2014 (1) TMI 604 - AT - Income Tax

Rejecting of application for approval u/s 80G of the Act Held that - The assessee has not spent any money for charitable activity during the previous year relevant to the assessment year 2006-07 - The assessee has spent more than 5% of the income for religious purpose - The observation/ note said to be made by the Commissioner who was holding additional charge on 17-10-2012 is contrary to the materials available on record - The assessee is not entitled for approval u/s 80G(5)(vi) of the Act. The Tribunal is of the opinion that the High Court directed the Commissioner to pass order either by granting or rejecting approval under Rule 11AA(4) or 11AA(5) of the Income-tax Rules, 1962 - Since it is a remanded matter by the High Court and direction to pass order after verifying the books of account, this Tribunal is of the considered opinion that the limitation prescribed under rule 11AA(6) shall not be applicable - The consequence of not passing the order within the prescribed time was not provided in the Act The approval was not granted Decided against assessee.

Issues Involved:
1. Rejection of application for approval under Section 80G of the Income Tax Act.
2. Verification of utilization of 95% of the income for charitable purposes.
3. Compliance with Rule 11AA of the Income Tax Rules.
4. Interpretation of judicial directions and compliance with High Court orders.

Detailed Analysis:

1. Rejection of Application for Approval under Section 80G:
The appeal was directed against the order of the Administrative Commissioner dated 29-04-2013, which rejected the application for approval under Section 80G of the Income Tax Act. The assessee had previously been granted registration under Section 12AA on 03-07-2007 and had applied for approval under Section 80G on 11-03-2008. Despite the Tribunal's earlier direction to grant approval, the Commissioner rejected the application, leading to the current appeal.

2. Verification of Utilization of 95% of the Income for Charitable Purposes:
The High Court had remanded the matter back to the Commissioner to verify whether 95% of the income was utilized for charitable purposes. The Commissioner, after examining the books of account, observed that 95% of the donations were used for charitable activities but still rejected the approval. The Commissioner handling the verification and the one passing the final order were different officers, which added complexity to the case.

3. Compliance with Rule 11AA of the Income Tax Rules:
The appellant argued that the Commissioner should have passed the order within six months from the date of application as per Rule 11AA. They cited various judgments to support the claim that if the order was not passed within this period, the registration should be deemed granted. However, the Tribunal held that since the matter was remanded by the High Court, the limitation prescribed under Rule 11AA(6) was not applicable.

4. Interpretation of Judicial Directions and Compliance with High Court Orders:
The High Court had specifically directed to verify the utilization of funds for charitable purposes. The Tribunal noted that the Commissioner could not go beyond this direction. However, the Tribunal also emphasized that the assessee must establish that 95% of the income was used for charitable purposes, which was not demonstrated satisfactorily.

Conclusion:
The Tribunal found that the assessee failed to prove that 95% of the income was used for charitable purposes. The expenditure details provided did not support the claim, and more than 5% of the income was spent on religious activities, which disqualified the trust from approval under Section 80G(5)(vi). The Tribunal confirmed the lower authority's order and dismissed the appeal.

Order:
The appeal of the assessee stands dismissed. The order was pronounced in the open court on 10th January, 2014.

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