2013 (5) TMI 151 - AT - Income Tax

Renewal of approval u/s. 80G(5)(vi) - Trust was registered as a charitable trust u/s. 12AA of the Act - Held that - We notice that the Ld. CIT has not brought out any material to show that the assessee-Trust did not comply with any of the conditions specified in sub-section (5) of section 80G of the Act, which would make it ineligible for recognition u/s 80G of the Act - Instead, in our view, the Ld CIT has misdirected himself in discussing about the activities of museum, which are required to be examined at the assessment level - Hence, in our view, the orders passed by the Ld. CIT(A) are not in accordance with the express provisions stated in sec. 80G(5) of the Act, i.e., in our view, the Ld. CIT has not processed the applications filed by the assessee seeking renewal of recognition u/s. 80G of the Act in terms of relevant provisions of the Act. The application filed by the assessee on 17.03.2009 needs to be examined afresh and in that case, the second application filed by the assessee on 29-11-2010 shall become infructuous - We set aside both the impugned orders passed by Ld CIT and direct him to process the application filed by the assessee on 17.3.2009 in terms of the provisions of sec. 80G of the Act and take appropriate decision in accordance with the law - Appeal is allowed for statistical purposes and the other appeal of the assessee is dismissed as infructuous.

Summary

Issues:
Challenge to refusal of renewal of approval u/s. 80G(5)(vi) of the Income Tax Act by the Ld. CIT, Kottayam in response to two separate applications by the assessee.

Analysis:
1. Facts and Background: The assessee-Trust sought renewal of approval u/s. 80G of the Income Tax Act after enjoying recognition up to the assessment year 2008-09. The Ld. CIT, Kottayam rejected the renewal applications leading to two appeals before the Tribunal.

2. Issue of Justification for Refusal: The main issue was whether the Ld. CIT was justified in refusing to renew the recognition granted to the assessee u/s 80G(5)(vi) of the Act. The assessee argued that its museum activities were solely for public benefit and educational purposes, supported by positive public feedback and compliance with statutory conditions.

3. Contentions of the Parties: The Ld. AR for the assessee emphasized the charitable nature of the trust's activities, citing relevant case laws. Conversely, the Ld. DR contended that running a museum did not qualify as educational activity under sec. 2(15) of the Act.

4. Reasoning of the Ld. CIT: The Ld. CIT based the refusal on the grounds that the museum operation was akin to a business activity, not authorized by the Trust Deed. This led to a conclusion that the trust did not engage in charitable activities as required for 80G approval.

5. Judicial Analysis: The Tribunal found the Ld. CIT's reasoning flawed as collecting entrance fees for museum upkeep did not constitute a business activity. The trust was registered as a charitable trust and had previously enjoyed 80G recognition, meeting statutory requirements.

6. Legal Provisions and Compliance: The Tribunal highlighted the conditions under sec. 80G(5) for allowing deductions, noting the lack of evidence that the trust failed to comply with these conditions. The Ld. CIT's focus on museum activities was deemed irrelevant to the renewal application process.

7. Decision and Directions: The Tribunal set aside the Ld. CIT's orders, directing a fresh examination of the initial application for renewal. The second application was rendered moot, with one appeal allowed and the other dismissed as infructuous.

In conclusion, the Tribunal found in favor of the assessee, emphasizing compliance with statutory conditions and the charitable nature of the trust's activities. The judgment underscored the importance of assessing applications for renewal of tax benefits in accordance with the explicit provisions of the relevant tax laws.