2024 (11) TMI 1426 - HC - Income Tax

Benefit of exemption u/s 80G(5) rejected - assessee Society runs a college and is also generating surplus out of fees charged from students to provide education - assessee s application u/s 12AA of the IT Act was granted and is continuing in operation - HELD THAT - As decided in HIRALAL BHAGWATI 2000 (4) TMI 14 - GUJARAT HIGH COURT once the registration under Section 12A(a) of the IT Act is granted the grant of benefit u/s 80G of the IT Act cannot be denied. In view of the decision rendered in Hiralal Bhagwati 2000 (4) TMI 14 - GUJARAT HIGH COURT approved by the Supreme Court in Surat City Gymkhana s case 2008 (4) TMI 16 - SUPREME COURT we have no hesitation to hold that since the respondent assessee stands registered as charitable institution u/s 12AA the only corollary is its application u/s 80G(5) also deserves to be allowed which the learned ITAT has rightly noticed to be the correct legal position and directed the CIT(E) to grant approval to the assessee under Section 80G(5). Decided in favour of assessee.

Summary

The High Court of Chhattisgarh considered a tax appeal under Section 260A of the Income-tax Act, 1961, where the Revenue challenged the judgment and order of the Income Tax Appellate Tribunal (ITAT) in favor of the assessee, directing approval under Section 80G(5) of the IT Act. The core legal question was whether the ITAT was correct in overturning the Commissioner of Income Tax (E)'s rejection of the respondent's application for exemption under Section 80G(5) of the IT Act.The factual background involved the assessee applying for exemption under Section 80G of the IT Act, which was rejected by the Commissioner of Income-tax (Exemption). The ITAT reversed this decision and directed approval under Section 80G. The Revenue contended that the ITAT's decision was unjustified, while the assessee argued that since they were already granted approval under Section 12AA of the IT Act, the ITAT's decision was justified.The Court noted that the issue had been previously addressed in the case of Hiralal Bhagwati v. Commissioner of Income-Tax and further affirmed by the Supreme Court in Assistant Commissioner of Income Tax v. Surat City Gymkhana. The Gujarat High Court in Hiralal Bhagwati held that once registration under Section 12A(a) of the IT Act is granted, the benefit under Section 80G cannot be denied. The Supreme Court in Surat City Gymkhana's case confirmed this principle, stating that further inquiry into charitable purposes is unnecessary once registration under Section 12A is granted.Based on these precedents, the Court held that since the respondent was registered as a charitable institution under Section 12AA of the IT Act, approval under Section 80G(5) should also be granted. The substantial question of law was answered in favor of the assessee, and the tax appeal was dismissed, with each party bearing their own costs.In conclusion, the Court relied on established legal principles to affirm the ITAT's decision in favor of the assessee, emphasizing the significance of registration under Section 12A in determining eligibility for benefits under Section 80G of the IT Act.