2010 (4) TMI 861 - AT - Income Tax

Issues Involved:
1. Double deduction on fixed assets and depreciation.
2. Collection of anonymous donations.
3. Expenditure on Mandir Pooja exceeding 5% of total income.
4. Application of income less than 85% for charitable purposes.
5. Corpus donations without specific directions.
6. Transparency in investment modes.
7. Authority of Commissioner in renewal of registration under section 80G.

Issue-wise Detailed Analysis:

1. Double Deduction on Fixed Assets and Depreciation:
The Commissioner of Income-tax (CIT) noted that the assessee-trust claimed double deduction by applying funds on fixed assets and also claiming depreciation on those assets. Citing the Supreme Court decision in Escorts Ltd. v. Union of India [1993] 199 ITR 43, the CIT argued that double deduction for the same business outgoings was not intended by the Legislature. However, the tribunal held that such issues are not relevant at the time of granting or renewing registration under section 80G. The tribunal emphasized that the CIT should not act as an Assessing Officer during the renewal process and should focus on whether the trust's objects and activities are charitable.

2. Collection of Anonymous Donations:
The CIT observed that the trust collected anonymous donations amounting to Rs. 6,42,800 in the financial year 2006-07, which were treated as specific donations despite the absence of donor details. These donations were liable to be taxed under section 115BBC(1)(i) of the Act. The tribunal, however, referenced the ITAT Lucknow Bench decision in Kalyanam Karoti v. CIT [2010] 123 ITD 317, stating that the Commissioner should only verify if the trust meets the conditions in section 80G(5) and not delve into the specifics of donations.

3. Expenditure on Mandir Pooja Exceeding 5% of Total Income:
The CIT noted that the trust incurred Rs. 2,40,167 on Mandir Pooja, exceeding 5% of its total income, thus violating section 80G(5). The tribunal found that the CIT incorrectly calculated the net income from Gaushala and interest income. The correct total income was Rs. 48,68,989, and the expenditure on Mandir Pooja was 4.93%, which is within the permissible limit under section 80G(5B). Therefore, the benefit of section 80G could not be denied on this ground.

4. Application of Income Less Than 85% for Charitable Purposes:
The CIT observed that the trust did not apply 85% of its income for charitable purposes in the financial year 2005-06. The tribunal held that such compliance issues are not relevant for the renewal of registration under section 80G. The focus should be on whether the trust's objects are charitable.

5. Corpus Donations Without Specific Directions:
The CIT noted that the trust received substantial corpus donations but could not produce specific directions from donors as required under section 11(1)(b). The tribunal reiterated that such issues should be addressed during assessment and not during the renewal of registration under section 80G.

6. Transparency in Investment Modes:
The CIT found that the trust opened a locker in Allahabad Bank, Brindavan, which was not transparent under section 11(5). The tribunal found no evidence that the locker contained undisclosed income and stated that the CIT's presumption was baseless. Lockers could be necessary for keeping valuables of the trust.

7. Authority of Commissioner in Renewal of Registration Under Section 80G:
The tribunal emphasized that the CIT should not act as an Assessing Officer during the renewal process. The CIT should focus on whether the trust meets the conditions specified in section 80G(5). The tribunal referenced several court decisions, including Sonepat Hindu Educational & Charitable Society v. CIT [2005] 278 ITR 262 and N.N. Desai Charitable Trust v. CIT [2000] 246 ITR 452, to support this view.

Conclusion:
The tribunal concluded that the CIT was not justified in refusing the continuation of registration under section 80G. The trust's objects and activities are charitable, and it has been registered under section 12A for 25 years. The tribunal set aside the CIT's order and directed the CIT to allow the registration under section 80G for the period applied by the assessee. The appeal filed by the assessee was allowed.

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