2023 (8) TMI 671 - AT - Income Tax

Approval u/s. 80G - Application filed by the assessee in Form no. 10AB for grant of approval u/s. 80G(5) rejected - HELD THAT - No doubt, there are clauses in the object clause in MOA viz. clause 1 and 6 , which permits the carrying on activities which are religious in nature, and the assessee case is prima-facie hit by the judgment and order of Upper Ganges Sugar Mills Limited 1997 (8) TMI 4 - SUPREME COURT but to arrive at the decision in the instant case of the assessee that these objects in MOA are wholly , or substantially wholly , of a religious nature, requires inquiry by ld. CIT(E). Thus, interest of justice will be best sub-served, if the order of ld. CIT(E) is set aside and matter is restored back to the file of ld. CIT(E) for adjudication afresh of the application filed by the assessee in Form No. 10AB on 29.09.2022 for grant of approval u/s 80G(5) , on merit in accordance with law.

Summary

Issues Involved:
1. Denial of exemption under Section 80G of the Income-tax Act, 1961.
2. Consideration of the nature of activities (charitable vs. religious).
3. Adherence to principles of natural justice and fair hearing.

Summary of Judgment:

Issue 1: Denial of Exemption under Section 80G
The appeal filed by the assessee challenges the order by the Commissioner of Income-tax (Exemption) [CIT(E)], Ahmedabad, rejecting the application for approval under Section 80G(5) of the Income-tax Act, 1961. The CIT(E) denied the exemption on the grounds that the assessee's objects included activities of a religious nature, which disqualified it from receiving approval under Section 80G(5).

Issue 2: Nature of Activities (Charitable vs. Religious)
The CIT(E) observed that the assessee's Memorandum of Association (MOA) included objects that were religious in nature, such as supporting religious place renovations. The CIT(E) cited the Supreme Court judgment in Upper Ganges Sugar Mills Ltd. v. CIT, which held that an institution with objects wholly or substantially of a religious nature does not qualify for Section 80G approval. The assessee argued that its primary activities were charitable, including medical help to animals and educational support, and that expenditure on religious activities was within the permissible limit of 5% under Section 80G(5B).

Issue 3: Principles of Natural Justice and Fair Hearing
The Tribunal noted that the CIT(E) did not provide adequate opportunity for the assessee to address the specific concerns regarding the religious nature of its activities. The CIT(E) issued multiple notices but did not clearly specify which replies were insufficient. The Tribunal emphasized the importance of adhering to principles of natural justice and fair hearing, stating that the assessee should not be condemned unheard.

Conclusion:
The Tribunal set aside the order of the CIT(E) and remanded the matter back for fresh adjudication. The CIT(E) is directed to conduct proper inquiries and provide the assessee with an opportunity to address the concerns raised. The Tribunal clarified that it had not commented on the merits of the case and that all contentions remain open. The appeal was allowed for statistical purposes, and the CIT(E) is to adjudicate the application afresh in accordance with the law.