Kings World Trust for Children (India), Tirunelveli V. ITO, Tirunelveli

ITA 2130/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0974 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 12; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER] I.T.A.NO.2130/MDS/2010 ASSESSMENT YEAR : N.A KINGS WORLD TRUST FOR CHILDREN (INDIA) CHINNAMMALPURAM THALAPATHISAMUDRAM P.O THIRUNELVELI DIST 627 101 VS THE ITO WARD I(1) THIRUNELVELI [PAN AAATK2770P ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. BASKAR RESPONDENT BY : SHRI TAPAS KUMAR DUTTA O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE-TRUST IS DIRECTED AGAINST THE ORDER OF THE LD. CIT-II, MADURAI, DATED 7.10.2010. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME - TAX IS WR ONG, ILLEGAL AND OPPOSED TO FACTS. 2. THE COMMISSIONER OF INCOME - TAX ERRED IN FACTS AND IN LAW IN REJECTING THE APPLICATION FOR APPROVAL U/S.8 0G OF THE INCOME - TAX ACT, EVEN THOUGH THE APPELLANT OUT OF IGNORANCE MADE SUCH AN APPLICATION, WHEN IT ALREADY ENJOYS SUCH RECOGNITION. ITA 2130/10 :- 2 -: 3. THE COMMISSIONER OF INCOME - TAX WENT WRONG IN PROCEEDING TO REJECT THE APPLICATION FOR RECOGNITIO N WITHOUT ADVERTING TO THE CHANGE IN LAW AND THE INSTRUCTIONS OF THE CBD T. 4. THE COMMISSIONER OF INCOME TAX ERRED IS NOT CONSIDE RING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, BEFORE ARRIVING AT THE UNTENABLE CONCLUSION. 5. IN ANY EVENT THE CONCLUSION OF THE COMMISSIONER OF INCOME TAX IS HYPER TECHNICAL AND SUPERFLUOUS. 6. THE APPLICATION ITSELF IS LIABLE TO BE REJECTED AS NOT WARRANTED IN THE CIRCUMSTANCES OF THE CASE. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S A FACT THAT THE TRUST HAD APPLIED FOR GRANT OF RENEWAL OF EXEMP TION U/S 80G OF THE ACT ON 13.4.2010. THE TRUST WAS REGISTERED U/S 12 AA OF THE ACT VIDE ORDER DATED 22.2.2000 FOR THE ASSESSMENT YEAR 1995- 96 ONWARDS. THE TRUST WAS ALSO GRANTED EXEMPTION U/S 80G(5) OF THE ACT VIDE ORDER DATED 6.2.2006 FOR THE PERIOD FROM 1.4.2005 TO 31.3 .2010. AFTER OBTAINING THE REPORT AND CONSIDERING THE MATERIAL, THE LD. CIT HAS REFUSED TO RENEW THE APPROVAL U/S 80G(5)(VI) OF THE ACT. BUT THE CASE OF THE ASSESSEE-TRUST IS A UNIQUE ONE IN THE SENSE THAT AFTER 1.4.2009 A SUB-CLAUSE (VII) WAS INSERTED BY THE FINANCE (NO.2) ACT, 2009, WHICH READS AS UNDER: (VII) WHERE ANY INSTITUTION OR FUND HAD BEEN APPROV ED UNDER CLAUSE (VI) FOR THE PREVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2007 AND ENDING ON THE 31ST DAY OF MARCH, 20 08, SUCH INSTITUTION OR FUND SHALL, FOR THE PURPOSES OF THIS SECTION AND ITA 2130/10 :- 3 -: NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISO T O CLAUSE (15) OF SECTION 2 , BE DEEMED TO HAVE BEEN, (A) ESTABLISHED FOR CHARITABLE PURPOSES FOR THE PR EVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY OF MARCH, 2009; AND (B) APPROVED UNDER THE SAID CLAUSE (VI) FOR THE PR EVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY OF MARCH, 2009. ] 3. IN THE LIGHT OF THIS, IT WAS ARGUED THAT THE ASSESS EE WAS GRANTED APPROVAL U/S 80G(5) ON 6.2.2006 FROM 1.4.2005 TO 31 .3.2010, WAS NOT REQUIRED TO SEEK A FRESH APPROVAL UNDER THIS SECTIO N. IT WAS ARGUED THAT IT IS TRUE THAT THE LD. CIT HAS POWER TO WITHD RAW THIS APPROVAL BUT THE ASSESSEE WAS NOT REQUIRED TO GET THE EXTENSION OF THE APPROVAL AFTER 1.4.2009 AS STATED ABOVE. ON THE OTHER HAND, THE LD.DR HAS RELIED ON THE ORDER OF THE LD. CIT. 4. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 80G AS WELL AS CBDT CIRCULAR NO.7 OF 2010 REPORTED IN 328 ITR (STA TUTE) 43 IN WHICH IT HAS BEEN EXPRESSED AS UNDER: SUBJECT:- PERIOD OF VALIDITY OF APPROVALS AMENDED VIDE TAXATION LAWS (AMENDMENT) ACT, 2006 UNDER SECTION 10(23C) (IV), (V), (VI) OR (VIA) AND SECTION 80G (5 ) OF THE IT ACT-CLARIFICATION REG. THE BOARD HAS RECEIVED VARIOUS REFERENCES FROM THE FIELD FORMATIONS AS WELL AS MEMBERS OF PUBLIC ABOUT THE P ERIOD OF VALIDITY OF APPROVALS GRANTED BY THE CHIEF COMMISSI ONERS OF INCOME TAX OR DIRECTORS GENERAL OF INCOME TAX UNDER SUB- CLAUSES (IV), (V), (VI) AND (VIA) OF SECTION 10(23C ) AND BY THE COMMISSIONERS OF INCOME TAX OR DIRECTORS OF INCOME TAX UNDER SECTION 80G (5) OF THE INCOME TAX ACT, 1961. ITA 2130/10 :- 4 -: 2. IT HAS ALSO BEEN NOTICED BY THE BOARD THAT DIFFE RENT FIELD AUTHORITIES ARE INTERPRETING THE PROVISIONS RELATIN G TO THE PERIOD OF VALIDITY OF THE ABOVE APPROVALS IN A DIFFERENT M ANNER. THE FOLLOWING INSTRUCTIONS ARE ACCORDINGLY ISSUED FOR T HE REMOVAL OF DOUBTS ABOUT THE PERIOD OF VALIDITY OF VARIOUS APPR OVALS REFERRED TO ABOVE. 3. SUB-CLAUSE (IV) AND (V) OF SECTION 10(23C) WERE AMENDED BY TAXATION LAWS (AMENDMENT) ACT, 2006 BY INSERTION OF THE FOLLOWING PROVISO TO THAT CLAUSE:- 'PROVIDED ALSO THAT ANY (NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER SUB-CLAUSE (IV) OR SUB-CLAUSE (V), BEFORE THE DATE ON WHICH THE TAXATION LAWS (AMENDMENT) BILL, 2 006 RECEIVES THE ASSENT OF THE PRESIDENT', SHALL AT ANY ONE TIME, HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS, NOT EXCEEDING THREE ASSESSMENT YEARS) (INCLUDING AN ASSESSMENT YE AR OR YEARS COMMENCING BEFORE THE DATE ON WHICH SUCH NOTI FICATION IS ISSUED) AS MAY BE SPECIFIED IN THE NOTIFICATION.)' THE INTENTION BEHIND THE INSERTION OF THE ABOVE PRO VISO WAS LAID OUT IN THE RELEVANT PORTION OF THE EXPLANATORY NOTE S TO THE TAXATION LAWS AMENDMENT ACT, 2006 WHICH READS AS UN DER: 'A NEED HAS BEEN FELT TO DISPENSE WITH THE REQUIREM ENT OF PERIODIC RENEWAL OF NOTIFICATIONS. THE REQUIREMENT OF PERIODIC RENEWAL OF NOTIFICATIONS HAS BEEN RESULTING IN DELA YS IN THEIR RENEWAL. 5.2 IN ORDER TO OVERCOME DELAYS, THE EIGHTH PROVISO TO SECTION 10(23C) HAS BEEN AMENDED SO AS TO PROVIDE THAT THE ABOVE MENTIONED LIMIT OF EFFECTIVITY FOR THREE ASSESSMENT YEARS SHALL BE APPLICABLE IN RESPECT OF NOTIFICATIONS ISSUED BY TH E CENTRAL GOVERNMENT UNDER SUB-CLAUSE (IV) OR SUB-CLAUSE (V) BEFORE THE DATE ON WHICH TAXATION LAWS (AMENDMENT) BILL, 2006 RECEIVES THE ASSENT OF THE PRESIDENT. 5.3 THE TAXATION LAWS (AMENDMENT) BILL, 2006 RECEIV ED THE ASSENT OF THE PRESIDENT ON 13.07.2006. THEREFORE, O N ACCOUNT OF THE ABOVE AMENDMENT ANY NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER THE SAID SUB-CLAUSE (IV) OR SUB-CL AUSE (V), ON OR AFTER 13.07.2006 WILL BE VALID UNTIL WITHDRAWN A ND THERE WILL BE NO REQUIREMENT ON THE PART OF THE ASSESSEE TO SEEK RENEWAL OF THE SAME AFTER THREE YEARS. ITA 2130/10 :- 5 -: THE INTENTION OF LEGISLATURE THAT THE APPROVALS UND ER SECTION 10 (23C) (IV) & (V) AFTER THE CUT OFF DATE MENTIONED A BOVE WOULD BE A ONE TIME APPROVAL WHICH WOULD BE VALID UNTIL WITH DRAWN, IS THUS SUFFICIENTLY CLEAR. 4. APPROVALS UNDER SUB-CLAUSE (VI) AND (VIA) OF SEC TION 10 (23C) ARE GOVERNED BY THE PROCEDURE CONTAINED IN RU LE 2CA. RULE 2CA WAS AMENDED W.E.F. 1.12.2006, INTER ALIA B Y SUBSTITUTION OF THE EXISTING SUB-RULE 3 BY A NEW PR OVISION WHICH IS REPRODUCED BELOW:- '(3) THE APPROVAL OF THE CENTRAL BOARD OF DIRECT TA XES OR CHIEF COMMISSIONER OR DIRECTOR GENERAL, AS THE CASE MAY B E, GRANTED BEFORE THE 1ST DAY OF DECEMBER, 2006 SHALL AT ANY O NE TIME HAVE EFFECT FOR A PERIOD OF EXCEEDING THREE ASSESSM ENT YEARS.' READ IN ISOLATION, WITHOUT ANY FURTHER GUIDANCE AS WAS GIVEN BY WAY OF EXPLANATORY NOTES TO FINANCE ACT, 2006 IN RE SPECT OF AMENDMENT OF SUB-CLAUSE (IV) & (V) OF SECTION 10(23 C), THE ABOVE AMENDMENT LEAVES SOME SCOPE FOR DOUBT ABOUT T HE PERIOD OF VALIDITY OF THE APPROVAL UNDER SECTION 10 (23C)(VI) AND (VIA) ON OR AFTER 1.12.2006. FOR THE REMOVAL OF DOU BTS IF ANY IN THIS REGARD, IT IS CLARIFIED THAT AS IN THE CASE OF APPROVALS UNDER SUB-CLAUSE (IV) & (V) OF SECTION 10(23C), ANY APPRO VAL ISSUED ON OR AFTER 1.12.2006 UNDER SUB-CLAUSE (VI) OR (VIA) O F THAT SUB- SECTION WOULD ALSO BE A ONE TIME APPROVAL WHICH WOU LD BE VALID TILL IT IS WITHDRAWN. 5. AS REGARDS APPROVALS GRANTED UPTO 1.10.2009 UNDE R SECTION 80G BY THE COMMISSIONERS OF INCOME TAX/ DIRECTORS O F INCOME TAX, PROVISO TO SECTION 80G (5)(VI) CLARIFIED THAT ANY APPROVAL SHALL HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS NOT EXCEEDING FIVE ASSESSMENT YEARS AS MAY BE SPECIFIED IN THE APPROVAL. THE ABOVE PROVISO WAS DELETED BY THE FINA NCE (NO. 2) ACT 2009. THE INTENT BEHIND THE DELETION OF ABOVE P ROVISO AS EXPLAINED IN THE EXPLANATORY MEMORANDUM TO FINANCE (NO.2) BILL, 2009 WAS AS UNDER: 'FURTHER AS PER CLAUSE (VI) OF SUB-SECTION (5) OF S ECTION 80G OF THE INCOME-TAX ACT, 1961, THE INSTITUTIONS OR FUNDS TO WHICH THE DONATIONS ARE MADE HAVE TO BE APPROVED BY THE COMMI SSIONER OF INCOME-TAX IN ACCORDANCE WITH THE RULES PRESCRIB ED IN RULE 11AA OF THE INCOME-TAX RULE, 1962. THE PROVISO TO T HIS CLAUSE PROVIDES THAT ANY APPROVAL GRANTED UNDER THIS CLAUS E SHALL HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS, NOT EXCEE DING FIVE ASSESSMENT YEARS, AS MAY BE SPECIFIED IN THE APPROV AL. ITA 2130/10 :- 6 -: DUE TO THIS LIMITATION IMPOSED ON THE VALIDITY OF S UCH 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 A DMINISTRATION IN RENEWING SUCH APPROVALS IN A ROUTINE MANNER. THEREFORE, IT IS PROPOSED TO OMIT THE PROVISO TO CL AUSE (VI) OF SUB-SECTION (5) OF SECTION 80G TO PROVIDE THAT THE APPROVAL ONCE GRANTED SHALL CONTINUE TO BE VALID IN PERPETUITY. F URTHER, THE COMMISSIONER WILL ALSO HAVE THE POWER OF WITHDRAW T HE APPROVAL IF THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIE S OF SUCH INSTITUTION OR FUND ARE NOT GENUINE OR ARE NOT BEIN G CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE INSTITUTION OR F UND. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST DAY OF OCTOBER, 2009. ACCORDINGLY, EXISTING APPROVALS EXPIRING ON OR AFTE R 1ST OCTOBER, 2009 SHALL BE DEEMED TO HAVE BEEN EXTENDED IN PERPE TUITY UNLESS SPECIFICALLY WITHDRAWN.' IT APPEARS THAT SOME DOUBTS STILL PREVAIL ABOUT THE PERIOD OF VALIDITY OF APPROVAL UNDER SECTION 80G SUBSEQUENT T O 1.10.2009, ESPECIALLY IN VIEW OF THE FACT THAT NO CORRESPONDIN G CHANGE HAS BEEN MADE IN RULE 11A(4). TO REMOVE ANY DOUBTS IN T HIS REGARD, IT IS REITERATED THAT ANY APPROVAL UNDER SE CTION 80G (5) ON OR AFTER 1.10.2009 WOULD BE A ONE TIME APPROVAL WHICH WOULD BE VALID TILL IT IS WITHDRAWN. RAMAN CHOPRA DIRECTOR (ITA-I) F.NO.197/21/2010-ITA-I 5. IN VIEW OF THE AMENDED PROVISION OF SECTION 80G(5) AND THE CBDT CIRCULAR (SUPRA), WE ARE OF THE CONSIDERED OPI NION THAT THE ASSESSEE WAS NOT REQUIRED TO SEEK RENEWAL AND UNLES S THE RENEWAL IS WITHDRAWN AS PER THE PROCEDURE LAID DOWN IN THE ACT , THE ASSESSEE TRUST SHALL BE DEEMED TO BE CONTINUING AS APPROVED U/S 80G(5) OF THE ACT. ITA 2130/10 :- 7 -: 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE-TRUST S TANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.3.2011 SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 18 TH MARCH, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR