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TMI Blog2012 (11) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... d to as the Act ) read with Rule 11AA of the Income-tax Rules, 1962 ,raises the following grounds :- 1. The rejection orders of the learned DIT(E), New Delhi are bad both in law and on facts. 2. That on the facts and circumstances of the case the learned DIT(E), New Delhi was not justified in rejection of Form No.10G for exemption u/s 80G of the Income-tax Act 1961. 3. That rejection order of the learned DIT(E), New Delhi are passed without given any opportunity to the assessee. As per rule 11 AA of the Income Tax Rules, 1962, no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard . 4. That rejection order of the learned DIT(E), New Delhi are received on 16th September, 2011 which is barred by time as prescribed in the Income Tax Rules, 1962 as the assessee filed application on 8th March, 2011. The time limit with in which the Commissioner shall pass an order either granting the approval or rejection the application, shall not exceed six months from the date on which such application was made. 2. Facts, in brief, as per relevant order are that the aforesaid foundation submitted an application in For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of scholarship, the company is protecting the interest of its employees only and not for general public. By awarding scholarship to the children of its employees through the charitable trust created by the company is actually a mode of benefit to the employees and no charitable activity has been done by the trust for general people/public. It is actually a mechanism evolved by the company for the benefit of its employees, on the one hand it is claiming the said donation/contribution as company s expenditure on the other hand the same amount is being utilized for its employees in the form of scholarship/assistance through the above said trust created by the company which ultimately resulted the benefit of the commercial entity and not the general public at large. 6.In view of above facts and circumstances of the case, the contention of the applicant that it is doing charitable activity by helping poor and needy children in the form of scholarship and assistance is not tenable, as its activity is only for a particular section/group or employees of a company who is founder of the trust. 7.In view of above fact and of documentary evidences of charity that applicant is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al is required to be filed for approvals existing on or after 1.10.2009 in terms of Circular no.7/2010 dated 27.10.2010.On the other hand, learned DR supported the findings of the ld. DIT(E). 4. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by the ld. AR. Indisputably, the applicant trust ,created vide indenture dated 17th December,1970 for promotion of national integration, international goodwill brother hood, building and maintaining national and international welfare centres for tourists besides aiding and assisting students by scholarships etc. to prosecute higher education, study and research particularly in the field of travel tourism etc., is registered u/s 12A of the Act on 20th September, 1973 and all along approval u/s 80G(5)(vi) of the Act was being granted, latest being on 16th June, 2008 for the period 01.04.2008 to 31.03.2011. Even when the registration u/s 12A of the Act has not been withdrawn, the ld. DIT(E) declined to renew the approval u/s 80G(5)(vi) of the Act for the period after 31.3.2011 on the ground that scholarship/financial assistance was awarded to the children of the employees of Select Holid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 13(3) of the Act. It cannot be denied that even the employees of Select Holiday Resorts (P) Ltd. and their sons/daughters form part of the general public and merely because they have some relationship with the author of the trust, they do not lose their primary identity as members of the public. In any case,, the facts and circumstances are the same as in earlier years since 1973 and grant to the children of the employees of the aforesaid company was being made available even in the preceding years. In these circumstances, we are of the opinion that the ld. DIT(E) was not justified in denying the approval u/s 80G(5)(vi) of the Act.. 5. Even otherwise, registration granted to the assessee as a charitable trust is subsisting and no material has been placed before us that the same has been or is intended to be withdrawn. In such circumstances, renewal of approval u/s 80G(5)(vi) of the Act could not be denied to the assessee as held by a coordinate Bench in Mayo College Old Boys Association(supra).Following this decision, similar view was taken in another decision dated 20.4.2011 by a coordinate bench in I.T.A. No.218/D/09 in the case of Maharishi Dayanand Education Society and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 009, the approval once granted shall continue to be valid in perpetuity. The memo explaining the provisions in Finance (No.2) Bill, 2009 as reported in 314 ITR 193 (St.) at page 194 reads as under:- This amendment will take effect from 1st day of April, 2009 and shall accordingly, apply in relation to assessment year 2009-10 only. Further as per clause (vi) of sub-section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rules, 1962. The proviso to this clause provides that any approval granted under this clause shall have effect for such assessment year or years, not exceeding five assessment years, as may be specified in the approval. Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or the Board or such authority may, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision, withdraw such approval at any time : Provided that the Central Government or Board or income-tax authority shall, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the assessee concerned, at anytime, withdraw the approval after recording the reasons for doing so.] 13. From the proviso attached to the section 293C of the Act, it is crystal clear that even if any Income-tax Authority wants to withdraw approval, he shall issue a show cause notice against the proposed withdrawal to the assessee concerned and after giving a reasonable opportunity of being heard shall withdraw approval after recording reasons for doing so. The use of the word shall in the aforesaid proviso makes it mandatory for Commissioner of Income-tax to issue a show cause notice to the assessee against the proposed withdrawal of approval granted u/s. 80G(5) of the Act. However, in the present case no such show cause notice has been issued to the assessee. Therefore, we do not see any merit in this contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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