2019 (12) TMI 1413 - AT - Income Tax

Grant of approval u/s. 80G(V)(vi) denied - evidence filed by the assessee showed that no charitable activity was carried on by the trust - application for grant of registration u/s. 12A allowed - HELD THAT - As decided in case of Bhima Foundation 2019 (9) TMI 1465 - ITAT BANGALORE Tribunal came to the conclusion that the assessee trust is newly set up and when the approval u/s. 80G is sought for and when the period between the formation of trust and examination of application of the assessee for grant of approval u/s. 80G of the Act was only a period of 5 months it is not possible for such organization to demonstrate the actual carrying of its activities. The Tribunal placed reliance on the decision of DIT(E) v. Meenakshi Amma Endowment Trust 2010 (11) TMI 853 - KARNATAKA HIGH COURT and came to the conclusion that for want of proof of activities of a trust when the trust was yet to commence its activities an application for grant of registration u/s.12A cannot be rejected. The Tribunal also placed reliance on the decision of ITAT Jaipur Bench in the case of Anand Incubation Centre v. CIT(E) 2017 (11) TMI 77 - ITAT JAIPUR wherein on identical facts approval u/s. 80G was directed to be granted. Thus we direct the CIT(E) to grant registration to the assessee u/s. 80G - Decided in favour of assessee.

Summary

Issues:
Grant of approval u/s. 80G of the Income Tax Act, 1961.

Analysis:
The judgment deals with the appeal by the assessee against the rejection of the application for approval u/s. 80G(V)(vi) of the Income Tax Act, 1961 by the Commissioner of Income-Tax (Exemptions) [CIT(E)], Bangalore. The assessee, a company established under the Companies Act, 2013, primarily focused on setting up educational institutions, hospitals, and sanatoriums. The CIT(E) had earlier granted registration to the assessee under section 12A of the Act, recognizing its charitable activities. However, the application for approval u/s. 80G was rejected by the CIT(E) citing lack of evidence of charitable activities based on financial statements and bank accounts of the trust.

During the appeal, the assessee's counsel highlighted a similar case where the Tribunal had granted approval u/s. 80G despite initial rejection by the CIT(E). The Tribunal in that case emphasized that for newly established organizations seeking approval, it may not be feasible to demonstrate ongoing charitable activities within a short period. The Tribunal referred to legal precedents and stressed that the objective of granting recognition under section 80G is to promote charitable activities and mobilize resources. The Tribunal concluded that denial of approval solely based on the absence of demonstrated activities, especially for newly formed trusts, is inappropriate.

Relying on the previous Tribunal decision and legal principles established by the Hon'ble Karnataka High Court, the Tribunal directed the CIT(E) to grant approval u/s. 80G to the assessee. The Tribunal highlighted that the CIT(E) had not specified any non-fulfillment of conditions under section 80G(5) and that the rejection based on the absence of activities was unjustified. The Tribunal's decision was based on the understanding that for newly established trusts, it might take time to initiate activities and hence premature evaluation of activity genuineness during the approval process is unwarranted.

In conclusion, the Tribunal allowed the appeal and directed the CIT(E) to grant registration to the assessee under section 80G of the Income Tax Act. The judgment emphasized the importance of considering the practical challenges faced by newly established charitable organizations in demonstrating ongoing activities within a short period after formation.