2015 (8) TMI 17 - HC - Income Tax

Continuation of the approval granted under Section 80G(5)(vi) rejected - assessee submision that Commissioner as well as Tribunal erred in not considering the fact that assessee - Trust had not carried on any activity which was hit by proviso to Section 2(15) of the Act and reply given to the respondent indicated that donations which had been received by the assessee had been utilised for the purpose envisaged under the objects of the Trust and its fulfillment - Held that - order of rejection of renewal of recognition dated 28.11.2008 - Annexure-G is bereft of reasons. On the ground of order of rejection being not a speaking order which has been affirmed by the Tribunal in a perfunctory manner, we are of the considered view that both the orders cannot be sustained and are liable to be set aside. In view of the fact that objections came to be filed by the assessee - applicant to the rejection proposed by respondent indicating that it had taken steps to fulfill the objects of the Trust by not only constructing Samudaya Bhavana but also medical treatment said to have been given by its Mumbai Samithi apart from distribution of books to the needy, are all aspects which was required to be examined by respondent and said exercise having not been undertaken, we are of the considered view that matter requires to be remitted to the respondent for being adjudicated afresh - Decided in favour of assessee.

Issues involved:
Challenge to rejection of application for continuance of approval under Section 80G of the Income Tax Act, 1961.

Detailed Analysis:

1. Background and Registration Status:
The appellant, a society registered under the Karnataka Societies Registration Act, 1960, was granted registration under Section 12A and approval under Section 80G(5)(vi) of the Act. The approval was granted initially from 17.02.2004 to 31.03.2005 and continued until 31.03.2008. The respondent rejected the application for continuance of approval, leading to the present appeal challenging the rejection.

2. Contentions of the Appellant:
The appellant argued that the rejection was unjustified as the aims and objects of the society were fulfilled, and the charitable purpose for which it was formed was achieved. The appellant also contended that the respondent erred in not considering that the activities did not fall under the proviso to Section 2(15) of the Act. The appellant claimed that the rejection resulted in a miscarriage of justice.

3. Contentions of the Respondent:
The respondent supported the rejection, stating that the appellant had not carried out the established objectives even after several years. The respondent argued that the denial of renewal was justifiable, and the appeal should be dismissed in favor of the revenue.

4. Substantial Questions of Law:
The Court admitted the appeal to consider substantial questions of law, including the justification for denying approval under Section 80G(5)(vi) based on the construction of a building and the continuity of approval under similar circumstances. The questions also revolved around the adequacy of constructing a building for carrying out the appellant's objectives and the application of the proviso to Section 2(15) of the Act.

5. Analysis and Decision:
The Court found that the orders of rejection lacked proper reasoning and examination of the appellant's objections. The Tribunal's decision was deemed unsustainable due to the lack of substantial reasons for upholding the rejection. The Court highlighted the requirements under Rule 11AA of the Income Tax Rules, emphasizing the need for a thorough examination of the institution's activities and compliance with conditions for approval under Section 80G.

6. Court's Decision and Conclusion:
The Court allowed the appeal in favor of the appellant, remitting the matter back to the Commissioner of Income Tax for fresh adjudication. The Court directed the Commissioner to reexamine the application on merits and in accordance with the law, disregarding previous observations. The substantial questions of law were answered in favor of the appellant, emphasizing the need for a proper review of the application for continuance of approval under Section 80G.

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