2019 (3) TMI 907 - AT - Income Tax

Grant of registration u/s 12AA and recognition u/s 80G - Charitable activity or not - main objection by the CIT(E) to grant of recognition u/s 80G was that the assessee trust has not carried out any noticeable activity till formation of the Trust; and therefore, it was not a fit case for grant of recognition under section 80G - HELD THAT - What is significant / noticeable activity is very subjective and cannot be the basis for rejection of the assessee s application. It is for the assessee to determine which of its activities in furtherance of its objects are to be taken up initially. Grant of approval / recognition under section 80G can act as a catalyst to encourage prospective donors to look at the intended activities / objects and possibly provide financial support through donations / contributions. In the case on hand, the CIT(E) has subsequently granted the assessee-trust registration under section 12AA of the Act vide order dated 29.08.2018; ostensibly, after examination of the assessee s objects, etc., which the CIT has categorized as Advancement of any other object of general public utility - restore the matter to the file of the CIT(E) to examine the matter afresh in the light of his subsequent order granting the assessee registration under section 12AA - Assessee s appeal allowed for statistical purposes.

Summary

Issues:
1. Rejection of application for recognition under section 80G of the Income Tax Act, 1961.
2. Consideration of noticeable activities by the assessee trust.
3. Dismissal of application by CIT(Exemptions) and subsequent appeal by the assessee.
4. Grant of registration under section 12AA and rejection under section 80G.

Analysis:

Issue 1: Rejection of application for recognition under section 80G
The appeal was against the order of the CIT(Exemptions) rejecting the assessee's application for recognition under section 80G of the Income Tax Act, 1961. The CIT(E) dismissed the application after considering the details furnished by the assessee trust in response to the clarifications sought. The grounds of appeal raised by the assessee included errors in the order passed by the CIT(E) and failure to properly consider the evidence on record. The assessee contended that it had fulfilled all conditions for recognition under section 80G, and the rejection was unjustified.

Issue 2: Consideration of noticeable activities
The main objection raised by the CIT(E) for rejecting the recognition under section 80G was the lack of noticeable activities by the assessee trust until the formation of the trust. The CIT(E) believed that this absence of significant activity made the trust ineligible for recognition under section 80G. However, the Tribunal found this criterion to be subjective and not a valid basis for rejection. It emphasized that the decision on which activities to undertake initially should be left to the assessee. Recognition under section 80G could attract potential donors to support the trust's objectives financially.

Issue 3: Dismissal of application and subsequent appeal
The appeal before the Tribunal challenged the CIT(E)'s order dated 20.08.2018. The assessee argued that since registration under section 12AA was granted, the trust's objects and establishment for charitable purposes were already verified. Therefore, the CIT(E) should also grant recognition under section 80G. The Tribunal considered the arguments of both parties and examined the material on record, including judicial precedents cited.

Issue 4: Grant of registration under section 12AA and rejection under section 80G
The Tribunal noted that the CIT(E) had granted the assessee trust registration under section 12AA of the Act but rejected the application for recognition under section 80G. Given this discrepancy and the subsequent grant of registration under section 12AA, the Tribunal set aside the CIT(E)'s order rejecting recognition under section 80G. The matter was remanded to the CIT(E) for fresh examination in light of the registration under section 12AA and the observations made by the Tribunal. The CIT(E) was directed to provide the assessee with a reasonable opportunity to be heard before making a decision.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, emphasizing the need for a fair reconsideration of the application for recognition under section 80G.