2021 (6) TMI 809 - AT - Income Tax

Exemption u/s 80G - assessee trust is religious in nature in exclusion to other activities - HELD THAT - Whole conclusion derived on a shaky ground is damp squib in the absence of any definite fact in this regard. Consequently, the second plea raised on behalf of the assessee that certain expenditure tabulated in page 3 of the CIT(E)'s order fall outside the ambit of religious activity is not being examined at this stage. No such plea has been dealt with by CIT(E). If the plea raised on behalf of the assessee having regard to the nature of expenses is found to be true, the threshold limit of incurred expenditure not exceeding 5% of its total income as stipulated u/s 80G(5B) will not be breached and therefore the adverse inference drawn against the assessee trust would not be sustainable in law. The order of the CIT(E) dated 19.06.2018 is set aside and the entire matter is restored back to the file of the CIT(E)/Competent Authority for de novo consideration in the light of facts available on record as well as fresh facts that may come to the light or pointed out to him by the assessee trust. It shall be open to the assessee trust to place all arguments and evidences in corroboration, as may be deemed necessary, in support of its application for approval 80G pending before the Competent Authority. Pertinent here to observe that the fair opportunity shall be granted to the assessee trust before coming to the conclusion as directed. Competent Authority shall make every possible endeavor to dispose of the application for approval u/s 80G in question within 3 months from the date of service of this order. The assessee trust shall extend full co-operation in speedy disposal of the matter without any demur. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Denial of registration under s. 80G(5) of the Income Tax Act based on exceeding 5% expenditure for religious purposes, lack of documentary evidence for genuineness of activities, denial of proper opportunity before disposal of application.

Analysis:

1. The appeal was filed against the order denying registration under s. 80G(5) of the Income Tax Act due to the trust's expenditure on religious activities exceeding the permissible limit of 5% of total income. The Commissioner observed a lack of documentary evidence to establish the genuineness of the trust's activities and their alignment with its stated objectives. Consequently, the denial was based on non-compliance with the requirements of law for approval under Section 80G(5) of the Act.

2. The assessee contended that the Commissioner's decision was flawed as it was based on a fundamental mistake regarding the nature of the trust's activities, which was later corrected in a corrigendum. The assessee argued that certain expenses, such as Mandir Rasoda expenses, Mandir Nibhav expenses, etc., were not religious in nature based on judicial precedents. The assessee urged for a reevaluation of the factual position and approval under s. 80G of the Act.

3. The Tribunal noted that the Commissioner's conclusion was based on the premise that the trust was religious in nature, which was contradicted by the subsequent corrigendum. As the initial assumption was disproved, the entire basis of the adverse decision was undermined. The Tribunal directed a fresh consideration by the Competent Authority, emphasizing the need for a fair opportunity for the assessee to present arguments and evidence. The Competent Authority was instructed to decide on the approval under s. 80G within three months, with the assessee's cooperation.

4. Ultimately, the Tribunal allowed the appeal for statistical purposes, setting aside the Commissioner's order and remanding the matter for reevaluation. The decision highlighted the importance of a proper assessment based on factual accuracy and adherence to legal requirements, ensuring a fair process for the assessee in seeking approval under s. 80G of the Income Tax Act.