2011 (2) TMI 1199 - HC - Income Tax

Exemption u/s 80G - application for renewal was rejected - in view of the Circular dated 3.6.2010 issued by the Central Board of Direct Taxes, submitted that the recognition under section 80-G (exemption) having been already granted on 8.6.09, which was valid upto 30.3.2010, therefore, no renewal was required in terms of the aforesaid Circular, as the said exemption (recognition) under section 80-G would continue in perpetuity unless withdrawn, merely moving an application by the petitioner would not divest it of the aforesaid right, writ petition is disposed of accordingly

Summary

Issues:
1. Validity of order passed by Income-tax Appellate Tribunal regarding renewal of exemption certificate under section 80-G.
2. Interpretation of Circular dated 3.6.2010 issued by the Central Board of Direct Taxes regarding exemption under section 80-G.
3. Effect of Circular on the requirement of renewal of exemption certificate.
4. Authority of Commissioner of Income-tax to refuse renewal after Circular issuance.
5. Applicability of Circular on existing approvals and exemptions.
6. Legal consequences of exemption being extended in perpetuity.

Analysis:
1. The petitioner challenged the order of the Income-tax Appellate Tribunal remanding the matter of renewal of the exemption certificate under section 80-G. Initially, the petitioner argued against the remand but later relied on a Circular dated 3.6.2010, stating that no renewal was required as the exemption granted under section 80-G would continue in perpetuity unless withdrawn.

2. The Circular issued by the Central Board of Direct Taxes clarified that approvals granted under section 80-G would be valid in perpetuity unless specifically withdrawn. The Circular applied from 1st April, 2010, and existing approvals expiring on or after 1st October, 2009, were deemed extended in perpetuity unless withdrawn.

3. The Commissioner of Income-tax rejected the petitioner's renewal application without considering the Circular, as the application was made before the Circular's issuance. The Appellate Tribunal also did not account for the Circular and remanded the matter, requiring the Commissioner to pass fresh orders in accordance with the law.

4. The judgment emphasized that once an approval or exemption is extended in perpetuity by law, any application for renewal does not affect the continuation of the exemption. The Commissioner had no authority to refuse renewal after the Circular's issuance, and the exemption would remain in force until withdrawn.

5. The Circular's applicability from 1st October, 2009, meant that existing approvals expiring after that date would be extended in perpetuity. Therefore, the petitioner's approval under section 80-G, expiring on 31.3.2010, was deemed extended unless specifically withdrawn, as per the Circular and the Act's amendment.

6. The Court concluded that due to the exemption being extended in perpetuity by operation of law, there was no need for the Tribunal's direction to the Commissioner to decide the renewal application afresh. The exemption would continue until withdrawn, as per the provisions of the Act. Consequently, the writ petition was disposed of accordingly.