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Issues involved: Application for renewal of exemption u/s 80G(5) of the Income Tax Act, 1961 rejected by the Director of Income Tax (Exemption), Ahmedabad.
Facts of the case: The assessee-trust applied for renewal of exemption u/s 80G(5) of the Act. The Director of Income Tax (Exemption), Ahmedabad noted advances made to three trusts without permission of the Charity Commissioner. The Chartered Accountant's audit report highlighted these advances and outstanding balances. Contentions: The assessee explained that the advances were made for the trust's objects and were old transactions. They argued that 85% of the income was applied annually, preventing accumulation u/s 11(2). Regarding section 11(1) explanation, they claimed that the advances were not considered in income computation. The trust stated that the advances were made as per their resolution and would be recovered in due course. Director's decision: The Director rejected the renewal application u/s 80G(5) due to advances made without Charity Commissioner's permission. The Director found deficiencies in the trust's activities, noting violations and lack of corrective actions. The Director was not convinced of the genuineness of the trust's activities, citing non-compliance with Rule 11AA of the IT Rules. Appeal: The assessee-trust appealed the decision. The Tribunal found that all facts related to the issue were not presented. It was unclear if the advances were from the trust's corpus or donations received. The Tribunal questioned the necessity of Charity Commissioner's approval and remanded the matter back to the Director for fresh adjudication with all relevant material. Conclusion: The appeal was allowed for statistical purposes, and the matter was sent back to the Director for further review with complete information.
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