2023 (6) TMI 872 - AT - Income Tax

Grant of approval u/s 80G (5) - Donations - scope of amended provisions of section 2(15) - claim denied as trust had utilised the public money raised through collection of fee from the students; donations from public, School bus fee etc., for the purpose of creating its own fixed assets or cash balances by way of earning profit in manner of carrying out commercial activity - as per CIT(E) real purpose of the trust is altogether different from the stated object in the memorandum of the society filed along with the statement of accounts in compliance to notice issued subsequent to the show cause notice to the assessee. HELD THAT - The Honorable Apex Court in the case of SERVANTS OF PEOPLE SOCIETY 2023 (2) TMI 535 - SUPREME COURT has observed that interpretation of section 2(15) had undergone a change, due to the decision of AHMEDABAD URBAN DEVELOPMENT AUTHORITY 2022 (11) TMI 255 - SUPREME COURT The amended definition of section 2(15) states that in course of achieving objects of general public utility, the concerned trust, society or other such organization carry on trade, commerce or business or provide service and relation thereto for consideration provided that firstly the activities of trade, commerce, or business, or connected to achievement of its object of general public utility in relation thereto, does not exceed the quantified limits that is 20% of total receipts of the previous year. Appellant trust is required to file fresh application for grant of registration u/s 2(15) and consequently, the application for approval under section 80G(5).

Summary

Issues:
The appeal challenges the rejection of the application for grant of approval under section 80G (5) of the Income Tax Act, 1961.

Grounds of Appeal:
1. The Ld. CIT(Exemptions) erred in law and facts by not giving approval under section 80(G) of the Income Tax Act, 1961.
2. The appellant reserves the right to add, alter, modify, and amend the grounds of appeal.

Summary of Judgment:
The appellant, despite multiple hearing dates, did not appear or file a written reply, indicating a lack of interest in pursuing the appeal. However, the tribunal decided to adjudicate the appeal on merits after considering the information available on records.

The appellant trust had applied for approval under section 80G (5) of the Income Tax Act, 1961, but the Ld. CIT (exemption) found discrepancies. It was observed that the trust utilized funds for creating fixed assets or cash balances through commercial activities rather than for public utility. The CIT rejected the application due to the lack of a nexus between the funds raised and the charitable purpose of the trust.

After reviewing the facts and hearing the Ld. DR, it was noted that the trust primarily operated a school and raised funds through various fees. The tribunal referred to a Supreme Court case highlighting the amended definition of section 2(15), emphasizing the need for the trust to file a fresh application for registration under the new provisions. The matter was remanded back to the Principal Commissioner for further consideration based on the amended law.

In conclusion, the appeal of the assessee trust was disposed of as discussed above, with directions for cooperation in the fresh proceedings before the Principal Commissioner of Income Tax (Exemption).

Separate Judgment by Judges:
No separate judgment was delivered by the judges in this case.