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2015 Supreme(Kar) 283
High Court of Karnataka
N. KUMAR & B. VEERAPPA, JJ.
Maheshwari Foundation – Appellant
Versus
Director of Income-Tax (Exemptions), Bangalore – Respondent
I.T. Appeal No. 807 of 2009
Decided On : 19-01-2015
Advocate Appeared:
For the Appellant:A. Shankar, Advocate.
For the Respondent:K.V. Aravind, Advocate.
The main legal point established is that an order passed beyond the prescribed period under Rule 11AA of the Income Tax Rules is invalid and without jurisdiction.
Headnote:
80G Renewal - Trust - Income-Tax Act, 1961 - Section 80G - Section 2(15) - Rule 11AA
Fact of the Case:
The assessee, a Trust, applied for renewal of recognition under Section 80G of the Income-Tax Act, 1961. The authorities rejected the renewal on the ground that the activity does not come within the scope of Section 2(15) of the Act as amended from 01.04.2009. The assessee appealed to the Tribunal, which upheld the rejection.
Finding of the Court:
The court found that the order rejecting the renewal was passed beyond the period prescribed under Rule 11AA, rendering it an order passed without jurisdiction. The court set aside the impugned orders and reserved liberty to the assessee to make a fresh application for the benefit of Section 80G of the Act.
Issues: (a) Justification of upholding the order of the Director of Income Tax that the appellant's activity is in the nature of trade, commerce, or business and hence not entitled to renew the recognition under Section 80G. (b) Validity of not granting renewal of recognition on the ground that the appellant's activity is affected by the amendment to section 2(15) of the Income-tax Act. (c) Justification of passing rejection order beyond the time prescribed under rule 11AA.
Ratio Decidendi: The court held that the order rejecting the renewal was passed beyond the period prescribed under Rule 11AA, making it an order passed without jurisdiction.
Final Decision: The appeal was allowed, the impugned orders were set aside, and liberty was reserved to the assessee to make a fresh application for the benefit of Section 80G of the Act.
N. KUMAR, J.
1. The assessee has preferred this appeal against the order passed by the Tribunal upholding the order passed by the Commissioner holding that the assessee is not entitled to the benefit of renewal of recognition under Section 80G of the Income-Tax Act, 1961(for short, hereinafter referred to as 'the Act').
2. The assessee is a Trust formed on 12.07.2000. It filed an application for renewal of the recognition granted under Section 80G of the Act on 31.03.2008. The authorities called for certain details in connection with the renewal of the recognition and the same was furnished. The assessee was running a Hostel for students, for which charges were collected for both boarding and lodging. According to the assessee it was treated as a charitable purpose and Section 80G benefit was given up to 31.03.2008. Even after the amendment to Section 2(15) of the Act without prejudice to its applicability, in view of the provisos, the position will be the same if the gross revenue from business was less than Rs.25 lakhs. The Director of Income tax (Exemptions) was not convinced. Therefore, he rejected the renewal on the ground that the activity does not come within the scope of Section 2(15) of the Act as amended from 01.04.2009.
3. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal also held that running of a hostel would not fall within the definition of a charitable purpose and therefore, upheld the order of the Director of Income Tax.
4. Aggrieved by the said order, the present appeal is filed. The appeal was admitted to consider the following substantial questions of law:
(a) Whether on the facts and in circumstances of the case, the Tribunal was justified in upholding the order of learned Director of Income Tax (Exemptions) that the appellant activity is in the nature of trade, commerce or business and hence is not entitled to renew the recognition under Section 80G of the Act?
(b) Whether the Authorities below were justified in law in not granting of renewal of recognition on the ground that the activity of the appellant are hit by the amendment to section 2(15) of the Income-tax Act?
(c) Whether the learned Director of Income-tax (Exemptions) was justified in law in passing rejection order beyond the time prescribed under rule 11AA?
5. The learned counsel for the assessee, assailing the impugned order contended that if the third substantial question of law is answered in favour of the assessee, the question of going into the other two questions of law would not arise, as the order passed by the authorities would be one without jurisdiction. His case is that, the application for renewal was made on 31.03.2008. The order rejecting or granting the benefit should have been passed on or before 30th September 2008. The order is passed on 06.10.2008 beyond the period prescribed under the law and therefore, he submits that the impugned order requires to be set-aside.
6. Per contra, the learned counsel appearing for the revenue submitted that if an order is passed within the prescribed period, it does not mean that permission is granted. There is no such deemed permission. Therefore, he submits that the impugned order is valid and illegal.
7. The question is not whether a deemed permission is granted or not. The question is whether an order passed beyond the period prescribed under the law is valid? The reliance is placed on Rule 11AA of the Income Tax Rules which reads as under:
"11AA. Requirements for approval of an institution or fund under section 80G.— (1) The application for approval of any institution or fund under clause (vi) of sub-section (5) of section 80G shall be in Form No. 10G and shall be made in triplicate.
(2) The application shall be accompanied by the following documents, namely:
(i) Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C);
(ii) Notes on activities of institution or fund since its inception or during th
