2011 (3) TMI 121 - AT - Income Tax

Registration u/s 12AA and approval under sec. 80G - Explanation 3 to sub-sec.(5C) of sec. 80G of the Act, it clearly says the charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature - A reading of the object clause of the assessee trust , would not in any way show that its purpose was in whole or substantially in whole, of religious nature - Assessee had by itself put a limitation for spending on religious activity, if at all it was spent for that purpose in future - Sub-rule (4) of Rule 11B mentions that the approval given under sec.80G would be only for specific years mentioned and the approving authority had the discretion to grant or not to grant a renewal periodically based on applications were put up for this by the assessee - Sub-sec.(3) of sec.12AA of the Act, it gives power to the Commissioner to withdraw registration given under sec.12AA of the Act if the activities of the institution or trust were not as per its objects. Held that the assessee was eligible for registration under sec.12AA as well as approval under sec. 80G of the Act, and these were unjustly denied without taking the totality of the circumstances and objects of the assessee - Quash the order of the DIT(E) and direct him to grant registration under sec. 12AA and approval sought by the assessee under sec. 80G of the Act - Hence, assessee s appeals are allowed.

Summary

Issues:
Challenge to denial of registration under sec. 12AA and approval under clause (v) of sub-sec. (5) to Sec. 80G of the Income-tax Act, 1961.

Analysis:
The assessee appealed against the order of the Director of Income-tax (Exemptions) denying registration under sec. 12AA and approval under sec. 80G due to an object clause in the trust deed allowing funds for religious activities. The Director contended that a trust seeking sec. 80G approval should not have any religious object. The assessee argued that its objects were charitable, with a restriction limiting religious spending to 5% of total income. The dispute centered on whether the trust's objects were connected to religious activities.

The Appellate Tribunal considered the trust's objects, which were predominantly charitable except for the clause allowing funds for religious activities. The Tribunal analyzed the conditions for approval under sec. 80G, emphasizing that the trust had met all requirements except for the religious spending clause. It highlighted the need to satisfy conditions laid down in sub-sec. (5) of sec. 80G, focusing on clauses related to income, charitable purpose, and regular accounts maintenance.

The Tribunal harmoniously interpreted the relevant clauses of sec. 80G, emphasizing that mentioning religious activities in one clause did not render the trust non-charitable, especially when other clauses were purely charitable. It noted that the trust did not benefit any particular religious community, and the limited religious spending did not make it non-charitable. The Tribunal invoked the non-obstante clause in sub-sec. (5B) to support its interpretation.

The Tribunal concluded that the denial of registration and approval was unjust, as the trust was eligible based on its overall charitable nature and the limited religious spending clause. It highlighted the authorities' power to grant, withdraw, or extend registration and approval, directing the Director to grant registration under sec. 12AA and approval under sec. 80G to the assessee. The Tribunal allowed the assessee's appeals, overturning the Director's decision.

In summary, the Tribunal's detailed analysis focused on the charitable nature of the trust's objects, the conditions for sec. 80G approval, and the interpretation of clauses related to religious activities. The decision emphasized the trust's overall charitable intent and the limited religious spending provision, ultimately ruling in favor of the assessee.