2012 (11) TMI 273 - AT - Income Tax

Application for renewal of exemption u/s 80G(5)(vi) of Income-tax Act - Indian Plumbing Association is a society registered under the Society Registration Act - association is registered u/s 12A of the Income Tax Act - Held that- As assessee s existing approval was expiring on or after the 1st day of October, 2009, the same shall be deemed to have been extended in perpetuity unless specifically withdrawn - there is no material on record according to which it can be said that the approval granted to the assessee u/s 80G (5) was specifically withdrawn - approval granted to the assessee u/s 80G will act in perpetuity unless it is specifically withdrawn - appeal filed by the assessee is allowed

Issues Involved:
1. Rejection of application for renewal of exemption under Section 80G(5)(vi) of the Income-tax Act, 1961.
2. Determination of the charitable nature of the assessee's activities.
3. Application of the proviso to Section 2(15) of the Income-tax Act.
4. Validity of the previous approval under Section 80G(5)(vi) in perpetuity.
5. Procedural fairness in the rejection of the renewal application.

Issue-wise Detailed Analysis:

1. Rejection of Application for Renewal of Exemption under Section 80G(5)(vi):
The appeal was filed against the order of the Director of Income-tax (Exemptions) [DIT (E)], New Delhi, which rejected the application for renewal of exemption under Section 80G(5)(vi) of the Income-tax Act, 1961. The previous approval was granted up to 31st March 2011, and the application for renewal was filed on 15th March 2011. The DIT (E) rejected the application, stating that the activities of the assessee were carried out purely on commercial lines and were hit by the proviso to Section 2(15) of the Act, as amended by the Finance Act, 2008.

2. Determination of the Charitable Nature of the Assessee's Activities:
The DIT (E) held that the assessee's activities lacked an element of charity and were carried out for commercial entities and people. The assessee contended that it was engaged in providing education within the meaning of Section 2(15) of the Act and that its activities, such as publishing a scientific medical journal and news bulletins, were not for commercial purposes but for educating its members and professional doctors. The expenses incurred by the publishing division exceeded the receipts, indicating a non-commercial intent.

3. Application of the Proviso to Section 2(15) of the Income-tax Act:
The DIT (E) concluded that the assessee's activities fell under the proviso to Section 2(15), which excludes activities in the nature of trade, commerce, or business from the definition of "charitable purpose." The assessee argued that its activities did not involve trade, commerce, or business and were not covered by the proviso.

4. Validity of the Previous Approval under Section 80G(5)(vi) in Perpetuity:
The assessee argued that as per the amendment effective from 1st October 2009, the exemption granted up to 31st March 2010 should be deemed extended in perpetuity unless specifically withdrawn. This argument was supported by Board Circular No. 7/2010 and the decision of the Hon'ble Allahabad High Court in the case of Babu Hargovind Dayal Trust vs. ITAT (2011) 199 Taxman 138 (All). The Tribunal found that the present issue was covered by the decision in the case of Educate India Society vs. DIT (E), where it was held that approvals granted under Section 80G(5)(vi) would continue in perpetuity unless specifically withdrawn.

5. Procedural Fairness in the Rejection of the Renewal Application:
The Tribunal noted that the DIT (E) rejected the renewal application without providing a reasonable opportunity for the assessee to present its case. The assessee claimed that it did not receive the notices issued by the DIT (E). The Tribunal emphasized that the rejection of the renewal application was contrary to the provisions of law, as the approval once granted should continue in perpetuity unless specifically withdrawn.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, vacating the order of the DIT (E) that rejected the renewal application. It held that the approval granted under Section 80G(5)(vi) would continue in perpetuity unless specifically withdrawn, and the assessee's activities were not covered by the proviso to Section 2(15). The Tribunal's decision was based on the interpretation of the statutory provisions, the CBDT Circular, and the precedent set by the Hon'ble Allahabad High Court.

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