The Income Tax Appellate Tribunal, Chennai has recently opined that the Advocates Welfare Fund constituted under the Advocates Welfare Fund Act, 2001 is a separate legal entity which is different from the Bar Council of Tamil Nadu. It was observed by the Judicial Member of the, Shri. N.R.S. Ganesan that both these entities must be registered separately for claiming exemption under s. 12AA of the Income Tax Act, 1961.
The assessee-Bar Council of Tamil Nadu is a statutory regulatory body established under Advocates Act, 1961 to regulate the profession of legal practice in India. The assessee-Bar Council of Tamil Nadu has established a Welfare Fund for thebenefit of practicing Advocates.According to the assessee,the Fund is not a legal entity. However, the Assessing Authorities assessed the income by treating the Fund as a separate legal entity.Referring to the order of the Director of Income Tax (Exemptions) dated 29.08.2011, the assessee submitted that on the basis of application filed on 25.02.2011, registration under Section 12AA of the Income-tax Act, 1961 was granted with effect from 25.02.2011.
The issue before the Tribunal was whether the Fund is entitled to exemption under section 12AA of the Act for the years 2003-04 to 2010-11.
The Department contends that though the assessee claims that Advocates’ Welfare Fund established by Bar Council of Tamil Nadu, is not an independent legal entity, the registration was granted separately to the Advocates’ Welfare Fund on the basis of application filed by the Fund itself on 25.02.2011. The Advocates’ Welfare Fund applied for Permanent Account Number and the Income Tax Department has allotted Permanent Account Number. Therefore, for all practical purposes, the Advocates’ Welfare Fund was treated as a separate legal entity.
The Tribunal analyzed the provisions of the Advocates’ Act, 1961 and Advocates Welfare Fund Act, 2001. Section 3 of Advocates Act, 1961 enables to constitute Bar Councils in the respective States. Section 4 of the Advocates Act, 1961 enables constitution of Bar Council of India. Section 5 of the Advocates Act, 1961 clearly says that every Bar Council established either under Section 3 or 4 of the Advocates Act, 1961, shall be a body corporate having perpetual succession and a common seal, with a power to acquire and hold property. Therefore, Bar Council of Tamil Nadu is a statutory body constituted under Section 3 of the Advocates Act, 1961 as claimed by the assessee.
It was further observed that as per the relevant provisions of the Advocate’s Welfare Fund Act, it is a mandatory requirement that the State Governments to appoint Trustee Committee for the purpose of administering the Fund. The office-bearer of the Bar Council of Tamil Nadu and Advocates’ Welfare Fund are totally different. Bar Council of Tamil Nadu was administered by the elected Chairman or Vice-Chairman, while Advocates’ Welfare Fund is administered by the Trustee Committee nominated by the respective State Governments. Therefore, it is obvious that Bar Council of Tamil Nadu and Advocates’ Welfare Fund are two different statutory bodies established under the respective statutory enactments, namely, the Advocates Act, 1961 and the Advocates’ Welfare Fund Act, 2001. Sub-section (2) of Section 4 of the Advocates’ Welfare Fund Act, 2001 clearly says that Trustee Committee of Advocates’ Welfare Fund shall be a body corporate having perpetual succession and common seal with power to acquire and hold and dispose of the property. Therefore, the Parliament in its wisdom made it very clear that Bar Council of Tamil Nadu is a separate legal entity and Advocates’ Welfare Fund is another legal entity.On this bais, the Tribunal opined that that the two entities have to be treated separately and the registration, if any, for claiming exemption under Section 11 of the Act has to be obtained separately and the registration obtained by the Bar Council of Tamil Nadu under Section 12AA of the Act cannot be a basis for claiming exemption under Section 11 of the Act for Advocates’ Welfare Fund. Both these entities shall obtain the necessary approval / registration under Section 12AA of the Act, separately.
The Tribunal further remanded the case to the assessing authorities for the reason that there exists some factual confusion in the orders passed by te authorities. The authorities was directed to consider the matter afresh in the light of the registration granted by the Director of Income Tax (Exemptions) on 29.08.2011 and the order that may be passed by the Director of Income Tax (Exemptions) consequent to the order of CBDT dated 27.05.2016 and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee.
Read the full text of the Judgment below.
