2019 (9) TMI 945 - AT - Income Tax

Grant of approval u/s 80G - approval denied as the assessee had incurred only ₹ 6,000/- for charitable activities such as distribution of stationary items Bottles and Tiffin boxes for orphan boys - applicant was engaged in charitable activities by way of distribution of stationary for the new terms for orphaned girls in a Child Care institution for girls (NGO), and by way of giving of Bottles and Tiffin Boxes for orphaned boys in a Child Care institution for Boys (NGO) - HELD THAT - Grounds on which approval under section 80G of the Income Tax Act can be denied to an applicant are specified in Rule 11AA (5) of I.T. Rules which refers to the conditions laid down in clauses (i) to (v) of sub section 5 of section 80G of I.T. Act. Nowhere it is the case of the ld. CIT(E) that any of the conditions laid down in clauses (i) to (v) of section 80G(5) of the I.T. Act are not fulfilled. It is also nowhere the case of the ld. CIT(E) that objects of the applicant trust are not charitable. On perusal of the trust deed, already reproduced in foregoing paragraph (B) of this order, we find that the trust is expressly declared to be a public charitable trust in paragraph (6) of the trust deed. It is nowhere the case of the ld. CIT(E) that the applicant did not comply with procedural requirements prescribed under sub-Rules (1), (2) and (3) of Rule 11AA of I.T. Rules. Moreover, in view of the foregoing paragraph (C.1) of this order, we find that further documents or information called for by the ld. CIT(E) were provided by the applicant trust. When the applicant has limited financial resources (₹ 19,000/- in this case), the mere fact that the applicant has not spent substantial amount for charitable work cannot be held against the assessee so far as the approval under section 80G of the Income Tax Act is concerned. Unless the learned CIT(E) expresses his satisfaction that one or more conditions laid down in Clauses (i) to (v) of Section 80G(5) of Income Tax Act are not fulfilled; the learned CIT(E) is required to grant approval under section 80G of I.T. Act, when the applicant has complied with procedural requirements prescribed under sub-Rules (1), (2) and (3) of Rule 11AA of I.T. Rules. We are of the view that the learned CIT(E) erred in denying approval under section 80G - Decided in favour of assessee.

Issues Involved:
1. Rejection of application for approval under section 80G of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemptions), Delhi.
2. Compliance with procedural requirements under section 80G and Rule 11AA of the Income Tax Rules, 1962.
3. Evaluation of charitable activities and financial resources of the applicant trust.

Issue-wise Detailed Analysis:

1. Rejection of Application for Approval under Section 80G:
The applicant, M/s Just be Foundation, appealed against the order dated 27th April 2018 by the Commissioner of Income Tax (Exemptions), Delhi, which rejected their application for approval under section 80G of the Income Tax Act, 1961. The primary ground of appeal was that the CIT(E) erred in rejecting the application and that the order was arbitrary, misconceived, erroneous, and unjust.

2. Compliance with Procedural Requirements:
The applicant trust was constituted by a trust deed dated 27th June 2017 and filed separate applications in Form Nos. 10A and 10G on 11th October 2017 for registration under section 12AA and approval under section 80G, respectively. The CIT(E) granted registration under section 12AA but denied approval under section 80G. The CIT(E) noted that the applicant had not established sufficient charitable activities, having only spent ?6,000 on charitable activities by 12th April 2018. Despite this, the applicant complied with procedural requirements, including submitting financial statements and other necessary documents.

3. Evaluation of Charitable Activities and Financial Resources:
The applicant argued that limited financial resources constrained their ability to spend more on charitable activities. At the time of the CIT(E)’s decision, the applicant had only ?19,000 in total funds, of which ?6,000 had been spent on charitable activities. The applicant contended that the denial of section 80G approval hindered their ability to obtain donations. The ITAT noted that the CIT(E) did not dispute the genuineness of the trust's activities or its compliance with procedural requirements.

Judgment:
The ITAT examined the statutory provisions under Rule 11AA of the Income Tax Rules, 1962, and section 80G(5) of the Income Tax Act. It found that the CIT(E) did not express dissatisfaction regarding any conditions laid down in clauses (i) to (v) of section 80G(5). The ITAT concluded that the mere fact of limited expenditure on charitable activities due to constrained financial resources should not be held against the applicant. The CIT(E) was required to grant approval under section 80G if the applicant complied with procedural requirements and the conditions of section 80G(5).

Conclusion:
The ITAT set aside the order of the CIT(E) dated 27th April 2018, directing the CIT(E) to grant approval under section 80G(5) to the applicant. The appeal of the assessee was allowed, and the order was pronounced in the open court on 17th September 2019.

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