2022 (10) TMI 981 - AT - Income Tax

Assessment of trust - Registration u/s 80G - provision in ITA which permits withdrawal / cancellation of section 80G certificate / order - whether the Ld. PCIT is empowered to accord approval sought for by the assessee under section 80G subject to the conditions to be complied with by the assessee trust ? - HELD THAT - Compliance of the conditions for section 11 12 of the Act by the assessee is to be examined by the Assessing Office (AO) during the assessment proceedings. The role of Ld. PCIT while according registration and approval under section 12A 80G is only to make himself satisfied about the genuineness of the activities to be carried out by the assessee trust and compliance of such requirement of any other law for the time being in force by the trust or institution material to achieve its object and then to accord the registration and approval. Moreover, assessee in this case has applied for approval under section 80G of the Act in form No.10AC as explained in column six of the impugned order i.e. 11-Clause (i) of first proviso to sub-section (5) of section 80G. Had the assessee moved to the PCIT under clause II III of proviso 2 to section 80G then he would have been empowered to impose the condition. When in the instant case assessee has come up under clause I of sub section v of section 80G, no such condition can be imposed by the Ld. PCIT. So we are of the considered view that impugned order passed by the Ld. PCIT is not sustainable to the extent of imposing conditions in para 10(a) to (j) of the impugned order, in the eyes of law. Consequently, approval granted by the Ld. PCIT under section 80G of the Act to the assessee is made absolute sans conditions laid down in para 10 of the impugned order. Hence, both the appeals filed by the assessee are allowed.

Summary

Issues involved:
1. Whether the Principal Commissioner of Income Tax (PCIT) has the power to impose conditions on the approval granted under section 80G of the Income Tax Act, 1961.

Detailed Analysis:
1. The appellants, two charitable trusts, challenged the orders passed by the PCIT granting registration under section 80G of the Income Tax Act, 1961, for the assessment years 2022-23 to 2026-27. The primary contention was that the PCIT erred in imposing conditions on the approval, arguing that there is no provision in the ITA allowing for conditional registration. The trusts sought to set aside the orders based on this issue.

2. The key issue for determination in both appeals was whether the PCIT had the authority to grant approval under section 80G subject to conditions imposed on the assessee trust. The PCIT had attached several conditions to the approval, including requirements related to maintaining accounts, issuing donation certificates, and complying with various provisions of the Income Tax Act.

3. The Tribunal analyzed the provisions of the Income Tax Act and emphasized that the role of the PCIT is to ensure the genuineness of the activities of the trust seeking registration and approval under sections 12A and 80G. The Tribunal noted that compliance with the conditions of sections 11 and 12 of the Act is to be verified by the Assessing Officer during assessment proceedings, not by the PCIT at the time of granting approval under section 80G.

4. The Tribunal further highlighted that the PCIT's power to impose conditions on approvals under section 80G is limited by the specific provisions invoked by the assessee. In this case, since the assessee applied under a particular clause of section 80G, the PCIT did not have the authority to impose conditions on the approval. Therefore, the Tribunal held that the conditions imposed by the PCIT were not legally sustainable.

5. As a result, the Tribunal allowed the appeals filed by the trusts, setting aside the conditions imposed by the PCIT on the approval granted under section 80G. The approval was made absolute without the conditions specified in the impugned order, emphasizing the limited power of the PCIT in imposing such conditions under the relevant provisions of the Income Tax Act.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented, and the Tribunal's decision based on the legal provisions and principles applied in the case.