income tax case laws

T-If statue allows perpetuity in sec. 80G exemption, it can't be withdrawn without giving an opportunity to trust

IT: Once statute gives perpetuity to exemptions granted under section 80G(5), same could not be withdrawn without issuing show-cause notice to assessee-trust

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[2013] 34 taxmann.com 89 (Punjab & Haryana)

HIGH COURT OF PUNJAB AND HARYANA

Commissioner of Income-tax

v.

Bhhola Bhandari Charitable Trust*

HEMANT GUPTA AND MS. RITU BAHRI, JJ.

IT APPEAL NO. 238 OF 2012 (O& M)†

JANUARY  30, 2013 

Section 80G of the Income-tax Act, 1961 - Deductions - Donation to certain funds, charitable institution [Withdrawal of approval] - Assessment year 2012-13 - Whether, where Finance (No.2) Act of 2009 and Circular Nos. 5 and 7 of 2010 made it explicit that existing exemptions granted under section 80G would continue till perpetuity, same could not be withdrawn without issuing show-cause notice to assessee-trust - Held, yes [Para 4] [In favour of assessee]

Circulars and Notifications : Circular No. 5 of 2010, dated 3-6-2010 and Circular No. 7 of 2010, dated 27-10-2010

FACTS

 

■		The assessee-trust was granted exemption under section 80G, which was valid up to financial year 2010-11. The assessee filed application for renewal of exemption on 25-4-2011, which was withdrawn on 31-5-2011 as Finance (No. 2) Act of 2009 and Circular Nos. 5 and 7 of 2010 made it explicit that existing exemption as on 1-10-2010 would continue till perpetuity.
■		However, the Commissioner withdrew the exemption by order dated 5-12-2011.
■		On appeal, the Tribunal set aside the order of the Commissioner, for withdrawal of exemption.
■		On appeal by revenue:

HELD

 

■		The order of the Tribunal setting aside the order of the Commissioner is based on sound reasoning. The assessee had valid exemption on 1-10-2010, when the provisions of section 80G were amended so as to dispense with the periodic renewal of the exemptions. Such statutory provisions were clarified by Circular No. 5 of 2010 and Circular No. 7 of 2010 issued by the Central Board of Direct Taxes. Once the statute had given perpetuity to the exemptions granted under section 80G(5), the same could not be withdrawn without issuing show-cause notice in terms of the statutory provisions in the manner prescribed by law. [Para 4]
■		In view of the said fact, no substantial question of law arises for consideration. [Para 5]

CASE REVIEW

 

Bhole Bhandari Charitable Trust v. CIT [2012] 137 ITD 55/22 taxmann.com 153 (Chd.) (para 5) affirmed.

CASES REFERRED TO

 

Bhole Bhandari Charitable Trust v. CIT [2012] 137 ITD 55/22 taxmann.com 153 (Chd.) (para 1).

JUDGMENT

 

Hemant Gupta, J. - The Revenue is in appeal under section 260A of the Income-tax Act, 1961 (for short "the Act"), against the order dated May 17, 2012, passed by the Income-tax Appellate Tribunal, Chandigarh Bench "A", Chandigarh (for short "the Tribunal") in I. T. A. No. 140/CHD/2012-since reported in Bhole Bhandari Charitable Trust v. CIT [2012] 137 ITD 55/22 taxmann.com 153 holding that the approval once granted to the assessee under section 80G(5) of the Act shall continue in perpetuity as per Circular No. 5, dated June 3, 2010 (See [2010] 324 ITR (St.) 293), issued by the Central Board of Direct Taxes (for short "the CBDT"). Our attention has been drawn to Circular No. 7 of 2010 (see [2010] 328 ITR (St.) 43) issued by the CBDT wherein the circular issued earlier has been clarified and reiterated.

2. The Revenue has claimed the following substantial questions of law :

"(i)		Whether, on the facts and in the circumstances of the case, the hon'ble the Income-tax Appellate Tribunal was justified in setting aside the order of the Commissioner of Income-tax relying upon the assessee's version that the approval once granted under section 80G(5) of the Income-tax Act shall continue in perpetuity as per Circular No. 5 of 2010 ?
(ii)		Whether, on the facts and in the circumstances of the case, the hon'ble the Income-tax Appellate Tribunal was justified in not appreciating that the Commissioner of Income-tax was well within his right to withdraw the exemption on the finding that the activities of the trust were not charitable even though the petition of the assessee could not be rejected keeping in view the guidelines as mentioned in paragraph 5 of Circular No. 7 of 2010, dated October 27, 2010 (see [2010] 328 ITR (St.) 43) ?"

3. The assessee was granted exemption under section 80G of the Act being the charitable trust. Such exemption was valid up to the financial year 2010-11 ending March 31, 2011. The assessee filed an application for renewal of exemption on April 25, 2011, which was withdrawn on May 31, 2011. It appears such request was withdrawn as by the Finance (No. 2) Act of 2009 and Circular No. 5 of 2010, it was made explicit that the existing exemptions granted section 80G of the Act as on October 1, 2010, would continue till perpetuity. But still the Commissioner of Income-tax withdrew the exemption, vide order dated December 5, 2011. It is the said order which has since been set aside by the Tribunal.

4. We find that the order of the Tribunal setting aside the order of Commissioner of Income tax is based on the sound reasoning. The assessee had valid exemption on October 1, 2010, when the provisions of section 80G of the Act were amended so as to dispense the periodic renewal of the exemptions. Such statutory provisions were clarified by Circular No. 5 of 2010 and Circular No. 7 of 2010 issued by the Central Board of Direct Taxes. Once the statute has given perpetuity to the exemptions granted under section 80G(5) of the Act, the same could not be withdrawn without issuing show-cause notice in terms of the statutory provisions in the manner prescribed by law.

5. In view of the said fact, we do not find that any substantial question of law arises for consideration.

6. Dismissed.