2014 (8) TMI 693 - HC - Income Tax

Exemption u/s 80G(5)(vi) Registration u/s 12AA granted Section 12AA and 80G operate under different fields or not Held that - The Tribunal in its judgment has wrongly proceeded on the basis that the sole reason for refusing an exemption u/s 80G was the denial of the registration u/s 12AA and since the Tribunal had already ordered the grant of registration under Section 12AA, an exemption u/s 80G should be allowed - there is a basic fallacy in the judgement of the Tribunal which proceeded on the basis that the only reason for refusing exemption u/s 80G was the refusal of the registration u/s 12AA - Since this premise is erroneous, the matter is to be remitted back to the Tribunal for fresh adjudication Decided in favour of Revenue.

Summary

Issues:
1. Refusal of exemption under Section 80G based on denial of registration under Section 12AA.
2. Interpretation of provisions under Section 80G and Section 2(15) for charitable activities.

Analysis:
1. The appeal before the High Court arose from a decision of the Income Tax Appellate Tribunal setting aside the order passed by the Commissioner of Income Tax, Meerut, under Section 80G(5)(vi) and directing the grant of exemption under Section 80G to the assessee. The Tribunal's decision was based on the grant of registration under Section 12AA. However, the Commissioner of Income Tax had denied the exemption not only due to the refusal of registration under Section 12AA but also because the Trust's activities did not align with charitable purposes as defined in Section 2(15) of the Income Tax Act, 1961. The High Court noted that both reasons weighed with the Commissioner in denying the exemption under Section 80G.

2. The Tribunal's judgment was found to be flawed as it solely relied on the denial of registration under Section 12AA as the basis for refusing the exemption under Section 80G. The High Court clarified that the denial of exemption was not solely due to the lack of registration under Section 12AA but also because the Trust had not conducted charitable activities as required by law. Therefore, the High Court concluded that the proceedings should be sent back to the Tribunal for a fresh decision, emphasizing that the denial of exemption under Section 80G was not solely linked to the refusal of registration under Section 12AA. The Court refrained from expressing a view on the legal questions raised, leaving all rights and contentions open for the parties during the fresh proceedings.

In conclusion, the High Court allowed the appeal by remanding the case back to the Tribunal for a fresh decision, highlighting that the denial of exemption under Section 80G was not solely based on the refusal of registration under Section 12AA but also due to the Trust's failure to engage in charitable activities as required by law.