2020 (7) TMI 171 - AT - Income Tax

Exemption u/s 11 - approved/notified institution for the purpose of section 10(23) - charitable within the meaning of section 2(15) - declining the registration u/s 12AA - exemption / approval u/s 80G - Bar Council of Delhi / Body of Advocates - HELD THAT - Hon ble Delhi High Court in case of DIT vs. Foundation of Ophthalmic Optometry Research Education Centre 2012 (8) TMI 777 - DELHI HIGH COURT has held to the extent that even if there is no commencement of charitable activities, registration u/s 12AA of the Act cannot be denied because the statute does not prohibit or enjoin the Commissioner from registering a trust solely based upon its objects without any activity in case of a newly registered trust. We are of the considered view that the CIT(E) has erred in declining the registration u/s 12AA of the Act on the ground that financials of FY 2018-19 have not been furnished by the appellant. Cursory findings returned by the ld. CIT (E) in the impugned order that, the provisions of section 11 to 13 specifically section 12AA are not applicable to such organisation or institution , is not correct interpretation of law as CIT vs. Bar Council of Maharashtra 1978 (8) TMI 14 - BOMBAY HIGH COURT held that two provisions viz. section 11 section 10(23A) are not mutually exclusive but operated under different circumstances. So, merely on the basis of the fact that income of the appellant exempted u/s 10(23A) is not a bar to claim deduction in assessment u/s 11 of the Act, as such income is to be excluded u/s 11. Appellant had furnished financial of FYs 2016-17 2017-18 but the ld. CIT (E), without making any adverse findings on the same, proceeded to reject the registration on the ground that financials of FY 2018-19 have not been furnished. Thought it is not a requirement of law to furnish the financials as required by the ld. CIT (E) the appellant has come up with argument that now the financials of FY 2018-19 are available and they are ready to furnish the same. What has been discussed in the preceding paras, we are of the considered view that the appellant being engaged in safeguarding the rights, privileges and interest of the advocates, its dominating purpose is the advancement of general public utility within the meaning of section 2(15) of the Act, as such, genuineness of its activities and object of charitable purpose is proved, thus entitled for registration u/s 12AA and consequent exemption u/s 80G. Appeal filed by the appellant is allowed directing the ld. CIT (E) to provide registration u/s 12AA and consequent exemption u/s 80G of the Act to the appellant.

Summary

Issues:
1. Rejection of application for registration under section 12A(a) of the Income Tax Act.
2. Denial of approval under section 80G of the Act.
3. Condonation of delay in filing the appeal before the Tribunal.
4. Determination of whether the activities of the appellant are charitable within the meaning of section 2(15) of the Act.
5. Empowerment of the CIT (E) to reject registration and exemption due to non-furnishing of financials.
6. Interpretation of the provisions of sections 11 to 13 and section 12AA in relation to the organization or institution.
7. Consideration of whether financial statements of FY 2018-19 are necessary for registration under section 12AA.
8. Compliance with the object clause of the institution for registration under section 12AA.

Analysis:

1. The appellant, Bar Council of Delhi, appealed against the rejection of its application for registration under section 12A(a) of the Income Tax Act. The rejection was based on the grounds that the Council failed to provide financial documents for the FY 2018-19 and was not listed as a charitable institution. The Tribunal considered the reasons for the rejection and the arguments presented by both parties.

2. The Tribunal acknowledged the appellant's request to condone a 2-day delay in filing the appeal due to the sudden sickness of their counsel. The delay was deemed reasonable, and the Tribunal granted the condonation.

3. The key issue revolved around whether the activities of the Bar Council of Delhi were charitable within the definition of section 2(15) of the Act. The appellant argued that its primary purpose was the advancement of general public utility, citing relevant case law and judgments to support its position.

4. The Tribunal examined whether the CIT (E) had the authority to reject registration and exemption under sections 12AA and 80G due to the non-furnishing of financial statements for FY 2018-19. It was established that the genuineness of activities should be assessed based on the object clause of the institution, and further scrutiny of financials was not mandatory for registration.

5. The Tribunal analyzed the interpretation of sections 11 to 13 and section 12AA concerning the organization or institution. It clarified that the provisions were not mutually exclusive and that income exempted under section 10(23A) did not preclude claiming deductions under section 11 of the Act.

6. The decision highlighted that the appellant had provided financial statements for previous years and was willing to furnish the FY 2018-19 statements. The Tribunal emphasized that the Bar Council's activities aimed at safeguarding the rights of advocates fulfilled the criteria of general public utility, making it eligible for registration under section 12AA and subsequent exemption under section 80G.

7. Consequently, the Tribunal allowed the appeal, directing the CIT (E) to grant registration under section 12AA and exemption under section 80G to the Bar Council of Delhi, based on the established charitable nature of its activities and compliance with the legal requirements.

This comprehensive analysis of the judgment addresses all the issues involved and provides a detailed overview of the Tribunal's decision and the legal arguments presented by both parties.