2012 (12) TMI 63 - AT - Income Tax

Withdrawl of Exemption u/s 80G - held that - Approval once granted u/s 80G(5)(vi) of the Act shall continue in perpetuity. Even if assessee files an application for seeking renewal of exemption u/s 80G(5) of the Act after 1st October, 2009,learned DIT(E) is to dispose of the application in accordance with the amended provisions ie Commissioner will also have the power to withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund - set aside the impugned order of the learned DIT(E) and accordingly, approval under sec. 80G(5) of the Act already granted to the assessee vide order dated 14th August, 2007 upto 31st March, 2010, shall continue in perpetuity unless and until the competent authority takes appropriate action in accordance with law to withdraw the same - DIT(E) to allow the exemption u/s 80G(5)(vi) of the act - issue in appeal of assessee is allowed.

Summary

Issues:
- Rejection of application for exemption under sec. 80G of the Income-tax Act, 1961.
- Barred by limitation as per Rule 11AA(6) of the Income-tax Rules.
- Effect of omission of Proviso to sec. 80G(5)(vi) of the Act.
- Continuation of exemption in perpetuity post the omission of the Proviso.

Analysis:

The appeal was filed against the order of the Director of Income-tax (Exemptions) rejecting the application of the assessee trust seeking exemption under sec. 80G of the Income-tax Act, 1961. The assessee was granted exemption under sec. 80G(5)(vi) of the Act, valid from 1st April, 2007 to 31st March, 2010. The application for renewal of exemption was filed on 30th March, 2010. The issue of the order being barred by limitation as per Rule 11AA(6) was raised but not pressed further during the hearing. The order of the learned DIT(E) was undated, mentioning the date of the application as 30th March, 2011, which was in dispute.

The Finance (No.2) Act, 2009 omitted the Proviso to sec. 80G(5)(vi) of the Act, which previously limited the approval period to five assessment years. The CBDT Circulars clarified that approvals granted before 1st October, 2009, needed renewal, but once renewed, they would continue in perpetuity unless withdrawn. The approval once granted under sec. 80G(5)(vi) of the Act was to continue indefinitely, even if the renewal application was filed after 1st October, 2009. The Tribunal set aside the order of the learned DIT(E) and directed the allowance of exemption under sec. 80G(5)(vi) of the Act, confirming the continuation of the exemption granted to the assessee in perpetuity unless withdrawn by the competent authority.

In conclusion, the appeal filed by the assessee was allowed, and the exemption under sec. 80G(5)(vi) of the Act was directed to be allowed, emphasizing the perpetual nature of the approval once granted under the Act. The judgment clarified the impact of the omission of the Proviso and the continuous validity of exemptions granted under the specified section.