2020 (9) TMI 960 - AT - Income Tax

Exemption u/s 11 - registration u/s 12AA and approval u/s 80G denied - assessee has not carried out any charitable activities - Whether grant of registration u/s 12AA does not automatically lead to the approval u/s 80G? - HELD THAT - CIT DR, had raised some objection to activities and sought to justify the act of the CIT exemption. In our view the order impugned before us is conspicuous silent on the carrying out of the activities by the assessee rather the order has not dealt with any of the activities carried out by the assessee. The interest of justice requires that the ld. CIT(E) should examine the documents (already on record) mentioned hereinabove and other documents which according to the assessee shows that, the assessee was involved in its own capacity of doing the charitable activity . For the purposes of granting the registration, if the CIT exemption on examination of the document satisfy that the assessee was involved in carried out a charitable activities then the CIT(E) individually as well, then the CIT exemption, shall assess the impact of carrying out of these activities and also contributing substantially to other trust for carrying out of the charitable activities in accordance with law. CIT exemption shall also examine in other attending Circumstances Like the major activities of the charitable work carried out by the other charitable institute and only part of it were carried out by the assessee by doing three activities namely i) Warne Baby Fold ii) Salaam Balaak Trust iii) Jeevan Dhara Trust. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Whether the order dated 30.08.2019 by the Commissioner of Income Tax (Exemption) was based on conjectures and incorrect facts.
2. Whether the activities of the appellant fall under the ambit of 'relief to the poor' as defined under the Act.
3. Whether the appellant's registration under section 12AA fulfills all conditions under section 80G.
4. Whether the CIT(Exemption) erred in examining the objects or activities carried out by the appellant.
5. Whether the appellant's activities were charitable in nature and genuine.
6. Whether the appellant's donations to other trusts qualify as charitable activities.
7. Whether the CIT(Exemption) was justified in denying approval under section 80G despite the appellant's registration under section 12AA.

Detailed Analysis:

1. Conjectures and Incorrect Facts:
The appellant argued that the order by the CIT(Exemption) was based on conjectures and incorrect facts. The Tribunal noted that the CIT(Exemption) had not adequately considered the evidence provided by the appellant, such as the grant of scholarships, distribution of books, and hearing aids. The Tribunal found that the CIT(Exemption) had not dealt with any of these activities in their order, indicating a lack of thorough examination.

2. Relief to the Poor:
The appellant contended that its activities, such as distributing books and hearing aids, fall under 'relief to the poor.' The Tribunal agreed that these activities are indeed charitable and should be considered under the ambit of 'relief to the poor.'

3. Registration under Section 12AA:
The appellant highlighted its registration under section 12AA and argued that it fulfills all conditions under section 80G. The Tribunal referenced the Allahabad High Court decision in Commissioner of Income Tax, Allahabad v Lok Sewa Sansthan Samiti Sonebhadra, which held that registration under section 12AA should naturally lead to approval under section 80G, barring any violations.

4. Examination of Objects or Activities:
The appellant argued that the CIT(Exemption) should not have re-examined its objects or activities, as these were already scrutinized during the registration under section 12AA. The Tribunal supported this view, citing the Hardiyal Charitable & Educational Trust v. Commissioner of Income Tax-11, Agra case, which held that the genuineness of objects should be the focus, not the activities, unless they have commenced.

5. Charitable Nature and Genuineness:
The Tribunal noted that the CIT(Exemption) failed to provide any evidence that the appellant's activities were not genuine or charitable. The Tribunal referenced the Supreme Court ruling in CIT(E) v/s Seth Vinod Kumar Somani Charitable Trust, which emphasized that the CIT(Exemption) must record a definite finding of fact regarding the misuse of funds for private purposes before denying approval under section 80G.

6. Donations to Other Trusts:
The appellant argued that donating to other registered charitable trusts is a recognized charitable activity. The Tribunal agreed, noting that the CIT(Exemption) did not provide sufficient reasons to disregard these donations as non-charitable. The Tribunal cited the Bharat Bhushan Jain Charitable Trust case, where similar donations were deemed acceptable for approval under section 80G.

7. Justification for Denial of Approval:
The Tribunal found that the CIT(Exemption) did not justify the denial of approval under section 80G adequately. The Tribunal emphasized that the CIT(Exemption) must follow the principles of natural justice and provide a reasonable opportunity for the appellant to support its claim with additional documents.

Conclusion:
The Tribunal remanded the matter back to the CIT(Exemption) for a fresh examination of the documents and activities of the appellant. The CIT(Exemption) was instructed to follow the principles of natural justice, provide a reasonable opportunity for the appellant to present its case, and decide the matter without being influenced by previous observations. The appeal was allowed for statistical purposes.

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