2022 (12) TMI 338 - AT - Income Tax

Grant of recognition u/s 80G - substance over form - assessee is also registered u/s 12AA - assessee is substantially a religious trust or not - As per AO assessee failed to substantiate genuineness of charitable activities and therefore, did not fulfil the conditions as required u/s 80G(5) - HELD THAT - In the present context given the facts when the assessee is registered u/s 12AA of the Act and when the provision of section 80G(5)(vi) of the Act has been complied with, we do not see any reason for refusing the assessee the grant of exemption u/s 80G of the Act. Department has also not brought out a case where they can prove through evidences that the assessee-trust has violated the stipulations contained in sec. 80G(5B) - revenue authorities have not demonstrated anything showing substantial expenditures of the fund received in donation by the assessee for religious purposes and whether it is exceeding the permissible limit of 5%. It has also been mentioned by the ld. CIT (Exemption) that the assessee has not provided head-wise details of various expenditure but all these details have been submitted before him and as annexed before us in the paper book. While exercising the power to reject or accord approval u/s 80G(5) the Commissioner acts as a quasi-judicial authority. Therefore, the conclusion arrived at by him is expected to be supported by valid and cogent reasons. It is also expected that he should apply his mind to the facts of each case and give reasons either to grant or refuse recognition/approval. This requirement is very much imperative on the part of the Commissioner particularly having regard to the statutory provision under which he functions. This proposition has been observed and upheld by the Hon‟ble Andhra Pradesh High Court in the case of Tirumala Tirupati Devasthanam 2001 (8) TMI 108 - ANDHRA PRADESH HIGH COURT If Trust/Institution incurs expenses for religious purposes which is inclusive and is only a small part of the income, and if the substantial work done by the trust is charitable in nature benefitting the public at large then the institution or trust has to be granted exemption u/s 80G of the Act. In the present case of the assessee, the department has not been able to make out a case through facts that the assessee is substantially a religious trust. That on examination of the facts and circumstances we set aside the order of the ld. CIT (Exemption) and direct him to grant exemption/approval u/s 80G of the Act to the assessee-trust. Grounds of appeal are allowed.

Issues Involved:
1. Rejection of the assessee's claim for recognition under Section 80G of the Income-tax Act, 1961.
2. Assessment of charitable versus religious activities of the assessee-trust.
3. Compliance with the conditions stipulated under Section 80G(5) of the Act.
4. Evaluation of the head-wise details of capital expenditure.

Detailed Analysis:

Issue 1: Rejection of the Assessee's Claim for Recognition under Section 80G

The primary grievance of the assessee was the rejection of their claim for recognition under Section 80G of the Income-tax Act, 1961. The assessee-trust had applied for approval under Section 80G(5)(vi) and provided details of its charitable activities, including running a school for poor children, a gaushala, an old-age home, and initiatives for the upliftment of the weaker sections of society. The department rejected the claim on the grounds that the trust received a donation of Rs. 13,50,00,000/- from another trust for constructing and maintaining a temple, which was not included in the objects of the assessee-trust. The department concluded that the trust failed to substantiate the genuineness of its charitable activities.

Issue 2: Assessment of Charitable versus Religious Activities

The assessee argued that the donation received was to be used for multiple purposes, including charitable activities, and not solely for religious purposes. The donation was authorized by the Joint Charity Commissioner, Pune, who directed that a portion of the funds be used for various charitable purposes, including the construction of a temple. The assessee emphasized that the temple had not yet been constructed and that they would seek necessary amendments to their trust deed if they proceeded with the construction. The department, however, maintained that the construction and maintenance of the temple constituted a religious activity, which was not aligned with the trust's stated objectives.

Issue 3: Compliance with Conditions under Section 80G(5)

The tribunal noted that the assessee-trust was already registered under Section 12AA of the Act, which implied that the Commissioner had previously satisfied himself regarding the genuineness of the trust's charitable activities. The tribunal held that once a trust is granted registration under Section 12AA, the question of whether it is established for charitable purposes should not arise again. The tribunal also referred to Section 80G(5B), which allows a trust to incur expenditure of a religious nature up to 5% of its total income without losing its eligibility for approval under Section 80G.

Issue 4: Evaluation of Head-wise Details of Capital Expenditure

The department contended that the assessee had not provided complete head-wise details of its capital expenditure for the relevant financial years. However, the assessee argued that they had submitted audited balance sheets and detailed schedules of expenditures, which were available to the department. The tribunal found that the department's claim was unsubstantiated as the necessary documents had been provided by the assessee.

Conclusion:

The tribunal concluded that the assessee-trust had complied with the conditions stipulated under Section 80G(5) of the Act and that the department had not provided sufficient evidence to demonstrate that the trust was engaged in substantial religious activities. The tribunal directed the Commissioner to grant the assessee-trust approval under Section 80G. The appeal of the assessee was allowed, and the order was pronounced on December 6, 2022.

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