2016 (8) TMI 554 - AT - Income Tax

Exemption u/s 11 - grant of registration under Section 12AA - assessee-Bar Council of Tamil Nadu - Held that - As even though the preamble of order of the Director of Income Tax (Exemptions) dated 29.08.2011 says Bar Council of Tamil Nadu and its unit Advocates Welfare Fund the body of the order clearly says that the registration was granted only to the Fund and not to the Bar Council. The CBDT however after examining the application filed by the Bar Council of Tamil Nadu found that the registration was granted with effect from 25.02.2011 on the basis of application dated 25.02.2011. Therefore there is a confusion as to whether the Bar Council of Tamil Nadu and Advocates Welfare Fund have filed any joint application for registration or the individual application filed by the respective statutory body was clubbed together by the Director of Income Tax (Exemptions) and passed a common order. These facts are not clear from the order of the lower authorities. Under the scheme of the Income-tax Act each statutory body has to file independent application for registration under Section 12AA of the Act. Be that as it may now registration was granted apparently to the Advocates Welfare Fund by the order of the Director of Income Tax (Exemptions) dated 29.08.2011 and the CBDT has condoned the delay in filing the application for registration under Section 12AA of the Act for the assessment years 2003-04 to 2010-11 to the Bar Council of Tamil Nadu. In view of these factual confusion this Tribunal is of the considered opinion that the matter needs to be reexamined by the Assessing Officer. Accordingly the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the matter afresh in the light of the registration granted by the Director of Income Tax (Exemptions) on 29.08.2011 and the order that may be passed by the Director of Income Tax (Exemptions) consequent to the order of CBDT dated 27.05.2016 and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee.

Summary

Issues:
1. Whether the Advocates' Welfare Fund established by the Bar Council of Tamil Nadu is a separate legal entity for tax assessment purposes.
2. Whether the registration under Section 12AA of the Income-tax Act, 1961 granted to the Advocates' Welfare Fund affects the tax exemption claim under Section 11 of the Act.
3. Whether the Advocates' Welfare Fund and the Bar Council of Tamil Nadu should be treated as separate legal entities for tax purposes.

Analysis:
1. The issue revolves around the classification of the Advocates' Welfare Fund as a separate legal entity. The representative for the assessee argued that the Fund is not a legal entity but a welfare fund established by the Bar Council of Tamil Nadu. However, the Departmental Representative contended that the Fund was treated as a separate legal entity by obtaining a Permanent Account Number and registration under Section 12AA. The Tribunal noted that the Fund was granted registration separately, indicating its distinct legal status.

2. The question arises concerning the impact of the registration of the Advocates' Welfare Fund under Section 12AA on the tax exemption claim under Section 11. The Tribunal observed that the Fund's exemption claim for assessment years 2003-04 to 2010-11 was rejected due to lack of registration. With the delay in filing the registration application condoned, the Tribunal deemed it necessary for the Assessing Officer to reconsider the exemption claim post-registration.

3. The issue of treating the Advocates' Welfare Fund and the Bar Council of Tamil Nadu as separate legal entities was extensively discussed. The Tribunal analyzed the statutory provisions of the Advocates Act, 1961, and the Advocates' Welfare Fund Act, 2001, highlighting the distinct entities created by these laws. It was concluded that both entities must obtain separate approvals/registrations under Section 12AA for tax exemption purposes, emphasizing their legal independence.

In conclusion, the Tribunal set aside the lower authorities' orders and remitted the matter back to the Assessing Officer for a fresh examination. The Assessing Officer was directed to reconsider the tax assessment in light of the registration granted to the Advocates' Welfare Fund and subsequent orders, ensuring a fair opportunity for the assessee. The appeals of both the assessees and the Revenue were allowed for statistical purposes.