2014 (9) TMI 571 - HC - Income Tax

Claim of exemption by the society u/s 80G Registration u/s 12AA not granted Held that - The exemption u/s 80G of the Act was granted to the trust for the first time on 19.10.1978 from 1.4.1977 to 31.3.1978 which was subsequently renewed on 29.1.2004 up to 31.3.2009 - The objects of the trust and the society were similar - The Tribunal rightly noted that the objects of the trust and those of the society are similar - No, be it a trust or a society, the legal status of either is that of a body of individuals and the benefit in either case inures to the same indeterminate public - there is nothing on record to show that the management of the trust has been taken over by the society, or that the property of the trust, post registration as society, belongs to the society there was no mistake likely to occur on grant of further exemption u/s 80G - The assessee are the indeterminate beneficiaries - the order passed by the CIT is cancelled - The application filed by the assessee trust is allowed - CIT is directed to grant exemption u/s 80G of the Act to the assessee The order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Interpretation of provisions under section 80G of the Income Tax Act, 1961 for a society not registered under section 12AA.
2. Determination of eligibility for exemption under section 80G based on trust-to-society conversion and similarity of objects.

Analysis:

Issue 1:
The appeal was filed by the revenue challenging the order of the Income Tax Appellate Tribunal (ITAT) allowing the claim of a society under section 80G of the Income Tax Act, 1961 despite not being registered under section 12AA. The Tribunal's decision was based on the similarity of objects between the trust and the society. The revenue contended that the trust had converted into a society, justifying the denial of exemption under section 80G. However, the High Court found no merit in this argument as the objects of the trust and society were similar, and the legal status of both entities was that of a body of individuals benefiting the public. The Court upheld the Tribunal's decision, emphasizing that the trust's conversion into a society did not alter the obligation to fulfill the trust's objectives.

Issue 2:
The controversy revolved around the conversion of the trust into a society and its impact on the eligibility for exemption under section 80G. The Court noted that the trust had initially received exemption under section 80G in 1978, which was subsequently renewed until 2009. Despite the conversion to a society, the management remained the same, and the property continued to be held for public benefit. The Court highlighted that the society had not actively functioned as an entity, with no filings or PAN allocation. The Court concluded that the trust's conversion to a society did not disqualify it from claiming exemption under section 80G, as the trust's objectives remained unchanged. The Court directed the Commissioner of Income Tax to grant the exemption to the trust in accordance with the law.

In conclusion, the High Court dismissed the revenue's appeal, affirming the Tribunal's decision to allow the society's claim for exemption under section 80G based on the similarity of objects and the continuity of the trust's public benefit obligations despite the conversion into a society.