Section 80G of the Income-tax Act, 1961 — After omission of proviso to clause (vi) of section 80G(5), existing approval expiring on or after 1-10- 2009 would be deemed to have been extended in perpetuity unless specifically withdrawn.
The assessee-charitable trust’s recognition for exemption u/s.80G expired on 31-3-2011. The assessee made an application in Form No. 10G seeking exemption for the period after 31-3-2011. The Director of Income-tax (Exemption) rejected this application for renewal of exemption and also held that assessee was earning huge money/fees in the name of medical treatment which was nothing but income from commercial activity carried out under the name of medical relief and, accordingly, invoked section 2(15) for withdrawing exemption.
The Tribunal held in favour of the assessee. The Tribunal noted as under:
(1) Proviso to clause (vi) of section 80G(5) has been omitted by the Finance Act, 2009 with effect from 1-10-2009. This proviso imposing the limitation of five years was omitted by the Finance Act, 2009 with effect from 1-10-2009 to provide that the approval once granted shall continue to be valid in perpetuity.
(2) The impact and scope of the omission of proviso to clause (vi) of s.s (5) of section 80G has been explained by the Board in its Circular No. 5, dated 3-6-2010 clarifying that the existing approval expiring on or after 1-10-2009 will be deemed to have been extended in perpetuity unless specifically withdrawn.
(3) Therefore, in the instant case, the filing of an application for renewal of exemption after the expiry of the same on 31-3-2011 by the assessee was not required. Once the exemption granted stands extended in perpetuity by operation of law, merely moving an application by the assessee would not divest it of the assessee’s right to treat the exemption to have been extended in perpetuity, which right had accrued to the assessee in view of the aforesaid Circular and the amendment made in the Act.
(4) Proviso to section 2(15) inserted w.e.f. 1-4-2009, provides that the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity.
(5) It is clear that this proviso is applicable in respect of charitable institutions engaged in the activity of advancement of any other object of general public utility i.e., the 4th limb of section 2(15). The first three limbs i.e., relief of the poor, education and medical relief are outside the purview of the aforesaid proviso inserted to section 2(15). It has been admitted by the Director of Income-tax (Exemption) himself that the assessee-society has been registered u/s.12A as charitable trust and is running dispensary and health centre, which makes it clear that the charitable purpose for which the assessee-society is established includes medical relief and it is not a case of advancement of any other object of general public utility. Therefore, applying the provisions of proviso to section 2(15) to the instant case by the Director of Income-tax (Exemption) is also totally misplaced and for that reason, the assessee cannot be said to be not eligible for exemption u/s.80G.
