2012 (6) TMI 515 - AT - Income Tax

Renewal of exemption u/s 80G(5) - rejection by CIT(A) without issuance of SCN - assessee Trust, established on 17.1.2002, had been granted registration u/s 12A as well as exemption u/s 80G - last exemption granted for the period from 1.4.2008 to 31.3.2011 - Held that - In view of omission of proviso to Section 80G(5)(vi) w.e.f.01.10.2009, approval once granted u/s 80G(5)(vi) shall continue in perpetuity. Further, Circular No. 5 being Explanatory circular for Finance (No. 2) Act, 2009 is in favour of the assessee and even if the assessee by ignorance or inadvertently filed an application for renewal, the CIT was required to decide the same in accordance with the amended provisions. therefore, we set aside the impugned order and hold that approval u/s 80G(5) already granted to the assessee shall continue unless and until the concerned authority takes appropriate action in accordance with law. See Association for Advocacy and Legal Initiatives v. CIT (2011 (2) TMI 315 (Tri)) - Decided in favor of assessee.

Summary

Issues:
Renewal of exemption u/s 80G(5) of the Income-tax Act, 1961.

Analysis:
1. The appeal was against the order of CIT-I, Ludhiana regarding the renewal of exemption u/s 80G(5) of the Income-tax Act, 1961. The assessee raised various grounds challenging the rejection of permission granted to them as a Charitable Trust under section 80G without addressing the registration granted under Section 12AA of the Act. The CIT had withdrawn the exemption without fulfilling legal requirements such as issuing a show cause notice and complying with circulars. The assessee's submissions during the hearing were not considered, leading to the withdrawal of the exemption based on conjectures.

2. The facts revealed that the Trust was established in 2002 and had been granted registration u/s 12A and exemption u/s 80G. The last exemption was granted for the period from 1.4.2008 to 31.3.2011. The assessee applied for renewal of exemption, but later withdrew the application citing changes in the law. The CIT rejected the renewal, citing that the perpetuity rule did not apply in this case and had the power to withdraw approval if activities were not genuine. The assessee appealed to the Tribunal, arguing that the approval should be valid in perpetuity as per the amended provisions.

3. The Tribunal considered the legislative changes and a similar case decided by ITAT Lucknow 'A' Bench. The ITAT decision supported the assessee's position, emphasizing that approvals granted under section 80G(5)(vi) would be valid in perpetuity post the legislative amendment. The Circular issued by CBDT also supported this interpretation. The Tribunal held that the CIT was not justified in withdrawing the approval without issuing a show-cause notice and set aside the CIT's decision, allowing the appeal in favor of the assessee.

4. The Tribunal's decision was based on the legislative intent to grant perpetual validity to approvals under section 80G(5)(vi) post the legislative amendment, ensuring that genuine institutions are not burdened with routine renewal processes. The Tribunal emphasized the mandatory nature of issuing a show-cause notice before withdrawing approval and held that the CIT's actions were not in accordance with the law. The Tribunal relied on legal provisions and precedents to support its decision in favor of the assessee.

5. In conclusion, the Tribunal allowed the appeal, setting aside the CIT's decision and holding that the approval under section 80G(5) already granted to the assessee shall continue unless appropriate action is taken in accordance with the law. The decision was in line with legal provisions, legislative intent, and precedents, ensuring fairness and adherence to legal procedures in matters of exemption renewal under the Income-tax Act, 1961.