2010 (3) TMI 722 - AT - Income Tax

Non-renewal of approval under section 80G of the Income-tax Act, 1961 - assessee-trust running a school and a computer centre and also running an old-age home - The other objection taken by the Director (Exemptions) is that the assessee trust is not registered under the A.P. Charitable and Hindu Religious Institutions and Endowment Act, 1987, and therefore, the assessee has violated the law of the land. - Held that - the mere fact that the assessee Trust is not registered under the provisions of the said Act, shall not render the assessee Trust as a non-charitable one. - matter restored to the file of D(E) for necessary action.

Summary

Issues:
1. Non-renewal of approval under section 80G of the Income-tax Act, 1961.

Analysis:
The appeal was against the order of the Director of Income-tax (Exemptions), Hyderabad, regarding the non-renewal of approval under section 80G of the Income-tax Act, 1961. The grounds of appeal centered around the issue of the non-renewal of approval. The assessee argued that the old-age home run by the trust was not a trade activity, emphasizing that some inmates were admitted for free and nominal fees were charged to others to cover expenses, not for profit. The Director of Income-tax (Exemptions) had refused renewal mainly due to the perceived trade nature of the old-age home and the trust's lack of registration under the A.P. Charitable and Hindu Religious Institutions and Endowment Act, 1987.

The Departmental Representative opposed the submissions, arguing that the trust's activities fell under the proviso to section 2(15) of the Income-tax Act, as inmates contributed fees. It was also highlighted that the trust was not registered under the A.P. Charitable & Hindu Religious Institutions Endowment Act, 1987, indicating a violation of the law. The Tribunal considered the changing societal landscape and the nature of the old-age home activities. It was noted that the intention behind maintaining the old-age home was crucial in determining whether it was philanthropic or for profit. After examining the fee details, the Tribunal found that the trust operated the old-age home without a profit motive, as fees charged were nominal and only covered partial expenses. The Tribunal held the trust to be charitable.

Regarding the non-registration issue, the Tribunal referred to a previous decision and concluded that the absence of registration did not render the trust non-charitable. The Tribunal set aside the Director's order and directed a fresh decision on the renewal application under section 80G, instructing cooperation between the assessee and the Department. The Director was mandated to decide on the renewal within three months. The appeal was allowed for statistical purposes.