2012 (3) TMI 280 - AT - Income Tax

Approval under section 80G - request was rejected by the DIT(E) as the trust deed contains object clause that objects are not confined to India alone and can be conducted outside Indian Territory - contention by the assessee has not taken up any activities outside India and the said clause r of the objects clause-3 merely remained on paper and was never implemented - assessee has further submitted that it is charitable institution registered under section 12AA of the Act - as a precautionary measure, the Trust passed a resolution amending the clause r and also made an application addressed to the DIT(E) requesting for permission to amend clause r of the objects clause No.3.2 - Held that - In the present case it is clear that all the conditions laid down in Rule 11AA i.e. condition laid down in sub-clauses (i) to (v) of sub-section (5) of section 80G are fulfilled. When the assessee trust was granted registration under section 12AA, it is a testimony to the fact that the trust is established for charitable purposes - Once the condition laid down in Rule 11AA as also in sub-clauses (i) to (v) of sub-section (5) of section 80G are complied with, the trust is, eligible for registration under section 80G(5)(vi) of the Act - the assessee has already made amendment to the trust deed amending Clause 3.2 - no objection to grant approval appeal of assessee allowed

Summary

Issues Involved:
1. Denial of approval under section 80G of the Income-tax Act.
2. Compliance with conditions specified in section 80G(5) of the Income-tax Act.
3. Impact of the trust's object clause allowing activities outside India.
4. Relevance of registration under section 12AA to approval under section 80G.

Detailed Analysis:

1. Denial of approval under section 80G of the Income-tax Act:
The primary issue is the denial of the assessee's request for approval under section 80G of the Income-tax Act by the DIT (Exemptions), Hyderabad. The denial was based on the trust deed containing an object clause that allowed activities outside India. The assessee argued that this clause did not contravene section 80G(5) and that all activities were confined to India. They also amended the clause to restrict activities to India and requested the DIT(E) to reconsider.

2. Compliance with conditions specified in section 80G(5) of the Income-tax Act:
The assessee contended that they met all conditions specified in clauses (i) to (v) of section 80G(5). The conditions include that the trust must be established in India for charitable purposes, must not benefit any particular religious community or caste, must maintain regular accounts, and must be constituted as a public charitable trust or registered under relevant acts. The tribunal noted that the DIT(E) did not dispute compliance with these conditions and that the trust was registered under section 12AA, indicating it was established for charitable purposes.

3. Impact of the trust's object clause allowing activities outside India:
The DIT(E) denied approval under section 80G because the trust deed allowed activities outside India. The assessee argued that this clause did not violate section 80G(5) and that no activities were conducted outside India. They also amended the clause to restrict activities to India. The tribunal found that the amended clause removed any objection and directed the DIT(E) to reconsider the approval in light of the amendment.

4. Relevance of registration under section 12AA to approval under section 80G:
The tribunal emphasized that registration under section 12AA is significant proof of the trust being established for charitable purposes. Citing judicial precedents, the tribunal noted that approval under section 80G should not be denied on technicalities if the trust's objects are charitable. The tribunal referenced cases like Sonepat Hindu Educational & Charitable Society v. CIT and N.N. Desai Charitable Trust v. CIT, which support the view that compliance with section 80G(5) conditions should suffice for approval.

Conclusion:
The tribunal concluded that the assessee met all conditions specified in section 80G(5) and had amended the object clause to restrict activities to India. Therefore, the denial of approval under section 80G by the DIT(E) was not justified. The tribunal directed the DIT(E) to reconsider the approval in light of the amendment and the compliance with section 80G(5) conditions. The appeal filed by the assessee was allowed.