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Issues involved: Rejection of renewal of approval u/s 80G(5)(vi) of the Income-tax Act, 1961 based on unauthorized activities and income sources of the society.
Consideration of unauthorized activities: The Commissioner of Income-tax (CIT) rejected the renewal of approval u/s 80G(5)(vi) due to the society's activities not aligning with its registered aims and objects. The CIT found that expenses incurred on unauthorized activities like granting scholarships, distributing sewing machines, and collecting various rents were not in accordance with the society's memorandum and articles of association. The CIT concluded that such unauthorized expenses disqualified the society from renewal of approval u/s 80G(5)(vi). Engagement in business activities: The CIT observed that the society was involved in unauthorized business activities such as letting out properties, publishing materials, and engaging in sales without maintaining separate books of account. The CIT determined that these activities were not authorized by the society's registered documents, leading to the denial of approval u/s 80G(5)(vi) based on non-compliance with the conditions. Legal arguments and decision: The assessee argued that the activities in question were within the charitable scope authorized by their memorandum of association. They contended that income derived from property rentals and publication activities did not constitute engaging in business, as the income was nominal compared to the expenses incurred. The Tribunal agreed with the assessee, emphasizing that the expenses on donations, scholarships, and celebrations were for charitable purposes. Since the society had been granted registration in earlier years on identical facts, the Tribunal directed the CIT to grant registration u/s 80G, as there was no violation of relevant provisions. Conclusion: The Appellate Tribunal allowed the appeal filed by the assessee, setting aside the CIT's order and directing the grant of registration u/s 80G.
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