2010 (12) TMI 954 - HC - Income Tax

Renewal of Exemption under Section 80G denied - application was rejected on the ground that the assessee was forcing the parents of the students in the school to give donation. It was also alleged that the assessee had indiscriminately issued Certificate under Section 80 G of the Act - It appears from the orders dated 16th January 2008 passed by the DIT that the DIT treated the said application for exemption filed by the respondent seeking exemption w.e.f. 1st April 2007 - Held that - While withdrawing first application the assessee had sought liberty to file fresh application. In these circumstances the presumption of the DIT that the second application was for the period started from 1st April 2007 is totally fallacious. Mr. Aggarwal has also submitted a chart showing the period from which the assessee has been given exemption under Section 80G. It would be of interest to note that even for the period from 1st April 2008 to 31st March 2010 the assessee has already been granted exemption under Section 80G of the Act vide orders dated 31st December 2008. This would also demonstrate that application which was preferred by the assessee seeking exemption was for the period from 1st April 2006 to 31st March 2008 and not for 1sat April 2007 as the assessee would not like to keep the period from 1st April 2006 to 31st March 2007 in vacuum when the assessee has shown its due diligence in seeking exemption even for subsequent years.

Issues:
1. Exemption under Section 80G of the Income Tax Act for the respondent school.
2. Dismissal of the application for exemption under Section 80G by the Director of Income-Tax.
3. Appeal against the order dismissing the application.
4. Allegations of irregularities in issuing donation certificates under Section 80G.
5. Discrepancy in the period mentioned in the application for exemption.
6. Decision of the Income Tax Appellate Tribunal (ITAT) granting exemption under Section 80G.

Analysis:
1. The respondent school enjoyed exemption under Section 11 of the Income Tax Act and exemption under Section 80G was granted for specific periods. However, the Director of Income-Tax dismissed the application for exemption under Section 80G on grounds of alleged irregularities, including forcing parents to give donations and issuing certificates indiscriminately. The Director noted previous denials of exemption under Section 11 and concluded that exemption under Section 80G should not be granted.
2. The Tribunal allowed the appeal against the Director's order, stating the respondent was entitled to the exemption certificate under Section 80G from April 1, 2006. The Revenue challenged this decision, arguing that the Tribunal relied on irrelevant past decisions and failed to consider specific irregularities highlighted by the Director.
3. The Tribunal's decision was based on findings that the school did not commit violations in donation collection or certificate issuance, similar to previous assessment years where the school was granted exemption under Section 11. The Tribunal held that the school should also receive exemption under Section 80G.
4. The Revenue contended that the Tribunal's reliance on past decisions was misplaced, as specific irregularities were identified by the Director in the year in question. The Revenue highlighted instances where goods or services were treated as donations, leading to the issuance of certificates under Section 80G. The school explained that these were contributions in kind for events like Winter Carnival, and not irregularities.
5. The Revenue further argued that the application for exemption under Section 80G was misunderstood by the Director, leading to the dismissal based on incorrect assumptions about the application period. The school clarified that the application was for renewal from April 1, 2006, and not a new application from April 1, 2007. The Tribunal upheld the school's position, noting the continuity in the application dates and the school's diligence in seeking exemptions for subsequent years.
6. The Court found no merit in the Revenue's appeals, dismissing them and awarding costs to the respondent. The Court upheld the Tribunal's decision granting the school exemption under Section 80G from April 1, 2006, based on the school's compliance and explanations regarding alleged irregularities.

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