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2016 (12) TMI 247 - HC - Income TaxRefusal to renew the registration under Section 80G - Held that - It is evident that after the omission of the proviso to Section 80G (5) (vi) of the Act there is no requirement of any renewal of registration under Section 80G at all in case the registration was valid as on 01.10.2009, which evidently is the position in the case of both the petitioners since their registration under Section 80G was valid till 31.03.2010. The said position is even accepted by the CBDT in its Circular issued from time to time. The plea of learned counsel for the Income-tax Department that the petitioners having themselves approached the CIT for renewal of their registration and not compelled by the Department to do so, it was open to the Commissioner to have passed an order refusing renewal under Section 80G of the Act does not have any force. The statutory authorities have to exercise their power in terms of what has been given to them by the statute under which they have been created. If the power of renewal of registration has been taken away by the amendment from 01.10.2009, there was no occasion for the CIT to exercise his power merely on the ground that the petitioner had filed an application for renewal of registration, rather he ought to have acted in the same manner as the Director of Income-tax (Exemption), Delhi by his letter dated 09.09.2010, communicating that in view of the amendment to Section 80G (5) (vi) through Finance Act (No.2), 2009 there was no need to seek renewal of the certificate. It is evident from the legal position as obtained from 01.10.2009 that the registration granted under Section 80G would operate in perpetuity, unless specifically withdrawn. For the aforesaid reasons, we hold that the impugned orders dated 29.09.2010 and 27.10.2010 of the CIT-1, Patna are illegal and invalid and they are, accordingly, quashed. Cancellation under Section 12AA (3) - Held that - This Court is, of the view that the order dated 28.11.2012 of the CIT-1, Patna cancelling the registration of Imarat Shariah Trust under Section 12AA is contrary to law. With regard to the Nyas Samity as to be held to be a trust in existence at least since the year 1958 and in that view of the matter even if it had been created or established for the benefit of a particular community or caste, which is not factually so as held above, it would not be covered by the exclusion provided under Section 13 (1) (b) of the Act from the benefit of the provisions of Section 11 or 12 of the Act. Thus, for the aforesaid reasons, the show cause notice dated 13.12.2010 in the case of the petitioner, Nyas Samiti as also the show cause notice. Revision u/s 263 - Held that - On a consideration of the order of the CIT, while reference to the fact that the assessing officer has not considered the refusal of renewal of the exemption under Section 80G of the Act and the show cause notice for cancellation of registration under Section 12AA of the Act can be considered as an attempt to overreach and ignore the stay order granted by this Court but the same would not apply to the remaining part of the order where he has set aside the order of the assessing officer by pointing out the lacuna during the assessment process. This Court does not agree with the submission of learned counsel for the petitioner that merely because it has been granted exemption under Section 12AA of the Act, therefore, nothing is required to be done during the assessment proceeding except to accept the return. For the aforesaid reasons, while the CIT-1, Patna is warned not to try to overreach the orders of this Court in the future, but at the same time it is not a fit case for setting aside the order dated 27/29.3.2014. The assessing officer, however, while making assessment should keep in mind the fact that both the impugned order dated 28.09.2010 and the show cause notice dated 13.03.2010 have been quashed by this Court and accordingly decide the matter in accordance with law keeping the same in view. It shall also be open to the petitioner to take such plea with regard to sale of medicines, commissions, Naivedya and Prasad as per the principles of law laid down by the Courts.
Issues Involved:
1. Refusal of renewal of exemption under Section 80G of the Income-tax Act, 1961. 2. Show cause notice for cancellation of registration under Section 12AA of the Income-tax Act. 3. Validity of expenditures for religious purposes exceeding the permissible limit. 4. Legality of the order passed under Section 263 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Refusal of Renewal of Exemption under Section 80G: The petitioners challenged the refusal of renewal of exemption under Section 80G by the Commissioner of Income Tax (CIT) on the grounds that, post the amendment to Section 80G(5)(vi) by the Finance Act (No.2), 2009, there was no requirement for renewal of registration, and the approval once granted was valid in perpetuity unless specifically withdrawn. The court held that the CIT lacked the jurisdiction to refuse renewal as the power of renewal had been taken away by the amendment. The impugned orders refusing renewal were thus quashed. 2. Show Cause Notice for Cancellation of Registration under Section 12AA: The show cause notices for cancellation of registration under Section 12AA were issued on the grounds that the trusts were not eligible for exclusion from total income under Section 11(1) due to the provisions of Section 13(1)(b). The court found that both trusts had charitable purposes and their activities were not confined to any particular religious community or caste. The court relied on the Supreme Court's decision in Commissioner of Income-tax, Ujjain vs. M/s. Dawoodi Bohra Jamat, which held that trusts with both religious and charitable purposes were eligible for exemption under Sections 11 and 12. The show cause notices and cancellation orders were quashed. 3. Validity of Expenditures for Religious Purposes Exceeding the Permissible Limit: For the petitioner Imarat Shariah Educational and Welfare Trust, the issue was the expenditure exceeding 5% for religious purposes in one assessment year. The court noted that this issue was separate and did not affect the renewal of registration under Section 80G. The court held that the trust's activities were charitable and not confined to any particular religious community, thus not falling under the exclusion of Section 13(1)(b). 4. Legality of the Order Passed under Section 263: The CIT had set aside the assessment order under Section 143(3) for the assessment year 2009-10, citing the assessing officer's failure to make necessary inquiries. The court found that while the CIT's reference to the refusal of renewal and show cause notice was an attempt to overreach the court's stay order, the remaining part of the CIT's order pointed out genuine lacunae in the assessment process. The court upheld the CIT's order but warned against overreaching court orders in the future. Conclusion: The court allowed the petitions in part, quashing the orders refusing renewal of exemption under Section 80G and the show cause notices for cancellation of registration under Section 12AA. The court upheld the CIT's order under Section 263, directing the assessing officer to consider the court's findings while making a fresh assessment.
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