2013 (7) TMI 648 - AT - Income Tax

Exemption certificate under section 80G(5)(vi) of the Income Tax Act, 1961 - Charitable purpose - renewal of exemption certificate under section 80G(5)(vi) of the Income-tax Act, 1961 Alleged that activities are beneficial to manufacturers only. It will not be covered under section 2(15) under public utility. It is governed by the principle of mutuality Held that - Assessee-association was registered under the Societies Registration Act since July 16, 1945 - Considering the objects for which the assessee-association the learned Director of Income-tax (Exemption) vide an order dated June 22, 2001 granted registration under section 12A of the Income-tax Act to the assessee-association with retrospective effect from April 1, 1997 and the same is still subsisting - Assessee-association was granted exemption certificate under section 80G(5)(vi) of the Act by an order dated July 27, 2001 of the learned Director of Income-tax (Exemption), which was further renewed for another term covering the period of the assessment year 2009-10, considering the same objects contained in the memorandum of association. Registration of an institution under section 12A by itself is a sufficient proof of the fact that the trust or the institution concerned is created or established for charitable/general public utility purposes and it enjoys approval under section 80G of the Act - When on the same set of facts and circumstances of the case, renewal of registration under section 80G(5)(vi) has been granted for the earlier years and there being no change in the facts and circumstances of the years for which renewal is sought for. No any justification to reject the assessee s application for renewal of exemption certificate under section 80G(5)(vi) for the assessment year 2009-10 onwards - Director of Income-tax (Exemption) s order rejecting the assessee s application under section 80G(5)(vi) is quashed Decided in favor of Assessee. Further, relying upon the decision in the case of Sonepat Hindu Educational & Charitable Society v. CIT 2005 (5) TMI 52 - PUNJAB AND HARYANA High Court , wherein their Lordships applying the ratio of decision of the hon ble Supreme Court in the case of Radhasoami Satsang v. CIT 1991 (11) TMI 2 - SUPREME Court has held as - Res judicata can be applied in income-tax proceedings when a fundamental aspect has prevailed through different assessment years without being challenged one way or the other. In such cases it is not appropriate to change the position in a subsequent year Being the same situation and circumstances as earlier years, there is no any justification to reject the assessee s application for renewal of exemption certificate under section 80G(5)(vi) for the assessment year 2010-11 onwards.

Summary

Issues Involved:
1. Rejection of application for renewal of exemption certificate under section 80G(5)(vi) of the Income-tax Act, 1961.
2. Interpretation of the term "charitable purpose" under section 2(15) of the Income-tax Act, 1961.
3. Validity of the Director of Income-tax (Exemption)'s decision based on the principle of mutuality.

Detailed Analysis:

1. Rejection of Application for Renewal of Exemption Certificate under Section 80G(5)(vi):
The appeal was directed against the order dated September 3, 2010, by the Director of Income-tax (Exemption), Kolkata, which rejected the assessee's application for renewal of the exemption certificate under section 80G(5)(vi) of the Income-tax Act, 1961. The assessee argued that none of the conditions precedent existed for such rejection and that the order was void, ultra vires, and null in law. The Director of Income-tax (Exemption) held that the activities of the assessee were beneficial only to manufacturers and not covered under public utility as per section 2(15) of the Act. The Tribunal found that the rejection was unjustified as the assessee's activities fell within the ambit of "advancement of general public utility," a recognized charitable purpose under section 2(15) of the Act.

2. Interpretation of the Term "Charitable Purpose" under Section 2(15):
The assessee argued that its main objects were to provide assistance and support services to entrepreneurs and investors in the hosiery industry, which included setting up training institutes and other measures beneficial to the industry. These activities were claimed to fall within the definition of "advancement of general public utility." The Tribunal agreed, referencing the Supreme Court's decision in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), which stated that benefiting a section of the public suffices for a charitable purpose. The Tribunal emphasized that the Department had not disputed the non-profit nature of the assessee's activities.

3. Validity of the Director of Income-tax (Exemption)'s Decision Based on the Principle of Mutuality:
The Director of Income-tax (Exemption) rejected the renewal application on the grounds that the assessee's activities were governed by the principle of mutuality and thus did not qualify as a public utility. The Tribunal found this reasoning flawed, noting that the assessee had been granted registration under section 12A since April 1, 1997, and had received exemption certificates for previous periods under similar circumstances. The Tribunal held that registration under section 12A is sufficient proof of an institution's charitable purpose, as supported by the Punjab and Haryana High Court's decision in Sonepat Hindu Educational & Charitable Society v. CIT [2005] 278 ITR 262 (P&H).

Conclusion:
The Tribunal concluded that the rejection of the renewal application was unjustified and directed the Director of Income-tax (Exemption) to grant the renewal of the exemption certificate under section 80G(5)(vi). The appeal of the assessee was allowed, and the order was pronounced in the open court on February 28, 2011.