2013 (5) TMI 364 - HC - Income Tax

Eligibility for claiming deduction u/s 80G(5) - Assessee appeal against declining the request for exemption u/s 80G of the Act Held that - The issue has been examined that at the stage of registration and for exemption u/s 80G of the Act the stated object of the trust is required to be examined. Whether the funds are properly applied or not can be examined by the AO at the time of framing the assessment. Thus the Tribunal has erred in law in refusing exemption to the assessee u/s 80G(5) of the Act. Assessee s appeal is allowed. Criteria for getting registration u/s 12AA of the Act - Revenue appeal against the grant of registration u/s 12AA Held that - The university is a body corporate and established for the cause of education. It is thus a Institution eligible for registration within the meaning of Section 12AA of the Act. In the earlier writ petition a categorically finding has been recorded that the university has been established solely for educational purpose and not for profit therefore it is a charitable institution read with Section 15(2) of the Act. In view of the said fact the assessee was thus rightly found eligible to seek registration under Section 12AA of the Act by the Tribunal.

Summary

Issues involved:
1. Registration under Section 12AA of the Income Tax Act
2. Exemption under Section 80G(5) of the Income Tax Act

Issue 1: Registration under Section 12AA of the Income Tax Act:
The High Court considered the appeal by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) granting registration to the assessee under Section 12AA but declining exemption under Section 80G of the Act. The Revenue raised substantial questions of law regarding the charitable nature of the assessee's activities, the classification of the university as an institution under Sections 12A and 12AA, and the legal entity status of the university separate from its sponsoring body. The Court analyzed the nature of the university established under the Haryana Private Universities Act, emphasizing its educational objectives. The Court held that the university, established solely for educational purposes and not for profit, qualifies as a charitable institution eligible for registration under Section 12AA of the Act. The Court found no merit in the Revenue's appeal, affirming the Tribunal's decision on registration.

Issue 2: Exemption under Section 80G(5) of the Income Tax Act:
The assessee appealed against the denial of exemption sought under Section 80G(5) of the Act. The Tribunal had declined the exemption based on concerns that in case of the university's dissolution, the assets would vest in a trust with charitable and religious objectives, which could conflict with Section 80G(5)(ii) requirements. The Court considered arguments regarding the hypothetical nature of the dissolution scenario and the one-time nature of exemption under Section 80G. Referring to precedent, the Court clarified that the assessment of charitable activities is not required at the registration stage under Section 12AA but can be examined during assessment proceedings. The Court concluded that the Tribunal erred in law by denying exemption under Section 80G(5) to the assessee. Consequently, the assessee's appeal was allowed based on the finding that the Tribunal's decision on exemption was incorrect.

This judgment from the Punjab & Haryana High Court addressed the issues of registration under Section 12AA and exemption under Section 80G(5) of the Income Tax Act, emphasizing the charitable nature of the university's activities and the legal requirements for registration and exemption. The Court's detailed analysis and interpretation of relevant provisions led to the dismissal of the Revenue's appeal on registration and the allowance of the assessee's appeal on exemption, highlighting the importance of the university's educational objectives in determining its eligibility for tax benefits under the Act.