2023 (9) TMI 684 - AT - Income Tax

Approval u/s 80G Denied - Real purpose to construct a building not known - no emphasis whatsoever on the objects on the basis of 12AA Registrations was accorded - Revenue submitted that the applicant generated huge resources in the name of building construction even the said building construction was to be financed by/from MPLADS and constructed by Government of Haryana, the appellant had not evidenced whether the money generated was handed over to the Government of Haryana which was to construct the building and handed over to the society - HELD THAT - PCIT found that the expenditure for the building was to be financed from MPLAD Scheme and construction was to be undertaken by the Government of Haryana till the building was handed over to the Society. Though the assessee has specifically urged a ground against the observation and the conclusion of the CIT(A) that the construction has to be undertaken by the Government of Haryana till the building was handed over to the society but the assessee has not produced any evidence/document in support of the said contention of the assessee to controvert the findings of the CIT(A). The action of the CIT(E) in relying on the agreement entered into between Government of Haryana and the appellant society and concluding that the construction was to be undertaken by the Government of Haryana to till the building was handed over to the society in accordance with law and we find no error in the said observation. Thus, we find no error or infirmity in the order of the CIT(E) in rejecting the approval u/s 80G of the Act, accordingly, Grounds of Appeal of the assessee are dismissed.

Summary

Issues involved:
The issues involved in this judgment are the denial of approval under section 80G, failure to carry out specified objects, and the construction of a building by the Government of Haryana.

Denial of Approval under Section 80G:
The appellant filed an appeal against the order of the Commissioner of Income Tax (Exemptions)-Chandigarh, rejecting the application for approval under section 80G of the Income Tax Act, 1961. The appellant argued that the Commissioner erred in concluding that the construction of the building was to be undertaken by the Government of Haryana until handed over to the society. The Departmental Representative contended that the appellant failed in its pursuit for approval under section 80G and emphasized that the funds generated were for building construction without clear evidence of utilization. The Commissioner highlighted discrepancies in the appellant's accounts and lack of expenditure towards stated objects, leading to the rejection of the approval under section 80G.

Failure to Carry Out Specified Objects:
The Commissioner observed that the appellant's main source of income was corpus donations with a specific direction for constructing a building, which was not an expressed object in the Memorandum of Association. The appellant accumulated substantial funds through donations but did not incur expenses towards the stated objects. The Commissioner concluded that the appellant failed to pursue approval under section 80G as the real purpose seemed to be building construction rather than charitable activities, as required by the Act.

Construction of Building by Government of Haryana:
The Commissioner based the denial of approval under section 80G on an agreement between the Government of Haryana and the appellant society, wherein the Government was responsible for constructing the building until handing it over to the society. The Commissioner found no error in this conclusion and dismissed the appellant's appeal. The Tribunal upheld the Commissioner's decision, noting the lack of evidence to counter the agreement's terms regarding the construction responsibility. Consequently, the Tribunal dismissed the appellant's appeal, affirming the denial of approval under section 80G.

Separate Judgment by Judges:
The judgment was delivered by Shri Yogesh Kumar U.S., Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member.