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2014 (5) TMI 113 - AT - Income TaxWithdrawal of exemption Scope of section 2(15) of the Act Opportunity of being heard Exemption u/s 80G of the Act - The assessee is engaged in making available health services - This is as per the National Family Planning Programme under the policy of the Ministry of Health and Family Welfare, Government of India - The promotion expenses incurred are partially reimbursed by the Ministry of Health and Family Welfare, Government of India, in order to support the National Family Planning Programme activities - The assessee is receiving grants/donations from Marie Stopes International (UK) and these donations comprise the major income of the assessee - the activity of the assessee is aided by the Government of India itself, in the Ministry of Health, in pursuance of its policies and National Family Planning Programme - the activity carried on by the assessee cannot at all be said to be a commercial activity - the activity is squarely covered by the provisions of Section 2 (15) of the IT Act. The conditions of Rule 11AA of the IT Rules, 1962 stand duly complied with - It has not been shown otherwise - the assessee company stands granted registration u/s 12A of the Act and approval u/s 80G (5) of the Act was granted to it - Relying upon N.N. Desai Charitable Trust vs. CIT 1999 (5) TMI 11 - GUJARAT High Court and Sonepat Hindu Educational Charitable Trust vs. CIT 2005 (5) TMI 52 - PUNJAB AND HARYANA High Court - while dealing with an application u/s 80G (5) of the Act, the scope of inquiry extends to eligibility to exemption and that registration u/s 12AA of the Act by itself is sufficient proof that the institution is created or established for charitable purposes thus, the assessee s application is allowed Decided in favour of Assessee.
Issues Involved:
1. Validity of the order dated 05.09.2008 passed by the Ld. DIT (E), Delhi. 2. Applicability of Section 2(15) of the Income Tax Act, 1961 to the activities of the assessee. 3. Justification for the rejection of renewal of exemption under Section 80G. 4. Opportunity of hearing provided by the Director of Income Tax (Exemption). 5. Evaluation of the activities and financial data of the assessee by the DIT (E). 6. Compliance with the conditions of Income Tax Rule 11AA by the assessee. Detailed Analysis: 1. Validity of the Order Dated 05.09.2008: The assessee challenged the order dated 05.09.2008, passed by the Ld. DIT (E), Delhi, under Section 80G(5)(vi) of the IT Act, arguing that the order was "bad in law and against the true self-explanatory facts of the case." The Tribunal found merit in the assessee's contention and cancelled the order under appeal, directing that the application of the assessee be allowed. 2. Applicability of Section 2(15) of the Income Tax Act, 1961: The assessee argued that its activities were covered under Section 2(15) of the IT Act, as it was engaged in health services, particularly in the distribution of contraceptives at subsidized rates to support family planning and HIV/AIDS prevention. The Tribunal agreed, noting that the assessee's activities were in line with the National Family Planning Programme and were partially reimbursed by the Ministry of Health and Family Welfare, Government of India. The Tribunal concluded that the assessee's activities were charitable and covered under Section 2(15). 3. Justification for the Rejection of Renewal of Exemption under Section 80G: The Ld. DIT (E) had rejected the renewal of exemption under Section 80G, stating that the assessee's activities were commercial in nature. The Tribunal, however, found that the assessee was a non-profit organization engaged in social marketing of contraceptives at highly subsidized rates, which did not constitute a commercial activity. The Tribunal emphasized that the primary objective of the assessee was to promote health services and family planning, which qualified as charitable activities under Section 2(15). Consequently, the rejection of renewal was deemed unjustified. 4. Opportunity of Hearing Provided by the Director of Income Tax (Exemption): The assessee contended that the Director of Income Tax (Exemption) did not provide an opportunity of hearing and passed the order with a predetermined opinion. The Tribunal noted the procedural lapse and found that the assessee was not given a fair opportunity to present its case, which contributed to the decision to cancel the order under appeal. 5. Evaluation of the Activities and Financial Data of the Assessee by the DIT (E): The assessee argued that the DIT (E) did not properly review and evaluate its activities or financial data, leading to incorrect conclusions about its income and expenditure. The Tribunal observed discrepancies in the financial figures mentioned by the DIT (E) and found that the DIT (E) had not made serious efforts to understand the activities and financial data of the assessee. This inadequate evaluation was another factor in the Tribunal's decision to cancel the order. 6. Compliance with the Conditions of Income Tax Rule 11AA by the Assessee: The assessee claimed that it fulfilled the conditions of Income Tax Rule 11AA, as it had registration under Section 12A and had been granted exemption under Section 80G based on its activities and audited accounts. The Tribunal agreed, noting that the assessee's compliance with Rule 11AA was evident and that it had been previously granted registration and exemption. The Tribunal cited several case laws supporting the view that registration under Section 12A and the charitable nature of activities should suffice for exemption under Section 80G. Conclusion: The Tribunal found merit in the assessee's appeal, accepted the grievances raised, and cancelled the order under appeal. The application of the assessee for exemption under Section 80G was directed to be allowed, and the appeal was partly allowed as indicated. The order was pronounced in the open court on 13.12.2013.
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