2019 (11) TMI 1538 - AT - Income Tax

Grant of exemption u/s 80G(5)(vi) - appellant institution is involved in educational activities that are charitable in nature or not? - Whether exemption u/s 80G(5)(vi) cannot be denied to an institution for not having substantial activity at its initial stages? - HELD THAT - As per this income and expenditure account up to 31.03.2018, it appears that no activity was carried out except incurring some administrative expenses. But still we feel that in the interest of justice, the matter shall go back to the file of ld. CIT(E) for fresh decision and hence, we set aside the order of ld. CIT(E) and restore the matter back to the file of ld. CIT(E) for fresh decision with the direction that the assessee should furnish the income and expenditure account and balance sheet for the year ended 31.03.2019 and for the current year up to 31.10.2019 or a date closure to the date when it is submitted before CIT-E and bring other evidence on record in support of assessee s claim that charitable activities are carried out by the assessee and after considering the same, ld. CIT(E) should pass necessary order as per law after providing reasonable opportunity of being heard to the assessee - Appeal filed by the assessee is allowed for statistical purposes.

Issues:
1. Denial of exemption u/s 80G(5)(vi) of the IT Act to the assessee by ld. CIT(E).
2. Failure to appreciate the charitable nature of educational activities conducted by the appellant institution.
3. Denial of exemption based on absence of substantial activities and newly formed status of the institution.
4. Disallowance of exemption u/s 80G(5)(vi) of the Act.
5. Allegations of excessive, arbitrary, and unreasonable disallowance.
6. Lack of opportunity provided to the appellant for a fair hearing.

Analysis:
1. The appeal was filed against the order of ld. CIT(E) denying exemption u/s 80G(5)(vi) of the IT Act to the assessee. The grounds raised by the appellant included contentions regarding the manner of passing the order, failure to recognize the charitable nature of educational activities, and the assertion that exemption cannot be denied solely based on the absence of substantial activities, especially for a newly formed institution.

2. The ld. AR of the assessee argued that although the trust was established in 2017, the appellant had engaged in educational activities of a charitable nature. The income and expenditure account for the year ended 31.03.2018 showed donations received and expenses incurred. However, the subsequent account for 31.03.2019 was not available. The Tribunal decided to remand the matter to the ld. CIT(E) for a fresh decision, directing the appellant to provide updated financial statements and evidence supporting their charitable activities for proper consideration.

3. The Tribunal acknowledged that while the initial records indicated limited activities, it was essential for justice to allow the appellant an opportunity to present current financial data and other evidence to support their claim of charitable activities. The order of ld. CIT(E) was set aside, and the matter was remanded for a fresh decision with specific instructions to consider the updated financial information and evidence before passing a new order.

4. The Tribunal emphasized that it made no judgment on the merits of the case but focused on ensuring a fair opportunity for the appellant to present their case adequately. The appeal was allowed for statistical purposes, indicating that the decision was based on procedural grounds rather than a substantive assessment of the exemption claim under section 80G(5)(vi) of the IT Act.

In conclusion, the Tribunal's decision highlighted the importance of providing a fair hearing and considering updated evidence before making determinations on exemptions under the IT Act. The remand for a fresh decision aimed to ensure that all relevant information was considered before reaching a final conclusion on the appellant's eligibility for exemption.

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