Convents under the Generalate not entitled to 12A Exemption unless a separate entity – High Court

Convents under the Generalate not entitled to 12A Exemption unless a separate entity, entitled to hold property for themselves and has absolute control of its affairs without interference from the Generalate

ABCAUS Case Law Citation:
ABCAUS 2407 (2018) 07 HC

The instant appeal was filed by the assessee against the order of the Income Tax Appellate Tribunal (ITAT) in upholding the denial exemption under Section 12A of the Income tax Act, 1961 (the Act).

The assessee was a Convent, which was under the Generalate of a Church. The constitution of the Generalate provided a specific hierarchy with the Generalate as the apex body, Provinces below the Generalate and then the Region and the last unit being the Convents, called the “House”.

The appellant was a ‘House’ coming within the constitution of the Generalate. The appellant had applied for a registration under Section 12A of the Act. However, the registration was declined by the Income Tax Commissioner. The Commissioner who considered the application, directed the Income Tax Officer to conduct an enquiry. The Income Tax Officer in his report stated that the applicant was not a separate entity, but one of the Convents under the Generalate.

Accordingly, the Income Tax Officer did not recommend the registration under Section 12A, which was accepted by the Commissioner.

The appellant went before the Tribunal, which rejected the claim of the assessee.

The asssessee filed the instant appeal before the High Court and relied on a batch of appeals where the Tribunal had directed fresh consideration with respect to various Houses, under different Congregations, who had applied for registration which were declined on the ground that there were no written instrument or constitution.

The Hon’ble High Court observed that in the present case, the Commissioner did not speak of absence of a written constitution. The case if the appellant was that the constitution of the Generalate regulates the Houses also, which come under the Generalate. The Tribunal had also found that the appellant comes under the exclusive control of the Generalate through the hierarchies as disclosed from the constitution and there could be no separate registration granted to the Convent.

The Hon’ble High Court opined that in view of the available materials, the orders of the Commissioner and the Tribunal were correct. However, there could be materials to be examined as to whether the appellant was a separate entity who was entitled to hold property for themselves and who has absolute control in its affairs without interference from the Generalate.

The Hon’ble High Court opined that a more comprehensive enquiry and reading of the constitution would be required. Therefore the High Court set aside the impugned order and remanded the case to the Commissioner to conduct a comprehensive enquiry who shall after looking at the constitution decide the issue as to whether there could be, as claimed by the appellant, status of a separate entity as distinguished and distanced from the Generalate.

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