2023 (4) TMI 360 - AT - Income Tax

Application u/s. 80G(5) (vi) r.w.s. 11AA rejected - genuineness of charitable activity could not be established for the reason that appellant was charging fee from the participants and most of the expenses are by way of cash - registration was issued u/s 12AA - HELD THAT - As a matter of fact for subsequent years the permission was granted showing that the genuineness of charitable activity was considered established for following years also. This all shows arbitrary exercise of the statutory power vested under the Act for passing the impugned order. On the contrary, the ld CIT(E) failed to follow or distinguish, the settled position of law that if registration was issued u/s 12AA of the Act then the natural consequence should have been to grant permission under Section 80G of the Act. As relying on BHARAT VIKAS PARISHAD MAHARANA PRATAP NYAS 2019 (2) TMI 661 - ITAT DELHI CIT(E), New Delhi is directed to grant approval to the assessee under section 80G(5)(vi) of the Income Tax Act, 1961, for the relevant year, from the date of application.

Summary

Issues:
1. Rejection of application U/s. 80G(5) (vi) of the Income Tax Act, 1961.
2. Consideration of genuineness of charitable activities.
3. Failure to follow the settled position of law regarding registration and approval under Sections 12AA and 80G.

Analysis:
1. The appeal was filed against the order rejecting the application for exemption under U/s. 80G of the Income Tax Act, 1961. The appellant, a charitable trust, had applied for approval U/s 80G (5) (VI) and registration U/s 12AA. While the registration U/s 12AA was granted, the approval U/s 80G was rejected by the Commissioner of Income Tax (Exemption). The appellant contended that since registration U/s 12AA was granted, approval U/s 80G should have been a natural consequence. The appellant reapplied for approval, which was subsequently granted for the following years. The Tribunal noted the arbitrary exercise of power by the authorities in passing the impugned order.

2. The Tribunal observed that the impugned order questioned the genuineness of charitable activities based on the collection of fees from participants and cash expenses. However, the registration U/s 12AA was granted on the same date, indicating the genuineness of activities. The Tribunal criticized the inconsistent approach of the authorities in granting registration but rejecting approval, highlighting the arbitrary exercise of statutory power.

3. The Tribunal emphasized the failure of the Commissioner of Income Tax (Exemption) to follow the settled position of law. Referring to precedents, the Tribunal noted that if registration was granted under Section 12AA, approval under Section 80G should logically follow. Citing relevant judgments, the Tribunal set aside the impugned order and directed the Commissioner to grant approval under Section 80G(5)(vi) from the date of application. The Tribunal's decision was based on the established legal principles and the need for consistency in granting approvals for charitable activities.

In conclusion, the Tribunal allowed the appeal, overturned the impugned order, and directed the grant of approval under Section 80G(5)(vi) of the Income Tax Act, 1961. The judgment highlighted the importance of following legal precedents and ensuring consistency in decision-making regarding charitable trusts' tax exemptions.