2016 (3) TMI 410 - AT - Income Tax

Eligibility of registration u/s 12A - approval u/s 80G(5)(vi) - whether the appellant society not being engaged in any charitable activities to deny it the approval u/s 80G(5)(vi)? - Held that - Registration granted to the assessee u/s 12A of ht Act as charitable association is existing and has not been shown to have withdrawn or cancelled till date. It is the situation in our considered opinion the grant of approval u/s 80G of the Act cannot be denied or rejected. The preposition laid down by the ITAT Amritsar and New Delhi, as cited by the assessee and discussed above also strongly support the grant of approval u/s 80G of the Act. Thus we are inclined to hold that there is no good cause or reason before the competent authority and we are unable to see any justification in the rejection of the claim of the assessee by charitable status granted to the assessee by certificate issued u/s 12AA of the Act is cancelled or withdrawn by following prescribed procedure u/s 12A(3) of the Act. In the present case after getting registration u/s 12A of the Act the assessee has done what was expected from it under the relevant provisions of the Act and the Rules made thereunder. The competent authority should have acted vigilantly to pass an appropriate order in the matter within the prescribed time as per sub-rule (6) of the Rule 11AA of the Rules and having not done so, the competent authority has put the assessee in a helpless and embarrassing situation which caused jeopardy against the assessee for no reason or good cause. In the light of above legal dicta and factual discussions and following the decision relied by the assessee, we are inclined to hold that the assessee is entitled for approval u/s 80G of the Act and the competent authority is directed to grant the same. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the appellant society was engaged in charitable activities to qualify for approval under Section 80G(5)(vi) of the Income-tax Act, 1961.
2. Whether the order rejecting the appellant's application for approval under Section 80G(5)(vi) was barred by limitation.

Issue-wise Detailed Analysis:

1. Engagement in Charitable Activities:
The appellant society contended that the CIT erred in finding that it was not engaged in charitable activities, thereby denying approval under Section 80G(5)(vi) of the Income-tax Act, 1961. The appellant's counsel argued that the society's activities fell within the definition of charitable purposes under Section 2(15) of the Act. They cited previous judgments, including the ITAT 'E' Bench New Delhi in Mayo College Old Boys Association and ITAT Amritsar Bench in S. Lakha Singh Bahra, which supported the notion that institutions registered under Section 12A should be granted approval under Section 80G unless their registration was canceled. The Tribunal observed that the appellant had a subsisting registration under Section 12A, which had not been shown to be withdrawn or canceled. Thus, the Tribunal concluded that the appellant was engaged in charitable activities and was entitled to approval under Section 80G(5)(vi).

2. Order Barred by Limitation:
The appellant argued that the CIT's order rejecting the application was passed beyond the prescribed six-month limit as mandated by Rule 11AA(6) of the Income-tax Rules, 1962. The application was submitted on 13.06.2011, and the order was passed on 31.05.2012, which was clearly beyond the six-month period. The Tribunal noted that the CIT failed to take appropriate action within the prescribed time limit and did not consider any time consumed by the appellant during the proceedings. The Tribunal referred to the ITAT Amritsar Bench's decision in S. Lakha Singh Bahra, which held that orders passed beyond the prescribed period are not sustainable and should be considered time-barred. The Tribunal concluded that the CIT's order was indeed barred by limitation and not sustainable in law.

Conclusion:
The Tribunal allowed the appeal of the appellant on both grounds. It directed the competent authority to grant approval under Section 80G of the Income-tax Act, 1961, to the appellant society. The Tribunal emphasized that the appellant had complied with all requirements and that the competent authority's delay in passing the order placed the appellant in an unjust and vulnerable position. The appeal was pronounced in the open court on 01.02.2016.