2010 (9) TMI 776 - AT - Income Tax

Exemption under section 80G(5)(vi) of the Act - paras 29.3 to 29.7 of Board s Circular No. 5 being Explanatory circular for Finance (No. 2) Act 2009 the learned Director of IT (Exemption) should have given the said certificate for the assessment year 2010-11 onwards and not for only three assessment years - Keeping in view the principle that any circular issued by the Board which is favourable to the assessee would be binding on the Revenue it was held that Director of IT (Exemption) to modify the exemption certificate dated 29th April 2010 so as to make the same valid for the assessment year 2010-11 onwards till the same is withdrawn as per law - Appeal allowed

Summary

Issues:
- Appeal against the order allowing continuation of exemption under section 80G(5)(vi) of the Act for specific assessment years.

Analysis:
The appellant appealed against the order of the Director of IT (Exemption), Kolkata, seeking modification of the exemption certificate issued under section 80G of the Income-tax Act, 1961. The appellant contended that the certificate should be valid until cancelled, citing Board Circular No. 5 as supporting their argument. The Department Representative, however, argued that the exemption certificate's validity is as per Rule 11AA, which allows specifying the assessment years for which it is valid. The Board Circular emphasized the need for approval to be given for perpetuity, which the Revenue should follow. The Tribunal noted that favorable circulars to the assessee are binding on the Revenue. Consequently, the Tribunal directed the Director of IT (Exemption) to modify the exemption certificate to be valid from the assessment year 2010-11 onwards until lawfully withdrawn. As a result, the appeal by the assessee was allowed.

This judgment highlights the importance of adherence to circulars beneficial to the assessee, which are binding on the Revenue. It also underscores the significance of following rules and regulations in determining the validity of exemption certificates under the Income-tax Act. The decision provides clarity on the interpretation of rules and circulars in tax matters, ensuring fair treatment and compliance with legal provisions.