2025 (4) TMI 850 - AT - Income Tax

Rejecting the application for registration u/s 80G(5)(i) - alleged failure of the Trust to provide necessary details and justify the genuineness of its charitable activities - HELD THAT - We find that the ITAT has set aside the issue of rejection u/s 12A to the file of the CIT(E) for fresh adjudication. We are therefore of the considered opinion that as the issue of registration u/s 80G being coterminous with the issue of registration u/s 12A the issue u/s 80G should also be set aside to the file of the CIT(E) for consideration afresh. CIT(E) shall afford reasonable opportunity to the assessee and examine the evidences filed by the assessee to adjudicate the issue of registration u/s 80G. Assessee are allowed for statistical purposes.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the Commissioner of Income Tax (Exemption) [CIT(E)] erred in rejecting the application for registration under section 80G(5)(i) of the Income Tax Act, 1961, due to the alleged failure of the Trust to provide necessary details and justify the genuineness of its charitable activities.

2. Whether the CIT(E) correctly determined that the Trust's activities were not for the benefit of society at large, based on the Trust's financial statements and the nature of expenses reported.

3. Whether the CIT(E) was justified in concluding that the Trust did not accept donations from outside sources and that its activities were not sufficiently supported by evidence.

4. Whether the CIT(E) appropriately evaluated the evidence, including photographs and other submissions, presented by the Trust regarding its activities.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of Application for Registration under Section 80G(5)(i)

The relevant legal framework involves section 80G of the Income Tax Act, which provides tax deductions for donations to certain charitable institutions. The CIT(E) rejected the application for registration, citing a lack of necessary details and justification for the Trust's charitable activities.

The Court's interpretation focused on the procedural aspects, noting that the Tribunal had previously set aside a related issue under section 12A for fresh adjudication. This indicated a need for a comprehensive reevaluation of the Trust's eligibility for registration under section 80G.

Key evidence included the Trust's financial statements and the absence of supporting documentation for claimed expenses. The Court found that the CIT(E) had not sufficiently considered the Trust's submissions, warranting a remand for further examination.

Issue 2: Determination of Activities Benefiting Society at Large

The CIT(E) concluded that the Trust's activities did not benefit society at large, based on the Trust Deed and financial records. The original Trust Deed focused on promoting the Nanchahal family, while a supplementary deed attempted to broaden the scope.

The Court noted the need for the CIT(E) to reassess the Trust's activities, considering both the original and supplementary deeds, and to evaluate whether the activities genuinely served a broader societal purpose.

Issue 3: Acceptance of Donations and Evidence of Activities

The CIT(E) observed that the Trust did not receive external donations and questioned the authenticity of its activities. The Trust argued that it relied on internal donations and provided facilities like a library for societal benefit.

The Court emphasized the importance of examining the evidence provided by the Trust, including photographs and documentation of activities, to determine the legitimacy and scope of its charitable undertakings.

Issue 4: Evaluation of Evidence Submitted by the Trust

The Trust submitted photographs and other evidence to support its claims of conducting charitable activities. The CIT(E) was criticized for not adequately considering this evidence.

The Court directed the CIT(E) to provide a reasonable opportunity for the Trust to present its evidence and to conduct a thorough evaluation of the submissions to make an informed decision on the registration application.

SIGNIFICANT HOLDINGS

The Court held that the issues concerning registration under section 80G are closely linked to those under section 12A, which had already been remanded for fresh adjudication. Therefore, the registration issue under section 80G should also be reconsidered by the CIT(E).

Verbatim Quote: "We are, therefore, of the considered opinion that as the issue of registration u/s 80G being coterminous with the issue of registration u/s 12A of the Act, the issue u/s 80G should also be set aside to the file of the ld. CIT(E) for consideration afresh."

The core principle established is the necessity for a comprehensive and fair evaluation of the Trust's activities and evidence when determining eligibility for registration under section 80G.

The final determination was to allow the appeal for statistical purposes, remanding the case to the CIT(E) for a fresh assessment of the Trust's application for registration, ensuring due consideration of all submitted evidence and arguments.

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