2012 (4) TMI 284 - HC - Income Tax

Registration u/s 80G assessee being religious institution, claims that it is engaged in charitable activities as well, thus, entitled to registration u/s 80G(5B) application rejected by Commissioner Tribunal held entitlement of registration - Held that - Assessee is entitled to one more opportunity to produce the accounts before the Commissioner to establish that 95% of the income is utilized for charitable purposes during the year for which registration is sought. We, restore the matter to the Commissioner for reconsideration based on accounts and evidence produced.

Summary

Issues:
1. Entitlement to registration under Section 80G(5)(vi) of the Income Tax Act.
2. Requirement of charitable activities for registration.
3. Disposal of application and verification of income utilization for charitable purposes.

Analysis:

The High Court of Kerala heard an appeal filed by the Revenue challenging the Tribunal's decision granting registration under Section 80G(5)(vi) of the Income Tax Act to the respondent. The respondent, a religious institution claiming engagement in charitable activities, had its application for registration rejected by the Commissioner citing lack of proof of charitable activities in the submitted accounts. The Court emphasized that registration under Section 80G(5B) mandates 95% income utilization for charitable purposes, a criterion necessitating proof before the Commissioner. The Revenue contended that delay in application disposal does not imply entitlement for registration. The Tribunal, though acknowledging this, erroneously granted registration without sufficient evidence. The Court ruled in favor of the Revenue, allowing the appeal, vacating the Tribunal and Commissioner's orders, and remanding the matter to the Commissioner for reevaluation based on verified accounts to establish the requisite income utilization for charitable activities. The Commissioner was directed to issue a reasoned order either granting or rejecting registration, ensuring the assessee's right to be heard before any adverse decision.

In conclusion, the High Court's decision clarifies the stringent requirements for registration under Section 80G(5B) of the Income Tax Act, emphasizing the need for thorough verification of income utilization for charitable purposes. The judgment underscores the importance of providing substantiated evidence to support claims of charitable engagement, highlighting the procedural fairness in reconsidering applications and issuing reasoned orders.