2022 (6) TMI 515 - AT - Income Tax

Approval of u/s 80G - approval denied as activities of the trust were not found eligible for approval - whether CIT(E) has granted registration u/s 12AA after examination genuineness of activities of trust and the registration granted has not been revoked or cancelled than it is not proper for ld. CIT(E) to reject the application of trust for benefit of exemption u/s 80G by holding that the activities of the trust were not found eligible for approval u/s 80G? - HELD THAT - The order of the Co-ordinate Bench and arguments of ld. AR of the assessee we hold that the assessee is eligible for approval of 80G of the Act since their 12AA registration is granted and continue. Even the assessment proceedings for A. Y. 2016-17 completed with out any adverse observation on the issue and the activities of the trust are in accordance with the condition prescribed. We set aside the order of ld. CIT(E) and direct ld. CIT(E) to grant an approval to the assessee u/s 80G of the Act. Thus the grounds of appeal raised by the assessee is allowed.

Summary

Issues:
1. Denial of exemption under section 80G of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemption), Bhopal.

Analysis:
The appeal was filed by the assessee challenging the order of the Commissioner of Income Tax (Exemption) denying approval under section 80G of the Income Tax Act for the assessment year 2018-19. The Commissioner observed deficiencies in the application, including the lack of justification for seeking exemption under section 80G, the surplus income generated by the Society, and discrepancies found during spot verification. The Income Tax Inspector noted discrepancies such as the absence of a signboard at the society's office and the Director's inability to produce the audited report. The Commissioner, based on these findings, denied approval under section 80G.

During the appeal, the assessee argued that they already had approval under section 12AA of the Income Tax Act and fulfilled all requirements. The absence of a signboard and surplus income should not be grounds for denial under section 80G. The assessee also cited a decision of the Punjab and Haryana High Court emphasizing that having a surplus should not be a reason to deny registration under section 80G. Additionally, a Co-ordinate Bench decision highlighted that once registration under section 12AA is granted and not revoked, it is improper to reject the application for section 80G benefits. The Co-ordinate Bench directed the Commissioner to grant approval under section 80G.

Considering the arguments and precedents cited, the Tribunal held that the assessee was eligible for approval under section 80G since they had a valid 12AA registration and no adverse observations were made in previous assessments. The Tribunal followed the Co-ordinate Bench decision and directed the Commissioner to grant approval under section 80G. As a result, the appeal of the assessee was allowed, overturning the Commissioner's decision to deny exemption under section 80G of the Income Tax Act, 1961.