Kayan Foundation, Kolkata v. DIT, Exemption, Kolkata, Kolkata

ITA 28/KOL/2011 | misc
Pronouncement Date: 22-07-2011 | Result: Allowed

Appeal Details

RSA Number 2823514 RSA 2011
Assessee PAN AAATK2965J
Bench Kolkata
Appeal Number ITA 28/KOL/2011
Duration Of Justice 6 month(s) 15 day(s)
Appellant Kayan Foundation, Kolkata
Respondent DIT, Exemption, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-07-2011
Assessment Year misc
Appeal Filed On 07-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . ! '# '# '# '# /AND ' $# ! ) [BEFORE HONBLE SHRI S. V. MEHROTRA AM & HONBLE S RI MAHAVIR SINGH JM] #% #% #% #% / I.T.A NO. 28/KOL/2011 $&' '() $&' '() $&' '() $&' '()/ // / ASSESSMENT YEAR: KAYAN FOUNDATION VS. DIRECTOR OF INCOME-TAX (EX EMPTION) (PAN-AAATK 2965 J) KOLKATA ( + /APPELLANT ) (-.+ / RESPONDENT ) & #% #% #% #% / I.T.A NO. 29/KOL/2011 $&' '() $&' '() $&' '() $&' '()/ // / ASSESSMENT YEAR: 2010-11 KAYAN CHARITABLE TRUST VS. DIRECTOR OF INCOME-TAX (EXEMPTION) (PAN-AAATK 2964 K) KOLKATA ( + /APPELLANT ) (-.+ / RESPONDENT ) FOR THE APPELLANT: SHRI S. S. GUPTA FOR THE RESPONDENT: SHRI A. K. PARAMANIK / / ORDER PER MAHAVIR SINGH JM ( ' $# ' $# ' $# ' $# ! ! ! ! ) BOTH THESE APPEALS BY ASSESSEE ARE ARISING OUT OF T HE ORDERS OF DIT(EXEMPTION) KOLKATA VIDE NO.8E/341/91-92 & 8E/355/91-92 DATED 1 5.11.2010. SINCE GROUNDS OF APPEAL IN BOTH THE CASES ARE IDENTICALLY WORDED AND THE FACTS ARE COMMON WE DISPOSE OF BOTH THE APPEALS BY THIS CONSOLIDATED ORDER. 2. THE SOLE ISSUE IN THESE APPEALS OF THE ASSESSEE IS AGAINST THE ORDER OF DIT(E) REJECTING THE APPLICATIONS IN FORM NO. 10G SEEKING RENEWAL OF EXEMPTION U/S. 80G(5)(VI) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT ). FOR THE SAKE OF BREVITY WE REPRODUCE THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN ITA NO. 28/ K/2011: 1) THAT THE LD. DIT (EXEMPTION) ERRED IN HASTILY REJECTING THE APPLICATION FOR RENEWAL OF EXEMPTION U/S. 80G(5)(VI) WITHOUT ALLOWING PROPE R OPPORTUNITY OF HEARING AND FURNISHING NAMES OF TRUSTEES OF THE DONEE TRUSTS. 2 ITA 28&29/K/2011 KAYAN FOUNDATION & KAYAN CHARITABLE TRUST 2) THAT THE LD. DIT (EXEMPTION) ERRED IN IGNORING S UBMISSIONS AND COMPLIANCE ON 10.11.2010 BY ASSESSEE TRUSTS REPRESENTATIVE IRR ATIONALLY INFERRING VIOLATIONS OF SECTION 13(3) CONSEQUENTIALLY REJECTING THE APPLICATION FOR RENEWAL OF REGISTRATION APPLIED FOR CONTRARY TO CBDT CIRCULAR SUBMITTED ON 10.11.2010 B INDING ON THE DIT (EXEMPTION). 3) THAT THE ORDER REJECTING THE APPLICATION FOR REN EWAL OF REGISTRATION U/S. 80G(5)(VI) IS ILLEGAL ARBITRARY CONTRARY TO PROVISIONS OF LAW A ND FACTS ON RECORD. 3. AT THE OUTSET IT IS NOTICED THAT THE ASSESSEE F ILED APPLICATION IN FORM NO. 10G DATED 20.4.2010 SEEKING RENEWAL OF EXEMPTION U/S. 80G(5)( VI) OF THE ACT BUT DIT(E) KOLKATA FIXED THE CASE FOR HEARING ON 8.10.2010 BY VIRTUE OF WHI CH HE WAS REQUIRED TO FILE DETAILS OF TRUSTEES OF THE TRUST TO WHOM DONATION WAS PAID ABOVE RS.10 LACS AND CASE WAS ADJOURNED ON 11.11.2010. THE ASSESSEE FILED NO DETAILS AND NO O PPORTUNITY WAS AVAILED. WE FIND THAT THIS IS A CONTINUATION OF APPLICATION AND THE DIT(E) HAS AL READY ALLOWED EXEMPTION U/S. 80G UPTO ASSESSMENT YEAR 2010-11 VIDE THEIR LETTER NO. DIT(E )/594/8E/341/91-92 DATED 19.12.2007 AND ASSESSEE BEFORE US ALSO NOW FILED COPY OF CIRCULAR NO. 7/2010 DATED 27.10.2010 WHICH HAVE GRANTED CONTINUING OF EXEMPTION U/S. 80G IN PERPETU ITY. THE RELEVANT CIRCULAR OF THE BOARD READS AS UNDER: CIRCULAR NO 7/20 10 DATED: OCTOBER 27 2010 SUBJECT:- PERIOD OF VALIDITY OF APPROVALS ISSUED UN DER 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 PERIOD OF VALIDITY OF APPROVALS GR ANTED BY THE CHIEF COMMISSIONERS OF INCOME TAX OR DIRECTORS GENERAL OF INCOME TAX UNDER SUB-CL AUSES (IV) (V) (VI) AND (VIA) OF SECTION 10(23C) AND BY THE COMMISSIONERS OF INCOME TAX OR D IRECTORS OF INCOME TAX UNDER SECTION 80G (5) OF THE INCOME TAX ACT 1961. 2. IT HAS ALSO BEEN NOTICED BY THE BOARD THAT DIFFE RENT FIELD AUTHORITIES ARE INTERPRETING THE PROVISIONS RELATING TO THE PERIOD OF VALIDITY OF TH E ABOVE APPROVALS IN A DIFFERENT MANNER. THE FOLLOWING INSTRUCTIONS ARE ACCORDINGLY ISSUED FOR T HE REMOVAL OF DOUBTS ABOUT THE PERIOD OF VALIDITY OF VARIOUS APPROVALS 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 W HICH THE TAXATION LAWS (AMENDMENT) BILL 2006 RECEIVES THE ASSENT OF THE PRESIDENT S HALL AT ANY ONE TIME HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS NOT EXCEEDING THREE ASSESSMENT YEARS) (INCLUDING AN ASSESSMENT YEAR OR YEARS COMMENCING BEFORE THE DATE ON WHICH SUCH NOTIFICATION 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 NOTES TO THE TAXATION LAWS AMENDMEN T ACT 2006 WHICH READS AS UNDER: A NEED HAS BEEN FELT TO DISPENSE WITH THE REQUIREME NT OF PERIODIC RENEWAL OF NOTIFICATIONS. THE REQUIREMENT OF PERIODIC RENEWAL OF NOTIFICATIONS HA S BEEN RESULTING IN DELAYS IN THEIR RENEWAL. 3 ITA 28&29/K/2011 KAYAN FOUNDATION & KAYAN CHARITABLE TRUST 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 EFFECT IVITY 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 LA WS (AMENDMENT) BILL 2006 RECEIVES THE ASSENT OF THE PRESIDENT. 5.3 THE TAXATION LAWS (AME NDMENT) BILL 2006 RECEIVED THE ASSENT OF THE PRESIDENT. 5.3. THE TAXATION LAWS (AMENDMENT) BILL 2006 RECEI VED THE ASSENT OF THE PRESIDENT ON 13.07.2006. THEREFORE ON ACCOUNT OF THE ABOVE AMEN DMENT ANY NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER THE SAID SUB CLAUSE (IV) O R SUB-CLAUSE (V) ON OR AFTER 13.07.2006 WILL BE VALID UNTIL WITHDRAWN AND THERE WILL BE NO REQUI REMENT ON THE PART OF THE ASSESSEE TO SEEK RENEWAL OF THE SAME AFTER THREE YEARS. THE INTENTION OF LEGISLATURE THAT THE APPROVALS UND ER SECTION 10 (23 C) (IV) & (V) AFTER THE CUT OFF DATE MENTIONED ABOVE WOULD BE A ONE TIME APPROV AL WHICH WOULD BE VALID UNTIL WITHDRAWN IS THUS SUFFICIENTLY CLEAR. 4. APPROVALS UNDER SUB-CLAUSE (VI) AND (VIA) OF SEC TION 10 (23C) ARE GOVERNED BY THE PROCEDURE CONTAINED IN RULE 2CA. RULE 2CA WAS AMEND ED W.E.F. 1.12.2006 INTER ALIA BY 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 BE GRANTED BEFOR E THE 1ST DAY OF DECEMBER 2006 SHALL AT ANY ONE TIME HAVE EFFECT FOR A PERIOD OF E XCEEDING THREE ASSESSMENT YEARS. READ IN ISOLATION WITHOUT ANY FURTHER GUIDANCE AS WAS GIVEN BY WAY OF EXPLANATORY NOTES TO FINANCE ACT 2006 IN RESPECT OF AMENDMENT OF SUB-CL AUSE (IV) & (V) OF SECTION 10 (23C) 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 DOUBTS 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 APPROVAL ISSUED ON OR AFTER 1.12.2006 UNDER SUB-CLAUSE (VI) OR (VIA) OF 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 OF INCOME TAX PROVISO TO SEC TION 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 ABOV E PROVISO WAS DELETED BY THE FINANCE (NO. 2) ACT 2009. THE INTENT BEHIND THE DELETION OF ABOV E PROVISO AS EXPLAINED IN THE EXPLANATORY MEMORANDUM TO FINANCE (NO.2) BILL 2009 WAS AS UNDE R: 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 MA DE HAVE TO BE APPROVED BY THE COMMISSIONER OF INCOME-TAX IN ACCORDANCE WITH THE RULES PRESCRIB ED IN RULE 1IAA OF THE INCOME-TAX RULE 1962. THE PROVISO TO THIS CLAUSE PROVIDES THAT ANY APPROVAL GRANTED UNDER THIS CLAUSE SHALL HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS NOT EXCEE DING FIVE ASSESSMENT YEARS AS MAY BE SPECIFIED IN THE APPROVAL. 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 AP PROVALS 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 SUC H 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 CONTIN UE TO BE VALID IN PERPETUITY. FURTHER THE COMMISSIONER WILL ALSO HAVE THE POWER OF WITHDRAW T HE APPROVAL IF THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH INSTITUTION O R FUND ARE NOT GENUINE OR ARE NOT BEING CARRIED 4 ITA 28&29/K/2011 KAYAN FOUNDATION & KAYAN CHARITABLE TRUST OUT IN ACCORDANCE WITH THE OBJECTS OF THE INSTITUTI ON OR FUND. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST DAY OF OCTOBER 2009. ACCORDINGLY EXISTIN G APPROVALS EXPIRING ON OR AFTER 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 TO 1.10.2009 ESPECIALLY IN VIEW OF THE FACT THAT NO CORRESPONDING CHANGE HAS BEEN MADE IN RULE 11A (4). TO REMOVE ANY DOUBTS IN THIS REGARD IT IS REITERATED THAT ANY APPROVAL UNDER SECTION 80G (5) ON OR AFTER 1.10.200 9 WOULD BE A ONE TIME APPROVAL WHICH WOULD BE VALID TILL IT IS WITHDRAWN. 4. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BABU HA RGOVIND DAYAL TRUST VS. ITAT WRIT PETITION NO. 556(MB) OF 2011 DATED FEBRUARY 7 2011 REPORTED IN (2011) 10 TAXMANN 241 (ALL.) WHEREIN IT IS HELD THAT THE PROVISO TO CLAU SE (VI) OF SUB-SECTION (5) OF SECTION 80G HAS BEEN OMITTED AND THERE REMAINS NO REQUIREMENT TO SE EK RENEWAL IN EVERY ASSESSMENT YEAR. ONCE EXEMPTION GRANTED STANDS EXTENDED IN PERPETUITY BY OPERATION OF LAW MERELY MOVING AN APPLICATION BY ASSESSEE WOULD NOT DIVEST IT OF THE AFORESAID RIGHT AND ASSESSEE IS AUTOMATICALLY ALLOWED RENEWAL IN PERPETUITY BY OPERATION OF LAW. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BABU HARGOVIND DAYAL TRUST (SUPRA) HAS HELD AS U NDER: THE APPELLATE TRIBUNAL ALSO DID NOT TAKE INTO ACCO UNT THE EFFECT OF THE CIRCULAR AFORESAID AND REMANDED THE MATTER FOR AFFORDING OPP ORTUNITY TO THE PETITIONER AND PASSING FRESH ORDERS BY THE COMMISSIONER OF INCOME- TAX IN ACCORDANCE WITH LAW. MAY BE THAT AT THE TIME OF MOVING THE APPLICATION CIRCULAR AFORESAID WAS NOT IN VOGUE AND IN THE ABSENCE OF ANY SUCH CIRCULAR HAVING BEEN ISSUED THE APPLICATION WOULD HAVE BEEN DECIDED IN THE MANNER AS REQUIRED UNDER THE AC T. BUT ONCE A CIRCULAR WAS ISSUED EVEN DURING THE PENDENCY OF THE APPLICATION FOR REN EWING THE EXEMPTION ALREADY GRANTED WHICH WAS IN FORCE IN PERPETUITY AS A CONSEQUENCE O F AMENDING THE PROVISO TO CLAUSE (VI) OF SUB-SECTION (5) OF SECTION 80-G EVEN ON REMAND THE COMMISSIONER OF INCOME-TAX HAS NO AUTHORITY TO REFUSE RENEWAL BUT TO DECLARE THE E XEMPTION IN FORCE TILL IT IS ACTUALLY WITHDRAWN. EVEN OTHERWISE CLAUSE 29.7 OF THE CIRCULAR MAKES I T VERY CLEAR THAT THE AMENDMENT IN QUESTION HAS BEEN MADE APPLICABLE W.E.F. 1.10.09 AN D ACCORDINGLY EXISTING APPROVALS WHICH WERE TO EXPIRE ON OR AFTER 1.10.09 WILL BE DE EMED TO HAVE BEEN EXTENDED IN PERPETUITY UNLESS SPECIFICALLY WITHDRAWN. THIS ITSE LF MEANS THAT THE PETITIONERS APPROVAL/EXEMPTION GRANTED UNDER SECTION 80-G WHIC H WAS TO EXPIRE ON 31.3.2010 WOULD BE DEEMED TO HAVE BEEN EXTENDED IN PERPETUITY UNLESS SPECIFICALLY WITHDRAWN. ONCE THE EXEMPTION GRANTED STANDS EXTENDED IN PERPE TUITY BY OPERATION OF LAW MERELY MOVING AN APPLICATION BY THE PETITIONER WOULD NOT D IVEST IT OF THE AFORESAID RIGHT WHICH HAS ACCRUED TO IT IN VIEW OF THE CIRCULAR AFORESAI D AND THE AMENDMENT MADE IN THE ACT. IN THESE CIRCUMSTANCES THERE IS NO REQUIREMENT OF MAINTAINING THE DIRECTION ISSUED BY THE TRIBUNAL TO THE COMMISSIONER INCOME-TAX FOR DE CIDING THE APPLICATION FOR RENEWAL AFRESH IN ACCORDANCE WITH LAW AS BY VIRTUE OF OPE RATION OF LAW THE EXEMPTION SHALL BE DEEMED TO BE CONTINUED IN PERPETUITY AND IT WILL CO NTINUE SO LONG IT IS NOT WITHDRAWN AS PER THE PROVISIONS OF THE ACT. 5 ITA 28&29/K/2011 KAYAN FOUNDATION & KAYAN CHARITABLE TRUST WE FIND THAT IN VIEW OF PARAGRAPHS 29.3 TO 29.7 OF THE BOARDS CIRCULAR NO. 5 BEING EXPLANATORY CIRCULAR FOR FINANCE (NO.2) ACT 2009 THE DIT(E) SH OULD HAVE BEEN ALLOWED THE EXEMPTION CERTIFICATE NOT ONLY FOR THE RELEVANT ASSESSMENT YE ARS BUT ONWARDS TILL THE SAME IS WITHDRAWN AS PER LAW. IT IS SETTLED PRINCIPLES OF LAW THAT ANY CIRCULAR ISSUED BY BOARD WHICH IS FAVOURABLE TO ASSESSEE WOULD BE BINDING ON THE REVENUE. ACCORDI NGLY WE DIRECT THE DIT(E) TO ALLOW EXEMPTION CERTIFICATE TO ASSESSEE IN BOTH THE CASES . 5. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE A LLOWED. 6. ORDER PRONOUNCED IN OPEN COURT ON 22.7.2011 SD/- SD/- . . ! ' '' ' $# $# $# $# ! (S. V. MEHROTRA (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 0 0 0 0) )) ) DATED 22ND JULY 2011 '12 $&34 $5' JD.(SR.P.S.) / 6 -$$7 87(9- COPY OF THE ORDER FORWARDED TO: 1 . + / APPELLANT KAYAN FOUNDATION & KAYAN CHARITABLE TRUST 9/2 HUNGERFORD STREET KOLKATA-700 017. 2 -.+ / RESPONDENT DIT(E) KOLKATA. 3 . DDIT(E) KOLKATA 4. $/& / CIT KOLKATA 5 . '$? -$& / DR KOLKATA BENCHES KOLKATA .7 -$/ TRUE COPY /&@/ BY ORDER #4 /ASSTT. REGISTRAR .