2009 (12) TMI 676 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the order denying approval u/s 80G.
2. Predetermined decision by CIT.
3. Application of mind by CIT.
4. Reliance on the Assistant CIT's report without confronting the assessee.
5. Basis for denial of exemption due to non-construction of building.
6. Donations to another Trust as a ground for denial.
7. Furnishing of information by the assessee.

Summary:

1. Legality of the order denying approval u/s 80G:
The appellant-assessee challenged the order dated 18-6-2009 by the Commissioner of Income-tax (CIT) denying approval u/s 80G(5)(vi) of the Income-tax Act. The CIT's decision was based on the report from the Assistant CIT, which highlighted that the Trust had not completed its school building even after 13 years of registration and had donated Rs. 45 lakhs to another Trust instead of using the funds for its own construction.

2. Predetermined decision by CIT:
The assessee argued that the CIT was predetermined to decline the approval as the order was passed on 18-6-2009, even though the hearing was conducted on 19-6-2009. However, this issue was not specifically addressed in the judgment.

3. Application of mind by CIT:
The assessee contended that the CIT did not apply his mind to the facts of the case and hastily concluded his order. The Tribunal found that the CIT had examined the provisions of sub-rule (3) of Rule 11AA read with section 80G and denied the exemption based on the facts reported by the Assistant CIT.

4. Reliance on the Assistant CIT's report without confronting the assessee:
The assessee claimed that the CIT relied solely on the Assistant CIT's report dated 16-6-2009 without confronting the assessee, causing a violation of the principles of natural justice. The Tribunal dismissed this ground, noting that the facts stated in the report were not disputed by the assessee.

5. Basis for denial of exemption due to non-construction of building:
The CIT denied the exemption on the grounds that the Trust had not started any construction activity for its school building and had not engaged in any charitable activities despite receiving significant donations. The Tribunal upheld this reasoning, emphasizing that the genuineness of the activities of the institution is paramount for granting approval u/s 80G.

6. Donations to another Trust as a ground for denial:
The assessee argued that making donations to another Trust running educational institutions should not be a ground for denial of exemption. The Tribunal did not specifically address this issue but focused on the lack of charitable activities by the appellant-Trust itself.

7. Furnishing of information by the assessee:
The assessee claimed there was no default in furnishing information as the CIT conceded that details were provided during the last hearing. The Tribunal did not find this argument sufficient to overturn the CIT's decision.

Conclusion:
The Tribunal upheld the CIT's order denying approval u/s 80G, concluding that the appellant-Trust had not engaged in any genuine charitable activities in line with its stated objectives. The appeal filed by the appellant-society was dismissed.