2018 (10) TMI 1384 - HC - Income Tax

Grant of approval u/s 80G (5)(vi) - Procedure for registration - Tribunal took into consideration the fact that the assessee-society has already been granted registration u/s 12AA of the Act and its activities have been found to be charitable thus allowed approval u/s 80G (5)(vi) - Held that - It is pertinent to note that while granting registration under Section 12AA of the Act, Commissioner of Income Tax, Faridabad considered the fact that the assessee-society was engaged in providing training of art and painting to under privileged children. It was further held that raising of funds from sale of art work was only incidental to main activity of the appellant. The Tribunal noted the fact that CIT(E) had not raised any question regarding the genuineness of the activity of the assessee-society. No doubt registration under Section 12AA of the Act by itself would not entitle the assessee for approval under Section 80G of the Act but in the absence of any dispute regarding the aim and objects of the assessee Society, denial of approval under Section 80G of the Act cannot be sustained. Appellant has neither been able to show that the view taken by the Tribunal is erroneous nor produce any material on record to show that the view taken by the Tribunal is legally unsustainable. - decided against revenue

Summary

Issues:
1. Interpretation of Section 80G approval under the Income Tax Act
2. Validity of rejection of application under Section 80G(5)(vi)
3. Consideration of 12AA registration for approval under Section 80G(5)
4. Allegation of perversity in the Tribunal's order

Issue 1: Interpretation of Section 80G approval under the Income Tax Act

The appeal involved a dispute regarding the interpretation of Section 80G(5)(vi) of the Income Tax Act, which pertains to deductions for donations to charitable institutions. The Tribunal allowed the appeal of the assessee-society, directing the Commissioner of Income Tax (Exemption) to grant approval under Section 80G(5)(vi) of the Act. The Tribunal considered the activities of the society, which included providing training in art and painting to underprivileged children, and found that the raising of funds from the sale of artwork was incidental to the main charitable activity. The Tribunal emphasized the relevance of Section 12AA registration, which was granted based on the charitable nature of the society's activities. The Tribunal's decision highlighted the importance of genuine charitable activities for approval under Section 80G.

Issue 2: Validity of rejection of application under Section 80G(5)(vi)

The Commissioner of Income Tax (Exemption) had rejected the application of the assessee-society under Section 80G(5)(vi) on the grounds that the society was primarily engaged in the sale of artwork, which was deemed as not charitable. The Commissioner also raised concerns about the intermingling of donations and proceeds from art sales, questioning the genuineness of the charitable nature of the society's activities. However, the Tribunal found that the rejection lacked valid reasons and noted that the society had submitted a list of donors with their names and addresses. The Tribunal concluded that the rejection was unfounded, especially considering the society's registration under Section 12AA and the charitable nature of its activities.

Issue 3: Consideration of 12AA registration for approval under Section 80G(5)

The Tribunal highlighted the significance of the society's registration under Section 12AA of the Act, which was granted after a detailed scrutiny of the charitable nature of its activities. The Tribunal emphasized that the registration under Section 12AA alone does not automatically entitle an entity to approval under Section 80G. However, in this case, the Tribunal found that since there was no dispute regarding the charitable nature of the society's activities, denial of approval under Section 80G was not justified. The Tribunal's decision underscored the importance of aligning the assessment of charitable activities under Section 12AA with the approval process under Section 80G(5)(vi).

Issue 4: Allegation of perversity in the Tribunal's order

The revenue contended that the Tribunal's order was contrary to the evidence and material on record, alleging perversity in the decision. However, the Tribunal's findings indicated that the rejection of the society's application under Section 80G(5)(vi) lacked valid reasons and failed to consider the genuine charitable nature of the society's activities. The Tribunal's detailed analysis of the facts and its reliance on the society's registration under Section 12AA demonstrated a thorough consideration of the case. Ultimately, the Tribunal dismissed the appeal, concluding that no substantial question of law arose from the Tribunal's decision.

This detailed analysis of the judgment highlights the key issues involved in the appeal and provides a comprehensive overview of the Tribunal's decision and its implications under the Income Tax Act.