2024 (10) TMI 167 - AT - Income Tax

Rejection of approval u/s 80G - applicant accepted to have been begun its activities from 05.11.2020, whereas the application in Form No. 10AB came to be filed beyond the prescribed period of six months - HELD THAT - Application was rejected on merits i.e. on the ground that religious trusts are not eligible under section 80G(5)(iii) of the Act. But, as we are going to discuss hereinafter, reasonable opportunity of being heard was not granted to the applicant before disposal of the application, and the matter needs to be remanded. Therefore, having regard to the extension of period by CBDT vide circular No.7 dated 25.4.2024, we deem it a fit case where the application rejected deserves to be restored to its original number for fresh decision by learned CIT(E), so far as the second ground is concerned. Religious trusts are not eligible u/s 80G(5)(iii) and the applicant being a religious trust does not fall within scope of section 80G - As per section 12AB of the Act, on an application under clause (ac) sub-section 12A of the Act, Principal of Commissioner or Commissioner is empowered to pass an order registering the trust or institution for a period of 5 years after specifying about genuineness of activities of the trust or institution. Section 80G(5)(iii) of the Act provides that the institution or fund established in India, should be for a charitable purpose and the institution or fund is not expressed to be for the benefit of any particular religious community or caste. It is true that as per Explanation 3 to section 80G, charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature. To explain the objects of the trust or to explain that the same are charitable purposes and do not include any purpose the whole or substantially the whole of which is of a religious nature, the applicant trust deserved reasonable opportunity of being heard. But, as noticed above, reasonable opportunity cannot be said to have been granted to the applicant trust before the application came to be rejected by Learned CIT(E). This appeal is disposed off for statistical purposes, and the matter is remanded to Learned CIT(E) for decision of the application u/s 80G(5)(ii) of the Act afresh.

Summary

Issues:
1. Rejection of application for approval u/s 80G of the Income Tax Act, 1961 by Learned CIT(E) based on commencement of activities and eligibility of religious trusts under section 80G(5)(iii).
2. Lack of reasonable opportunity provided to the appellant trust to present its case before the rejection of the application.

Analysis:
1. The Appellate Tribunal addressed the first ground for rejection, emphasizing that the application was filed beyond the prescribed time limit, not due to non-commencement of activities by the trust. The appellant admitted to starting activities on 05.11.2020, but the application was filed late. The Tribunal noted that the time limit for filing was extended after the rejection, indicating a procedural oversight by the CIT(E). The AR mentioned a fresh application was submitted, leading the Tribunal to remand the matter for a fresh decision considering the time extension.

2. The second ground for rejection was the classification of the appellant trust as a religious trust, making it ineligible under section 80G(5)(iii). The AR argued that the trust was not given a fair chance to clarify its objectives, which were deemed religious. The Tribunal found that a show cause notice was issued shortly before the rejection, limiting the trust's ability to respond adequately. The AR highlighted the registration under section 12AB as a charitable activity, contrasting the rejection under section 80G. The Tribunal agreed that the trust deserved a proper hearing to explain its charitable nature, leading to the decision to remand the case for a fresh evaluation.

3. The Tribunal highlighted the distinction between registration under section 12AB and approval under section 80G, emphasizing the need for a charitable purpose without a predominantly religious nature. The lack of a thorough opportunity for the trust to present its case led to the decision to remand the matter to the CIT(E) for a fair assessment after affording the trust a reasonable opportunity to be heard. The appeal was disposed of for statistical purposes, ensuring a just process moving forward.

This comprehensive analysis of the judgment showcases the Tribunal's meticulous review of the grounds for rejection and the importance of providing a fair opportunity for the appellant trust to address the concerns raised by the CIT(E) before a final decision is made.