Income Tax Appellate Tribunal - Hyderabad
Stanley Education Society, Kurnool vs Assessee on 13 December, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.324/Hyd/2012
Stanley Education Society, V/s Director of Income-tax(Exemption)
Kurnool. Hyderabad
( PAN - AWHPS 5100 R)
(Appellant) (Respondent)
Appellant by : Shri A.G.Gangaiah
Respondent by : S/Shri V.Srinivas & M.H.Naik
Date of Hearing 14.5.2012
Date of Pronouncement 30.5.2012
ORDER
Per D.Karunakara Rao, Accountant Member:
This is an appeal filed by the assessee against the order of the Director of Income-tax(Exemption), Hyderabad dated 13.12.2011, denying renewal of approval under S.80G of the Income-tax Act to the assessee.
2. Grounds raised by the assessee read as follows-
"1. DIT might have not revoked the registration without issuing any notice for revocation. DIT specified that the clauses are not existing in the memorandum and rules and regulations. The statement is beyond the facts of the case. DIT might have not seen the Memorandum society. The revocation may be annulled.
OR
2. to issue suitable instructions to verify the clauses and pass the orders of revocation after the order passed by the DIT is annulled."
3. Briefly stated, facts of the case are that the assessee is a society engaged in the charitable work by way of giving education to boys 2 ITA No.324/Hyd/2012 Stanley Educational Society, Kurnool.
and girls. Assessee got registration under S1.2AA of the Act as well as approval under S.80G of the Act, vide separate orders of the Director of Income-tax(Exemption) both dated 25.3.2011. The approval under S.80G granted to the assessee was to be valid till 31.3.2010. Meanwhile, there was an amendment to the statute under S.80G(vi) by the Finance(No.2) Act, 2009 with effect from 1.10.2009, whereby proviso for specifying the period of validity of the approval was dispensed with. Notwithstanding the above amendment on account of which there was requirement of seeking renewal of approval after the specified period, assessee, to be on safe side, filed an application for approval or renewal of approval under S.80G, vide Form No.10G filed on 1.7.2011. Basing on the said application, the Director of Income-tax(Exemption) Hyderabad, after hearing Dr.B.Stephen Charles, Secretary of the assessee society, rejected the request of the assessee for renewal of approval under S.80G of the Act, for the reasons given in paras 2 to 4 of his order dated 13.12.2011, which read as follows-
"2. On going through the Memorandum and rules and regulations of the society furnished along with Form 10G, it is observed that there are no clauses on 'aims and objects of the society'.
Under the circumstances, it is not possible to examine whether the society has carried out the activities in accordance with its aims and objects.
3. Further, the amendments clause and winding up clause of the memorandum are not specific.
4. For the failures of the society as explained above, the society's application for renewal of exemption u/s. 80G of the I.T.Act, 1961 cannot be accepted. Previously, the society was granted extension of exemption u/s. 80G up to 31-03-2011. In view o the amendment to Section 80G(5)(vi) through Finance Act (No.2), 2009, the Trust continues to enjoy the exemption in perpetuity. In view of the limitations imposed by this amendment, the trust's request for renewal of exemption cannot be rejected. As such the only option available to me in view of the failures of the trust as explained above, is to cancel the exemption itself. As such, I hereby revoke the exemption granted to the trust u/s. 80(G)(vi) of the I.T. Act, 1961."3 ITA No.324/Hyd/2012
Stanley Educational Society, Kurnool.
4. Aggrieved by the above order of the Director of Income- tax(Exemption), Hyderabad, assessee filed the present appeal before us with the grounds mentioned above.
5. During the proceedings before us, learned Authorised Representative of the assessee, Shri A.C.Gangaiah refuted strongly the observations of the Director of Income-tax(Exemption) and demonstrated that there exists clauses on aims and objects of the society, unlike the observations of the Director of Income-tax(Exemption). He also demonstrated by reading out the amendment clause and winding up clause from the Memorandum of association and demonstrated that the Memorandum of Association not only provides for the rules to amend or alter for the purpose of objects of the Trust enshrined in the Memorandum. He mentioned that para 8 of the Memorandum is relevant here. Similarly, referring to para 15 of the society's rules and regulations placed at page 17 of the paper-book, he mentioned that winding up or dissolution of the Society is conditioned by Dissolution, and the net assets remaining shall be given to some other society or association having similar aims and objects. This should constitute specific nature of the clause and Director of Income-tax(Exemption) should not have rejected the request of the assessee for renewl of approval under S.80G of the Act.
6. Learned Departmental Representative on the other hand, strongly relied on the order of the Director of Income-tax(Exemption).
7. We heard both the parties, perused the orders of the Director of Income-tax(Exemption) and the material available on record. On perusal of the impugned orders of the Director of Income- tax(Exemption), we find that the objections of the Director of Income- tax(Exemption) for granting approval under S.80G includes the absence 4 ITA No.324/Hyd/2012 Stanley Educational Society, Kurnool.
of clauses on aims and objectives of the assessee-society and other clauses relating to the clauses on amendment power and winding up of the society. Director of Income-tax(Exemption) opines that these clauses are not specific. In para 4 of the order, the Director of Income- tax(Exemption) made a general observation that the limitations prescribed in the Act were not provided by the assessee in its Memorandum of Association or rules and regulations. In this regard, we perused the relevant papers available before us and find that there exists clause on aims and objects of the society, which are placed in the paper book, to which we have already referred above. Similarly, we have perused the relevant paras of the rules and regulations of the assessee- society, being 9 and 15 on pagers 15 to 17 of the paper-book. In our opinion, those clauses shall meet the requirements of statute for granting approval under S.80G of the Act. So far as the restrictive clauses, referred to by the Director of Income-tax(Exemption) in para 4 of his order, are concerned, we find that the allegations are too general and he has not specified the limitations not met by the assessee. In these circumstances, we are of the opinion that the order of the Director of Income-tax(Exemption) is erroneous and it requires to be reversed.
8. Before parting, it is pertinent to mention that we are not inclined to go into the redundancy of the application of the assessee for renewal in view of statutory amendment to the provisions of S.80G noted above, or the effect of the rejection of the assessee's application, on the claim of the assessee for exemption under S.80G, in view of amendment to the provisions of S.80G of the Act noted above, since those aspects of the matter are of only academic interest in view of our decision on the merits of the issue, viz. validity of the reasons given by the Director of Income-tax(Exemption) while rejecting the said application and assessee's eligibility for renewal under S.80G based on its application.
5 ITA No.324/Hyd/2012Stanley Educational Society, Kurnool.
9. In the result, assessee's appeal is allowed.
Order pronounced in the Court on 30.5.2012
Sd/- Sd/-
(Saktijit Dey) (D.Karunakara Rao)
Judicial Member. Accountant Member.
Dt/- 30th May, 2012
Copy forwarded to:
1. Stanley Education Society, 43/127, E.C.M. Compound, Kurnool 518 004.
2. Director of Income-tax(Exemption) Hyderabad
3. Dy. Director of Income-tax(Exemption), Hyderabad
4. Departmental Representative, ITAT, Hyderabad B.V.S.