2020 (1) TMI 116 - AT - Income Tax

Approval u/s 80G - Exemption u/s 11 - whether no significant activity has been started by the assessee appellant as per objects of the trust? - HELD THAT - In the case in hand, the ld. CIT (E) has not found that the activities carried out by the assessee trust are not as per the objects but it was noticed that no significant activity has been started by the assessee trust. Even otherwise, as per the statement made at bar by the ld. Counsel that the assessee trust has already started its activity, then the said objection of the ld. CIT (E) is also complied with by the assessee. As regards the requirement of the order granting registration under section 12AA to be annexed with the application for approval under section 80G(5) when the assessee has applied on the same date and the registration was granted by the ld. CIT (E) under section 12AA at the time of refusal of the approval under section 80G, then the said condition as provided under rule 11AA stands satisfied as the order of granting approval under section 12AA was already with the ld. CIT (E) at the time of passing the impugned order. The purpose and requirement of accompanying the order granting registration under section 12AA is to make available such order for verification and consideration of the competent authority at the time of considering the application for grant of approval under section 80G(5). Hence once the order of granting registration under section 12AA was already with the learned CIT (E), then the condition provided under rule 11AA is satisfied. Merely because the assessee could not undertake much activity within the short span of time, the ld. CIT (E) should not have refused the claim of approval under section 80G(5) of the Act. When there is no adverse fact found against the assessee and the assessee has claimed to have already started the activity, the matter is required to be considered afresh by the ld. CIT (E) after verification of the activities carried out by the assessee. Hence the matter is set aside to the record of the ld. CIT (E) for passing a fresh order in the light of the above observation. - Appeal of assessee allowed for statistical purposes.

Issues Involved:
1. Rejection of the application for approval under section 80G(5)(vi) of the IT Act.
2. Non-initiation of significant activity by the assessee trust as per its objects.
3. Compliance with Rule 11AA of the IT Rules regarding the submission of the order under section 12AA along with the application for approval under section 80G(5)(vi).

Issue-wise Detailed Analysis:

1. Rejection of the Application for Approval under Section 80G(5)(vi):
The primary issue in this case is the rejection of the assessee's application for approval under section 80G(5)(vi) of the IT Act by the CIT (Exemptions). The assessee argued that the charitable nature of the trust's objects was not disputed, and the registration under section 12AA(1)(b) was granted based on these objects. The denial of approval under section 80G(5) was solely due to the non-initiation of significant activities by the trust. The assessee contended that the approval should not be denied on this ground alone, citing precedents where approval under section 80G(5) was granted despite the trust not having commenced significant activities.

2. Non-initiation of Significant Activity by the Assessee Trust:
The CIT (Exemptions) denied the approval under section 80G(5)(vi) on the basis that the assessee trust had not started any significant activity as per its objects. The assessee's counsel argued that the trust had faced delays due to external factors, including the late opening of a bank account and the illness of a trustee. The counsel further stated that the trust had now commenced its activities and should be granted approval under section 80G(5). The Tribunal noted that the CIT (Exemptions) did not dispute the charitable nature of the trust's objects and had granted registration under section 12AA based on these objects. The Tribunal held that the non-start of activities should not be a reason for denial of approval when the registration under section 12AA was granted on the same set of facts.

3. Compliance with Rule 11AA of the IT Rules:
The CIT (Exemptions) also argued that the application for approval under section 80G(5) was not accompanied by the order under section 12AA, as required by Rule 11AA of the IT Rules. The Tribunal found that since the registration under section 12AA was granted on the same date as the application for approval under section 80G(5), the condition under Rule 11AA was satisfied. The Tribunal emphasized that the purpose of this requirement is to ensure that the order granting registration under section 12AA is available for verification at the time of considering the application for approval under section 80G(5).

Judgment:
The Tribunal concluded that the CIT (Exemptions) should not have denied the approval under section 80G(5) solely on the ground of non-initiation of significant activities. The Tribunal directed the CIT (Exemptions) to reconsider the application afresh, taking into account the activities carried out by the assessee trust. The matter was set aside to the CIT (Exemptions) for passing a fresh order after verification of the activities, with an opportunity of hearing to be given to the assessee.

Conclusion:
In the result, the appeal of the assessee was allowed for statistical purposes, and the case was remanded back to the CIT (Exemptions) for a fresh decision in light of the Tribunal's observations.

← Previous Next →