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TMI Blog2015 (1) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... X APPEAL NO. 1309 of 2014 - - - Dated:- 2-12-2014 - MR. KS JHAVERI AND MR. K.J.THAKER, JJ. FOR THE APPELLANT : MR PRANAV G DESAI, ADVOCATE JUDGEMENT Per: K S Jhaveri: 1. By way of this appeal, the appellant has challenged the judgment and order dated 12.8.2014 passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot in ITA No. 454/Rjt/2013 - approval u/s. 80G(5). 2. The facts of the present case are that the assessee-Trust has made an application, in form No. 10G for approval u/s. 80G(5) of the IT Act, which was received by the appellant on 17.4.2013. The form submitted by the assessee- Trust is also accompanied with the zerox copy of the trust deed and registration certificate dated 12.1.2012. The main objects of the trust as per the trust deed are educational activities. In order to verify the application, the trust was asked to explain as to how its activities are in accordance with its objects prescribed in the Memorandum of Association as well as to produce books of account, relevant vouchers, donation book and minutes book in original on 3.10.2013. In response to the same, the assessee-trust produced the details. It was submitted that the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted any error in quashing and setting aside the order passed by the Commissioner rejecting the application made by the assessee trust seeking approval under Section 80G(5) of the Act and has erred in directing Commissioner to grant recognition under Section 80G(5) of the Act? As such issued involved in the present case is now not res integra in view of the decision of the Division Bench in the case of N.N.Desai Charitable Trust (supra). While considering the certification of institution for the purpose of Section 80G, the Division Bench has specifically observed and held that inquiry should be confined to finding out if institution satisfies prescribed conditions as mentioned in Section 80G of the Act. In the aforesaid case also the Commissioner refused the application for registration under Section 80G(5) of the Act on the ground that in the past for some period the petitioner had not applied 75% of the income of the trust for the purpose of trust. While considering the aforesaid and the scope of the inquiry at the time of recognition under Section 80G(5) of the Act by the appropriate authority, the Division Bench has observed and held as under: From the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a donor to satisfy an ITO independently about the eligibility of donation made by him for deduction. It was in order to keep a check on an inquiry into such details which may not be possible for every donor to harness and make good a claim which otherwise he is legitimately entitled to make, and also to relieve ITO to hold such enquiry in respect of donations made to such institution at different levels and to avoid possibility of different conclusions reached by different officers in relation to donations made to the same fund or institution, to simplify the procedure, the provision was made for recognising, what was, a prevailing practice by making a statutory provision in that regard. It is also to be noticed that whether the income of an institution or fund would ultimately be liable to inclusion in its total income at the close of assessment year or not cannot be determined at the time of making of donation. The eligibility of the donation for deduction has to be considered with reference to the point of time at which donation is made and not with respect of the time in future depending on assessment of the donee. That is where the use of the verb in future tense 'would&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the donor to claim deduction depends on the eligibility of the donee to claim exemption of its income on the date when donation is made. Examining from this angle, we find that for applicability of ss. 11 and 12, what is required is that such trust must have moved an application for registration under s. 12A and registered for that purpose. Once a trust is registered under s. 12A, its income from property, which includes donations whether covered under s. 11(1) (d) or under s. 12 such donations are deemed to be income from property, is not to be included in its total income under s. 11 or s. 12. The equity under s. 80G(5) cannot go beyond that. A perusal of s. 11 and s. 12 would disclose that income from property held for charitable or religious purposes under a trust is not included in the total income of the previous year of the persons in receipt of the income where any such income has accumulated or set apart for application to such purposes in India to the extent to which the income so accumulated or set apart is not in excess of 25 per cent of the income from such property. In clause (d) of subs.(1) of s. 11 income in the form of voluntary contributions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments, in our opinion, exceeded his jurisdiction while considering the application for approval. He, as a matter of fact, stepped into the jurisdiction of the AO, decided upon the claim of the assessee in respect of its ssessment of income then pending and acted as if he was the AO deciding upon the assessment of the trust. While dwelling on the merits of pending assessment he failed to consider that upto 31st March, 1998, the trust has already enjoyed approval and the donors who had already made donations to it would be entitled to such benefit notwithstanding the fate of assessment of the trust. The actual assessment of the trust and its actual liability to tax in accordance with provisions of s. 11 and 12 and 12A has no bearing on the claim of the donors for what benefit approval is accorded. Explanation 2 to s. 80G(5) which tells in no uncertain terms that a deduction to which the assessee is entitled in respect of donation made to an institution or fund to which subs. (5) applies shall not be denied merely on either or both the following grounds, namely, that any part of income of the institution or fund has become chargeable to tax due to noncompliance with any of the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of condition under s. 80G(5)(i). That extends to eligibility to exemption under various provisions of the IT Act referred to in that subsection, but not to actual assessment which depends on fulfillment of further conditions by the eligible institutions, trusts or funds. In none of these cases inquiry of the CIT under s. 80G(5)(vi) extend to the actual computation of income under the assessment that is likely to be framed. We see no reason that such exercise can be taken in respect of a trust which is claiming exemption not under s. 10 but under s. 11 and 12 of the Act, once the CIT finds that the person who is claiming approval is the assessee who claimed his income not liable to be included in taxable income under s. 11 or 12. The enquiry relates to whether it is registered under s. 12A, whether it is a trust wholly for charitable purposes or religious purposes, and whether income received by it is liable to be considered under s. 11, but it does not go beyond that to examine as an AO whether the income received by it at the close of any particular year or years was or was not actually be included in taxable income in the past. This consideration must be whether the income r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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