2012 (9) TMI 426 - HC - Income Tax

Court allows appeal, directs respondent to pay costs. Emphasizes charitable activities over strict accounting. Findings inconsistent with evidence.

The Court set aside the lower authorities' orders and allowed the appeal, directing the respondent to pay costs to the appellant. The Court emphasized ... Refusal to extend/continuance of Certificate of Registration under Section 80G of the Income Tax Act – alleged that on verification of the books of account, bills and vouchers produced, discrepancies were noticed – Held that:- main object should be charitable activity and not maintenance of accounts in the way the authorities want. Books of account are maintained substantially as required under law and as long as money is not spent for any other purpose other than charitable purpose, they should be granted the benefit - Unnecessarily the assessee is made to find litigation before this Court. He would have spent that time in conducting charitable activities – in favor of assessee - respondent shall pay a sum of Rs. 25,000 to the assessee towards cost of this appeal Issues:Renewal of Certificate of Registration under Section 80G of the Income Tax Act, 1961.Analysis:The case involved an appeal challenging the order passed by the Tribunal regarding the refusal to extend the Certificate of Registration under Section 80G of the Income Tax Act. The appellant, a trust registered under the Societies Registration Act, had previously been granted exemptions under Sections 12 and 80G of the Act for specific financial years. Upon expiry of the recognition under Section 80G, the appellant applied for renewal but faced discrepancies during verification by the Director of Income Tax Appeals (Exemption).The Director raised concerns about various discrepancies, including bills issued in another foundation's name, applications for scholarships addressed to a different foundation, and lack of proper evidence for purchases made. The Director, unsatisfied with the explanation provided, declined the renewal of registration. The Tribunal, while not agreeing with all findings, upheld the order on the grounds that the appellant was not carrying out charitable activities effectively.The appellant failed to prove that it was engaged in charitable activities, as the evidence suggested that another registered society was conducting the charitable work. However, the appellant demonstrated that funds were used for charitable purposes, meeting the trust's objectives. The issue of maintaining proper books of account was not the primary ground for the Director's refusal, and the appellant had provided detailed accounts and bank statements to support their expenditures.The Tribunal's findings were deemed inconsistent with the evidence on record, as there was no indication of misuse of funds for personal gain. The Court emphasized that the main objective of such provisions is to promote charitable activities, not just strict adherence to accounting standards. The authorities were reminded to support the legislative intent behind these provisions and not hinder genuine charitable efforts with unnecessary litigation.Ultimately, the Court found the lower authorities' orders unsustainable and set them aside, allowing the appeal and directing the respondent to pay costs to the appellant.