2017 (9) TMI 565 - AT - Income Tax

Denial of approval u/s 80G(5)(vi) - as per revenue no charitable activities has been started by the assessee as per its objects - Held that - Given the fact that the assessee trust has started carrying out activities in terms of contribution to sports activities and books distribution which is claimed to be in consonance with its objectives, which is a principle contention raised by the Revenue while denying the approval u/s 80G, we are setting aside the matter to the file of the ld CIT(E) to examine the same afresh in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Challenge of denial of approval u/s 80G(5)(vi) of the Act based on non-commencement of charitable activities by the assessee trust.

Detailed Analysis:
The appellant trust challenged the denial of approval u/s 80G(5)(vi) of the Act by the ld. CIT(Exemptions) based on the ground that no charitable activities had commenced as per its objects. The trust came into existence on 04.08.2015 and was granted approval u/s 12AA on 24.02.2016. The appellant trust applied for approval u/s 80G(5)(vi) within two months of its establishment, but the application was rejected on 04.04.2016 by the ld. CIT(Exemptions). The appellant argued that there is no statutory requirement for a minimum level of charitable activity to be eligible for approval u/s 80G, citing judicial precedents that approval u/s 12AA does not mandate the commencement of charitable activities. The appellant contended that the denial of approval u/s 80G based on the non-commencement of activities was unjustified and not supported by law.

The appellant's representative relied on various judicial pronouncements to support their argument. They cited the case of DIT(E) vs. Meenakshi Amma Endowment Trust, where the Karnataka High Court emphasized that the commencement of charitable activities cannot be a criterion for granting approval under sections 12AA and 80G. Additionally, the case of Hemdha Medi Resources (P.) Ltd. vs. CIT(E), Jaipur was referenced to highlight the close link between approvals under sections 12AA and 80G, suggesting that approval under section 80G should not be denied once registration under section 12AA is granted, unless specific conditions under section 80G(5) are not met. The appellant also mentioned the case of Saraswathi Swetha Educational Trust vs. DIT(E) to emphasize that there is no legal restriction on applying for registrations under sections 12AA and 80G immediately upon the formation of a trust.

Furthermore, the appellant pointed out the provision of section 293C, which empowers the ld. CIT(E) to withdraw exemption if not satisfied with the extent of activities carried out by a charitable trust. The appellant argued that since the law provides a remedy for unsatisfactory activities, there was no justification for rejecting the application solely based on the non-commencement of activities.

After hearing both parties and considering the appellant's submissions regarding the commencement of activities such as contributions to sports events and book distributions aligning with the trust's objectives, the Tribunal set aside the matter for the ld. CIT(E) to re-examine the claim in accordance with the law. The appeal of the assessee was allowed for statistical purposes, indicating a favorable outcome for the appellant trust in challenging the denial of approval u/s 80G(5)(vi) based on the non-commencement of charitable activities.