DDIT, CHENNAI vs. ADVOATES WELFARE FUND OF THE BAR COUNCIL OF TAMILNADU, CHENNAI

आदेश /O R D E R

All the appeals of two independent assessees and cross

appeals of the Revenue are directed against the respective orders

of the Commissioner of Income Tax (Appeals) – VII, Chennai, dated

27.02.2014. Since common issue arises for consideration in all

these appeals, I heard these appeals together and disposing of the

same by this common order.

submitted that the assessee-Bar Council of Tamil Nadu is a

statutory regulatory body established under Advocates Act, 1961 to

regulate the profession of legal practice in India. The assessee-Bar

Council of Tamil Nadu has established a Welfare Fund for the

3 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 benefit of practicing Advocates. According to the Ld.

representative, Advocates’ Welfare Fund is not a legal entity. In

fact, it is a fund established by Bar Council of Tamil Nadu for the

welfare of legal practitioners. However, both the authorities below

treated the Advocates’ Welfare Fund as a separate legal entity and

assessed the income. Referring to the order of the Director of

Income Tax (Exemptions) dated 29.08.2011, a copy of the same is

available on record, the Ld. representative submitted that on the

basis of application filed on 25.02.2011, registration under Section

12AA of the Income-tax Act, 1961 (in short 'the Act') was granted

with effect from 25.02.2011. The assessee filed an application

before the CBDT under Section 119(2)(b) of the Act praying for

condonation of delay for the assessment year 2003-04 onwards till

24.02.2011 in filing the application for registration under Section

12AA of the Act. The CBDT, in fact, condoned the delay in filing the

application for the assessment years 2003-04 to 2010-11.

However, the CBDT kept it open to grant registration under Section

12AA to the Director of Income Tax (Exemptions). Since the delay

in filing the application for registration was condoned for

assessment years 2003-04 to 2010-11, according to the Ld.

representative, the assessee’s claim for exemption under Section

4 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 11 of the Act has to be examined after the order of the Director of

Income Tax (Exemptions) for the assessment years 2003-04 to

2010-11.

consequent to the order of the CBDT condoning the delay in filing

the application for registration under Section 12AA of the Act for the

assessment years 2003-04 to 2010-11, the Director of Income Tax

(Exemptions) has to now examine whether registration has to be

granted after satisfying himself about the fulfilment of conditions

prescribed under the provisions of the Act. After the order of the

Director of Income Tax (Exemptions), the matter has to be re-

examined by the Assessing Officer. Therefore, the Ld.

representative submitted that the matter may be remitted back to

the file of the Assessing Officer for reconsideration.

Representative, submitted that though the assessee claims that

Advocates’ Welfare Fund established by Bar Council of Tamil Nadu,

is not an independent legal entity, the registration was granted

separately to the Advocates’ Welfare Fund on the basis of

application filed by the Fund itself on 25.02.2011. The Advocates’

5 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 Welfare Fund applied for Permanent Account Number and the

Income Tax Department has allotted Permanent Account Number.

Therefore, according to the Ld. D.R., for all practical purposes, the

Advocates’ Welfare Fund was treated as a separate legal entity.

Therefore, according to the Ld. D.R., the contention of the Ld.

representative for the assessee that the Advocates' Welfare Fund

was established by Bar Council of Tamil Nadu and it is not a

separate legal entity is misconceived.

(Exemptions) dated 29.08.2011, the Ld. D.R. submitted that the

registration was granted to Advocates’ Welfare Fund under Section

12AA of the Act. However, the application filed by the Bar Council

of Tamil Nadu for condonation of delay for assessment years 2003-

04 to 2010-11 was allowed by the CBDT. The Advocates' Welfare

Fund has not filed any application for condonation of delay for

registration under Section 12AA of the Act. Therefore, according to

the Ld. D.R., in the case of Advocates' Welfare Fund, no purpose

would be served even if the matter was remitted back to the file of

the Assessing Officer. According to the Ld. D.R., in the case of

Advocates' Welfare Fund, the registration was granted with effect

from 25.02.2011. Moreover, the Advocates' Welfare Fund has not

6 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 filed any application for condoning the delay for earlier assessment

years. Therefore, it may not be necessary to remit the matter back

to the file of the Assessing Officer.

perused the relevant material available on record. The order of the

Director of Income Tax (Exemptions) dated 29.08.2011 clearly says

“Bar Council of Tamil Nadu and its unit Advocates' Welfare Fund” in

the preamble portion of the order. It is not in dispute that Bar

Council of Tamil Nadu was established under the provisions of the

Advocates Act, 1961. The Bar Council of Tamil Nadu constituted a

fund called Advocates' Welfare Fund for the welfare of the practicing

advocates. The assessee now claims before this Tribunal that the

application for registration under Section 12AA of the Act was filed

on 25.02.2011 and the Director of Income Tax (Exemptions)

granted approval under Section 12AA with effect from 25.02.2011.

The Bar Council of Tamil Nadu has filed the application before the

CBDT for condonation of delay in filing the application for

registration under Section 12AA of the Act for the assessment years

2003-04 to 2010-11. In fact, the delay was condoned and the

matter was left to the discretion of the Director of Income Tax

(Exemptions) to satisfy himself about the fulfilment of the conditions

7 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 prescribed under the Act which are necessary for granting

registration under Section 12AA of the Act. It is not in dispute that

for assessment years 2003-04 to 2010-11, the claim of exemption

under Section 11 of the Act was rejected by the authorities below on

the ground that there was no registration under Section 12AA of the

Act. In view of the CBDT’s order dated 27.05.2016, condoning the

delay in filing the application for assessment years 2003-04 to 2010-

11, this Tribunal is of the considered opinion that the matter needs

reconsideration by the Assessing Officer in the case of Bar Council

of Tamil Nadu.

claims that the assessee itself applied for Permanent Account

Number to treat itself as a separate legal entity. However, the

assessee claims that it is a part of Bar Council of Tamil Nadu,

therefore, it cannot be treated as a separate legal entity. I have

carefully gone through the Advocates Act, 1961 and the Advocates'

Welfare Fund Act, 2001. Section 3 of Advocates Act, 1961 enables

to constitute Bar Councils in the respective States. Section 4 of the

Advocates Act, 1961 enables constitution of Bar Council of India.

Section 5 of the Advocates Act, 1961 clearly says that every Bar

Council established either under Section 3 or 4 of the Advocates

8 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 Act, 1961, shall be a body corporate having perpetual succession

and a common seal, with a power to acquire and hold property.

Therefore, Bar Council of Tamil Nadu is a statutory body constituted

under Section 3 of the Advocates Act, 1961 as claimed by the

assessee.

the respective State Governments to constitute a fund called

“Advocates' Welfare Fund”. Section 4 of the Advocates' Welfare

Fund Act, 2001 enables the respective State Governments to

appoint Trustee Committee for the purpose of administering the

Fund. The office-bearer of the Bar Council of Tamil Nadu and

Advocates' Welfare Fund are totally different. Bar Council of Tamil

Nadu was administered by the elected Chairman or Vice-Chairman,

while Advocates' Welfare Fund is administered by the Trustee

Committee nominated by the respective State Governments.

Therefore, it is obvious that Bar Council of Tamil Nadu and

Advocates' Welfare Fund are two different statutory bodies

established under the respective statutory enactments, namely, the

Advocates Act, 1961 and the Advocates' Welfare Fund Act, 2001.

Sub-section (2) of Section 4 of the Advocates' Welfare Fund Act,

2001 clearly says that Trustee Committee of Advocates' Welfare

9 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 Fund shall be a body corporate having perpetual succession and

common seal with power to acquire and hold and dispose of the

property. Therefore, the Parliament in its wisdom made it very clear

that Bar Council of Tamil Nadu is a separate legal entity and

Advocates' Welfare Fund is another legal entity. Therefore, this

Tribunal is of the considered opinion that the two entities have to be

treated separately and the registration, if any, for claiming

exemption under Section 11 of the Act has to be obtained

separately. In other words, the registration obtained by the Bar

Council of Tamil Nadu under Section 12AA of the Act cannot be a

basis for claiming exemption under Section 11 of the Act for

Advocates' Welfare Fund. The Advocates' Welfare Fund and the

Bar Council of Tamil Nadu, shall obtain the necessary approval /

registration under Section 12AA of the Act, separately.

the Director of Income Tax (Exemptions) dated 29.08.2011 says

“Bar Council of Tamil Nadu and its unit Advocates' Welfare Fund”,

the body of the order clearly says that the registration was granted

only to the Fund and not to the Bar Council. The CBDT, however,

after examining the application filed by the Bar Council of Tamil

Nadu, found that the registration was granted with effect from

10 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 25.02.2011 on the basis of application dated 25.02.2011.

Therefore, there is a confusion as to whether the Bar Council of

Tamil Nadu and Advocates' Welfare Fund have filed any joint

application for registration or the individual application filed by the

respective statutory body was clubbed together by the Director of

Income Tax (Exemptions) and passed a common order. These

facts are not clear from the order of the lower authorities. Under the

scheme of the Income-tax Act, each statutory body has to file

independent application for registration under Section 12AA of the

Act. Be that as it may, now registration was granted apparently to

the Advocates' Welfare Fund by the order of the Director of Income

Tax (Exemptions) dated 29.08.2011 and the CBDT has condoned

the delay in filing the application for registration under Section 12AA

of the Act for the assessment years 2003-04 to 2010-11 to the Bar

Council of Tamil Nadu. In view of these factual confusion, this

Tribunal is of the considered opinion that the matter needs to be re-

examined by the Assessing Officer. Accordingly, the orders of the

authorities below are set aside and the entire issue is remitted back

to the file of the Assessing Officer. The Assessing Officer shall re-

examine the matter afresh in the light of the registration granted by

the Director of Income Tax (Exemptions) on 29.08.2011 and the

11 I.T.A. Nos.1195 to 1204/Mds/14 I.T.A. Nos.1603 to 1606/Mds/14 order that may be passed by the Director of Income Tax (Exemptions) consequent to the order of CBDT dated 27.05.2016 and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee.

Order pronounced on 15th July, 2016 at Chennai.

sd/- (एन.आर.एस. गणेशन) (N.R.S. Ganesan) �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 15th July, 2016.

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. �नधा�रती /Assessees 2. Assessing Officers 3. आयकर आयु�त (अपील)/CIT(A)-VII, Chennai-34 4. DIT(Exemptions), Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.