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2018 (12) TMI 699 - HC - Income TaxCharitable activity - approval u/s 80G(5) - as per revenue the applicant has not commenced any charitable activity as per its objects in last three years - ITAT allowing approval - Held that - According to us, an assessee can neither be expected to spend higher amount than its income nor can it be expected to elongate its feet beyond its blanket. The amount of ₹ 41,000/-, which the respondent Trust has spent during the period of three years cannot be said to be insufficient, considering its income/receipts for the corresponding period. In the present facts, it was absolutely erroneous on the part of the Commissioner to infer that the Trust has failed to carry out its objects. An appraisal of the scheme of Section 80G and Rule 11AA, more particularly sub-rule (4) thereof clearly suggests that an application of the Trust for grant of approval under Section 80G(5)(vi) of the Act can be turned down only if the trust fails to carry out its objects and/or violates the conditions encapsulated in Clause (i) to (v) of Section 80G(5) of the Act of 1961. Neither the Commissioner (Exemption) has recorded any finding nor the counsel for the Revenue has brought to fore, any breach of the conditions enumerated in clause (i) to (v) of Section 80G(5) of the Act; which is a precursor for refusal of the approval u/s 80G. Appellant has neither pointed out any statutory provision nor has he cited any precedent, which provides or rules that in case the amount spent by a trust is insignificant, its request for approval under Section 80G of the Act deserves to be rejected. - Decided in favour of assessee.
Issues:
1. Legality of allowing approval under Section 80G(5) despite no charitable activities by the trust. Analysis: The appeal before the High Court questioned the legality of the Income Tax Appellate Tribunal's order allowing approval under Section 80G(5) of the Income Tax Act, despite the trust not commencing any charitable activities in the last three years. The trust's application for approval was initially rejected by the Commissioner of Income Tax (Exemption) on the grounds of lack of significant charitable activities. The Tribunal, however, overturned this decision based on the trust's bank interest earnings and donations made to another exempt trust. The appellant argued that granting approval in such cases would defeat the purpose of Section 80G. The High Court, after considering the arguments, upheld the Tribunal's decision, emphasizing that the trust's spending of Rs. 41,000 over three years was reasonable given its income. The court found no error in the Tribunal's judgment and dismissed the appeal. The High Court's analysis centered on the provisions of Section 80G(5) of the Income Tax Act and Rule 11AA, which outline the conditions for approval of trusts. The court highlighted that rejection of approval can only occur if the trust fails to carry out its objects or violates specific conditions of Section 80G(5). In this case, neither the Commissioner nor the Revenue demonstrated any breaches of the specified conditions, which are prerequisites for disapproval under Section 80G. The court noted that the appellant failed to cite any legal provision or precedent supporting rejection of approval based on the insignificance of the amount spent by a trust. The judgment emphasized that a trust cannot be expected to spend beyond its means or engage in activities beyond its financial capacity. The court found the trust's expenditure of Rs. 41,000 over three years to be reasonable considering its income. It criticized the Commissioner's erroneous inference that the trust failed to fulfill its objects. Ultimately, the High Court dismissed the appeal, concluding that no legal error or substantial question of law was present in the case.
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