2015 (11) TMI 1116 - AT - Income Tax

Approval under section 80G denied - whether the presence of even one religious object in the deed would disentitle the assessee for approval under section 80G of the Act? - Held that - When the expenditure does not exceed 5 per cent. of the total income for the previous year, then such a society/institution shall be deemed to be an institution to which the provisions of section 80G would apply. The Commissioner has not examined the expenditure incurred by the assessee in the previous year. Even though the assessee claims that no expenditure was incurred exceeding 5 per cent. of the total income, the Commissioner has not examined the same. Therefore, this Tribunal is of the considered opinion that the Commissioner has to re-examine the matter afresh. Accordingly, we set aside the order of the Commissioner and the entire issue is remitted to his file. The Commissioner shall re-examine the issue in the light of the provisions of section 80G(5B) and thereafter decide the same in accordance with law, after giving reasonable opportunity to the assessee. It is made clear that in case the Commissioner decides to grant approval under section 80G of the Act and the expenditure incurred by the assessee exceeded 5 per cent. of the total income in any of the previous year, then the Commissioner is at liberty to withdraw the approval for the year in which the expenditure exceeded 5 per cent. of the total income. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Delay in filing the appeal and condonation of delay.
2. Rejection of approval under section 80G of the Income-tax Act, 1961 based on religious nature of expenditure.
3. Interpretation of section 80G(5B) regarding expenditure not exceeding 5% of total income for approval.

Analysis:
1. The appeal was filed with a delay of 12 days, and the assessee requested condonation of the delay. The Tribunal found sufficient cause for the delay and granted condonation, admitting the appeal.

2. The rejection of approval under section 80G was based on the nature of the expenditure related to establishing places of worship and prayer halls by the assessee-society. The Commissioner contended that any religious object in the deed would disentitle the assessee for approval under section 80G. However, the Tribunal noted that the Commissioner did not consider the provisions of section 80G(5)(i) which allow for religious expenditure not exceeding 5% of total income to be deemed eligible for approval.

3. The Tribunal analyzed section 80G(5B) of the Act which states that when an institution incurs expenditure not exceeding 5% of its total income of a religious nature, it shall be deemed eligible for approval under section 80G. The Tribunal observed that the Commissioner did not examine the actual expenditure incurred by the assessee in the previous year. Therefore, the Tribunal set aside the Commissioner's order and remitted the issue for re-examination. The Commissioner was directed to reconsider the matter in light of section 80G(5B) and decide accordingly, with the provision to withdraw approval if expenditure exceeded 5% of total income in any previous year.

4. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fresh examination by the Commissioner regarding the approval under section 80G. The order was pronounced on June 12, 2015, in Chennai.