2012 (10) TMI 701 - HC - Income Tax

Exemption under Section 10(23C)(iv) - non filing of balance-sheet and income & expenditure accounts statement - Audit report was filed under Form 10B and not under 10BB - Petitioner was charging processing fees ranging from 0.1% to 0.5% of the project costs. - Held that - Once the financial year 2011-2012 had started w.e.f. 01.04.2011 and only 26 days had passed, the rejection of the application for non-production of the audited balance-sheet and income and expenditure accounts for the assessment year 2011-2012 was not justified as there was still time available with the petitioner to get its accounts audited and file the return for assessment year 2011-2012. Charitable activity / purpose - held that - petitioner had not been charging processing fees since 01.02.2009 which was the ground of rejection for earlier years. - The application fees received by the Board was from sale of application forms and not for income of the Board but were only incidental charges and reliance was placed upon advancement of the object of general public utility which falls under the charitable acts under Section 2 of the Act. - matter remanded back for reconsider these factors.

Summary

Issues:
Challenge to rejection of exemption under Section 10(23C)(iv) of the Income Tax Act, 1961 for assessment years 2011-12 to 2013-14.

Analysis:
The petitioner, a National Horticulture Board, sought exemption under Section 10(23C)(iv) of the Income Tax Act, 1961, for the assessment years 2011-12 to 2013-14. The petitioner was previously exempted from Income Tax up to 2007 under the same section. The application for exemption was rejected by the Chief Commissioner of Income Tax, citing reasons related to the filing of audited accounts and income details. The petitioner had complied with the necessary procedures and submitted relevant information but faced rejection based on past rejections and failure to provide specific details for the assessment year 2011-12.

The rejection was challenged in a writ petition, highlighting that the petitioner had rectified previous issues raised by not charging processing fees and had complied with the requirement of filing audited accounts. The respondent defended the rejection by claiming that the petitioner's activities were not charitable and that the application was filed beyond the stipulated time frame. The petitioner argued that the balance sheet for the year ending 31.03.2011 was under compilation and should not be a basis for rejection.

The High Court analyzed the grounds for rejection and found them unjustified. It noted that the petitioner had time to compile the necessary documents for the assessment year 2011-12 and had rectified previous issues regarding processing fees. The Court emphasized that the rejection based on past rejections without considering the current circumstances was not valid. The Court ordered the quashing of the rejection order and directed the respondent to re-decide the application based on the documents provided, emphasizing that observations made in the judgment should not influence the new decision.

In conclusion, the High Court allowed the writ petition, quashed the rejection order, and instructed the respondent to reconsider the application based on the documents submitted by the petitioner, ensuring a fair evaluation without prejudice from previous rejections or observations made in the judgment.