2012 (7) TMI 122 - AT - Income Tax

Renewal of recognition u/s. 80G(5)(vi) of the Income-tax Act - scope of enquiry by Commissioner while dealing with an application under section 80G(5)(vi) Held that - assessee continues to enjoy registration u/s. 12A(a) of the Act vide certificate of registration same would imply that assessee qualifies the condition prescribed in clause (i) of section 80G(5) of the Act and its objections raised by the commissioner are beyond the scope of enquiry at the present stage - objections raised by the commissioner may be relevant for the purposes of assessment of the income of the assessee in the respective assessment years by the assessing authority, but are certainly outside the purview of the scope of enquiry required to be carried out by the commissioner while granting approval u/s. 80G(5)(vi) of the Act - Commissioner directed to grant the renewal of recognition of the assessee u/s. 80G5(vi) of the Act in accordance with the law

Summary

Issues:
1. Rejection of renewal of recognition u/s. 80G(5)(vi) of the Income-tax Act, 1961 based on investments made by the assessee.
2. Non-compliance with the provisions of Section 11(1) for the financial years 2006-07 to 2008-09 leading to rejection of recognition u/s. 80G(5)(vi).

Analysis:
Issue 1: The Commissioner rejected the renewal of recognition u/s. 80G(5)(vi) primarily due to investments made by the assessee in Senapati Bapat Nagri Sahakari Patsanstha, deemed violative of Section 11(5) of the Act. The Commissioner also highlighted non-compliance with Section 11(1) for the financial years 2006-07 to 2008-09, where the assessee failed to apply the prescribed percentage of income towards stated purposes. The rejection was based on the belief that the assessee did not adhere to the provisions of Sections 11/12 of the Act, rendering them ineligible for recognition under 80G(5)(vi).

Issue 2: The assessee contested the rejection, arguing that the investment in the cooperative society was not violative of Section 11(5) and that the objections raised by the Commissioner were irrelevant for considering recognition under 80G(5)(vi). The counsel emphasized that the Commissioner's role was to assess eligibility for exemption under Sections 11 and 12, not to delve into income assessment. Citing relevant case laws, the assessee asserted that being registered under section 12A sufficed for compliance with 80G(5)(i). The Revenue defended the Commissioner's decision without providing new arguments.

The Tribunal analyzed the legal framework governing approval or renewal under 80G(5)(vi), emphasizing the conditions specified in sub-section 5 of Section 80G. It outlined the requirements for approval, including the eligibility for exemption under relevant sections and maintenance of accounts. The Tribunal scrutinized the objections raised by the Commissioner, emphasizing the need to fulfill conditions under clause (i) of Section 80G(5) for approval. Referring to judicial precedents, the Tribunal concluded that the Commissioner's objections exceeded the scope of inquiry for 80G(5)(vi) and were more suited for income assessment by the assessing authority.

Ultimately, the Tribunal held that the Commissioner erred in rejecting the renewal of recognition under 80G(5)(vi) as sought by the assessee. The decision was overturned, directing the Commissioner to grant the renewal of recognition in accordance with the law. As a result, the appeal of the assessee was allowed, emphasizing compliance with the statutory provisions for approval under 80G(5)(vi).