2011 (10) TMI 672 - AT - Income Tax

Addition u/s 80G(5)(vi) - Held that - All the authorities working under the control of CBDT are bound to follow the instructions issued by the CBDT. Therefore, it has to be held that as assessee s existing approval was expiring on or after the 1st day of October, 2009, the same shall be deemed to have been extended in perpetuity unless specifically withdrawn. We have already mentioned that there is no material on record according to which it can be said that the approval granted to the assessee u/s 80G (5) was specifically withdrawn and what is rejected by the impugned order is the renewal application of the assessee which does not have any meaning in law as the assessee was not under an obligation to seek renewal as approval granted to it shall be deemed to have been extended in perpetuity. The aforementioned decision of Hon ble Allahabad High Court in the case of Babu Hargovind Dayal Trust 2011 (2) TMI 1199 - Allahabad High Court also support this proposition. Therefore, we vacate the order of ld. DIT (E) vide which the renewal application filed by the assessee for approval u/s 80G has been rejected. It is held that the approval granted to the assessee u/s 80G will act in perpetuity unless it is specifically withdrawn by the ld. DIT (E). The appeal filed by the assessee is allowed in the manner aforesaid.

Summary

Issues:
1. Rejection of renewal of exemption u/s 80G(5)(vi) of the Income-tax Act.
2. Interpretation of the statutory provisions regarding the renewal of approval u/s 80G.
3. Obligation of the assessee to seek renewal of approval u/s 80G.
4. Application of the Circular No.7/2010 by CBDT in determining the validity of approvals under section 80G.
5. Consideration of documentary evidence and non-appearance by the assessee in the renewal process.

Issue 1: Rejection of renewal of exemption u/s 80G(5)(vi) of the Income-tax Act:
The appeal was filed against the rejection of the renewal application by the Director of Income-tax (Exemptions) [DIT (E)] u/s 80G(5)(vi) of the Income-tax Act. The grounds of appeal included contentions that the rejection orders were against the law and facts of the case, failure to appreciate the amended provisions post-October 1, 2009, and lack of opportunity for the appellant society to present their case. The appellant argued that the rejection was unlawful and that they had fulfilled the conditions for exemption under section 80G.

Issue 2: Interpretation of the statutory provisions regarding the renewal of approval u/s 80G:
The Circular No.7/2010 by CBDT clarified the period of validity of approvals under section 80G. The omission of the proviso to Section 80G(5)(vi) by the Finance (No.2) Act, 2009, implied that approvals granted after October 1, 2009, would be valid until specifically withdrawn. The appellant contended that the exemption should continue in perpetuity unless withdrawn, citing a High Court ruling. The Tribunal held that the approval granted to the assessee under section 80G would act in perpetuity unless specifically withdrawn, as there was no statutory obligation for renewal.

Issue 3: Obligation of the assessee to seek renewal of approval u/s 80G:
The Tribunal noted that before the omission of the proviso to Section 80G(5)(vi) by the Finance (No.2) Act, 2009, approvals had a specified validity period. However, post the amendment, approvals were deemed to be extended in perpetuity unless withdrawn. As the appellant's approval fell beyond October 1, 2009, and no withdrawal was evidenced, the Tribunal held that the application for renewal was unnecessary, and the approval would continue perpetually.

Issue 4: Application of the Circular No.7/2010 by CBDT in determining the validity of approvals under section 80G:
The Circular clarified that approvals granted after October 1, 2009, would be considered valid until specifically withdrawn. The Tribunal emphasized that the approval granted to the assessee under section 80G would be deemed to continue in perpetuity unless withdrawn by the authority. The Tribunal relied on the Circular to support the decision to vacate the rejection of the renewal application by the DIT (E).

Issue 5: Consideration of documentary evidence and non-appearance by the assessee in the renewal process:
The DIT (E) rejected the renewal application due to the non-appearance of the assessee and the absence of documentary evidence of charitable activities. The Tribunal observed that the rejection was based on the application for renewal, which was unnecessary as per the statutory provisions post-amendment. The Tribunal vacated the rejection, emphasizing that the approval would continue in perpetuity unless specifically withdrawn, as per the Circular and legal interpretation.

This detailed analysis of the judgment provides insights into the issues raised, the legal arguments presented, and the Tribunal's decision based on the interpretation of statutory provisions and relevant Circulars.