2010 (8) TMI 127 - HC - Income Tax

Deduction u/s 80G - Charitable trust - registration under Section 80G - The benefit under Section 80G of the Act was coming to an end and as such the trust filed an application for renewal of registration - application was rejected by the Commissioner of Income Tax on the ground that a sum of money had not been utilized for the purposes and as such the conditions of Section 80G(5)(i) of the Act were not satisfied - Held that - It is not disputed that an agreement dated 15.3.2007 had been executed between the respondent and Kanpur Gaushala Society (the Society) to purchase an agricultural land for Rs. 1.26 crores and a sum of Rs. 8,89,895/- had been paid by the respondent towards advance. Under the agreement it was agreed that the entire amount of Rs. 1.26 crores was to be kept separate in F.D.R. in a nationalized bank for five years and was made to be utilized with the condition that in case the litigation was not decided and permission for leasing was not granted to the Society, the same would be returned. The fact that a sum of Rs.8,89,895/- was already given to the Society and in view of this it cannot be said that the accumulated amount was not spent towards charitable purposes

Summary

Issues:
Renewal of registration under Section 80G of the Income Tax Act - Rejection of application by Commissioner of Income Tax - Appeal before Income Tax Appellate Tribunal - Utilization of funds for charitable purposes - Interpretation of Section 80G(5)(i) of the Act - Agreement with Kanpur Gaushala Society - Judicial precedents on similar cases.

Analysis:
The judgment by the Allahabad High Court dealt with a case involving the renewal of registration under Section 80G of the Income Tax Act. The respondent, a charitable trust, had filed for renewal as the benefit under Section 80G was expiring. However, the Commissioner of Income Tax rejected the application citing non-utilization of a specific sum of Rs.8,89,895 for charitable purposes, thus not meeting the conditions of Section 80G(5)(i) of the Act.

The trust appealed to the Income Tax Appellate Tribunal, which ruled in their favor, stating that the sum in question had already been applied for charitable purposes and could not be deemed as not utilized for the same. The High Court noted that an agreement had been executed with Kanpur Gaushala Society for the purchase of agricultural land, with the sum in question paid as an advance. The agreement specified the conditions under which the amount was to be utilized, ensuring it was earmarked for charitable purposes.

Citing judicial precedents, the High Court highlighted similar views taken by other High Courts in cases involving the interpretation of Section 80G and the utilization of funds for charitable activities. The court found no substantial question of law in the appeal and dismissed it, affirming the Tribunal's decision. The judgment emphasized the importance of ensuring funds are utilized for the intended charitable purposes to maintain eligibility for benefits under Section 80G of the Income Tax Act.