2010 (4) TMI 706 - AT - Income Tax

Renewal of recognition u/s. 80G of the Income-tax Act 1961 - Section 80G(5)(iv) do specify that the institution or fund has to maintain regular accounts of its expenditure - Accordingly the trust has maintained proper books of accounts and maintained records which are very much evident from the audit report and the certified copy of the balance sheet income & expenditure account receipt & payment account issued by the Chartered Accountant of the trust - trust had been enjoying recognition u/s. 80G(5)(vi) of the Act since 20.12.2005 after being granted recognition u/s. 12AA(1)(b)(i) of the Act w.e.f. 14.1.2005 - assessee trust deserve to be granted renewal of recognition under section 80G(5)of the Act - appeal of the assessee allowed

Summary

Issues:
Renewal of recognition u/s. 80G of the Income-tax Act, 1961

Analysis:

1. Grounds of Appeal:
The appeal was filed against the order rejecting the renewal of recognition u/s. 80G of the Income-tax Act, 1961. The appellant raised effective grounds challenging the decision of the Director of Income-tax (E) and contended that the institution met the necessary conditions for renewal.

2. Verification of Trust Activities:
The assessee trust, engaged in running an educational institution, applied for renewal of recognition u/s. 80G. The Director of Income-tax (E) found discrepancies in the vouchers for certain expenditures, such as computer expenses and advertisement charges, leading to the rejection of the renewal application based on non-compliance with conditions under section 80G(5)(i) to (iv) of the Act.

3. Arguments Before Tribunal:
The appellant argued that the trust's main objects were related to education and charitable activities, complying with all conditions for 80G benefits. The rejection based on missing vouchers for specific expenditures was challenged, emphasizing that it did not amount to violations of relevant sections of the Act.

4. Contentions of the Revenue:
The Revenue supported the decision of the Director of Income-tax (E), highlighting the importance of maintaining proper vouchers for expenditures to prevent misapplication of funds. It was argued that the trust's failure to produce necessary vouchers indicated a violation of section 80G(5)(iv) and rendered it ineligible for recognition.

5. Tribunal's Decision:
After reviewing the submissions and evidence, the Tribunal noted the trust's compliance with maintaining accounts and fulfilling charitable purposes. Despite minor irregularities in voucher production, the trust's activities were found to align with its objectives. The absence of some vouchers did not indicate malafide intentions or a deviation from charitable activities, leading to the Tribunal's decision to grant renewal of recognition u/s. 80G(5) of the Act.

6. Conclusion:
Considering the trust's track record, financial statements, and compliance with regulatory requirements, the Tribunal allowed the appeal and directed the grant of renewal of recognition under section 80G(5) of the Income-tax Act, 1961. The decision was made in favor of the appellant trust, emphasizing its eligibility for the benefits under the specified section.