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2014 (11) TMI 1165 - HC - Income TaxRecognition under Section 80G(5) - proof of charitable activities - examination of extent and nature of activities - Held that - It is well settled position of law that at the time of granting approval under Section 80G of the Act, what is to be examined is the object of the trust and so far as the aspect of income is concerned, same can be very well examined by the AO at the time of framing assessment. However, in the case on hand, the assessee-Trust was refused recognition only on the ground that the assessee- Trust had not spent 85 per cent of the amount towards the objects of the Trust. The Tribunal, while passing the impugned order, relied on a decision in CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST 2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT wherein held that at the stage of registration under Section 12AA of the Act, the extent and nature of activities are not required to be examined and the same is required to be examined in assessment proceedings. We are of the opinion that the Tribunal committed no error in issuing direction to grant recognition to the Respondent-Trust under Section 80G(5) of the Act. - Decided in favour of assessee
Issues Involved:
1. Whether the ITAT is justified in directing recognition under Section 80G(5) of the Income Tax Act to the assessee Trust. Detailed Analysis: Issue 1: Justification of ITAT in Granting Recognition under Section 80G(5): Facts of the Case: The Respondent-Trust, created in 2002, applied for recognition under Section 80G(5) of the Income Tax Act, 1961, on 13.09.2013. The application was rejected by the appellant-Revenue on the grounds that the Trust failed to spend 85% of its income for the assessment years 2010-11, 2011-12, and 2012-13. The Respondent-Trust's appeal to the CIT(A) was dismissed, leading to an appeal before the ITAT, which then allowed the appeal in favor of the Trust. Legal Question: The primary legal question raised was whether the ITAT was justified in law and on facts in directing recognition under Section 80G(5) of the Income Tax Act to the assessee Trust. Court's Analysis: The court referred to a previous decision in Tax Appeal No. 306 of 2014, where it was established that the inquiry for certification under Section 80G should be confined to whether the institution satisfies the prescribed conditions mentioned in the section. The court noted that the main object of the trust as per the trust deed includes educational, social activities, and medical purposes. Previous Precedents: The court cited the Division Bench's decision in the case of N.N. Desai Charitable Trust, which clarified that the inquiry should focus on whether the institution satisfies the prescribed conditions under Section 80G. The court emphasized that the CIT had overstepped by refusing the application based on the Trust's past failure to apply 75% of its income for the purposes of the trust. Legal Provisions: The court highlighted that Section 11(1) relates to giving deductions for donations to eligible institutions and that the eligibility of the donation for deduction should be considered at the time of making the donation, not based on future assessments. Tribunal's Decision: The ITAT had relied on the decision of the Punjab & Haryana High Court in "CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST" and similar views from the Gujarat High Court, which held that the extent and nature of activities should be examined during assessment proceedings, not at the stage of registration under Section 12AA. Court's Conclusion: The court concluded that the Tribunal did not err in directing the Commissioner to grant recognition under Section 80G(5) of the Act. The refusal based solely on the Trust not spending 85% of its income was not justified. The court reiterated that the assessment of income should be done by the AO during the framing of assessment, not at the time of granting approval under Section 80G. Final Judgment: The issue was resolved in favor of the assessee and against the revenue. The appeal was dismissed with no order as to costs.
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