ITAT | Bar Council of Delhi’s dominant purpose is advancement of general public utility: Held entitled for registration under S. 12-AA and consequent exemption under S. 80-G, Income Tax Act

Income Tax Appellate Tribunal (ITAT): A Division Bench of R.K. Panda (Accountant Member) and Kuldip Singh (Judicial Member), while addressing a matter held,

“Bar Council of Delhi being engaged in safeguarding the rights, privileges and interest of the advocates, its dominating purpose is the advancement of general public utility within the meaning of Section 2(15) of the Act, as such, genuineness of its activities and object of charitable purpose is proved, thus entitled for registration under 12AA and consequent exemption under Section 80G.”

Bar Council of Delhi — Appellant sought to set aside the impugned order passed by the Commissioner of Income tax (Exemption) passed on 27th September, 2019.

Application in Form No. 10A and 10G moved by the appellant seeking registration under Section 12 AA of the Income tax Act, 1961 were rejected by CIT (E) on the grounds inter alia that since the appellant failed to furnish balance sheet and income & expenditure account for the FY 2018-19 despite called for, the conditions laid down under Section 12 AA are not satisfied and that the name of the Bar Council of Delhi does not appear in approved association/institution notified by the Government thus not a charitable institution within meaning of Section 2(15) of the Act.

Appellant approached the tribunal by filing the present appeal.

Tribunal noted that, appellant has been established with object to control, supervise, regulate or encouragement of the profession of law for which there is a separate provision in the Act as contained under Section 10(23A) of the Act for exempting its income which shall not be included in its total income.

CIT (E) proceeded to reject the application under Section 12AA and consequent exemption under Section 80G of the Income Tax Act.

Question for determination in this case is:

Whether activities of the appellant – Bar Council/ professional body which is to control, supervise and regulate profession is not a charitable within the meaning of definition contained under Section 2(15) of the Act as has been held by the CIT(E)?

Supreme Court in case of CIT v. Bar Council of Maharashtra, 130 ITR 28, affirming the judgment of Bombay High Court in case of Bar Council of Maharashtra v. CIT , 126 ITR 27, held that primary and dominant purpose of an institution like the appellant is the advancement of the object of general public utility within the meaning of Section 2(15) of the Act and as such, the income from securities held by the appellant would be exempt from any tax liability under Section 11 of the Act.

Whether the CIT (E) is empowered to reject the registration and consequent exemption under Sections 12AA and 80G of the Act due to non-furnishing of financials of FY 2018-19?

When the object of the institution is proved to be charitable within the meaning of Section 2(15) of the Act, further scrutiny of the financials of the appellant are not required because it is otherwise within the purview of AO to examine at the time of assessment if the appellant is entitled to exemption under Section 11 of the Act.

In the present matter, the tribunal is thus of the opinion that the CIT (E) has erred in declining the registration under Section 12 AA of the Act on the ground that financials of FY 2018-19 have not been furnished by the appellant.

Tribunal further observed that, merely on the basis of the fact that income of the appellant exempted under Section 10(23A) is not a bar to claim deduction in assessment under Section 11 of the Act, as such income is to be excluded under Section 11 of the Act.

Hence, appeal filed by the appellant is allowed directing CIT(E) to provide registration under Section 12 AA and consequent exemption under Section 80 G of the Act. [Bar Council of Delhi v. CIT (Exemption), 2020 SCC OnLine ITAT 340 , decided on 02-07-2020]

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