2014 (8) TMI 561 - HC - Income Tax

Court affirms Tribunal's recognition under Income Tax Act, rules Commissioner exceeded jurisdiction.

The court upheld the Tribunal's decision to grant recognition under Section 80G(5) of the Income Tax Act to the assessee trust. The court found that the ... Grant of recognition u/s 80G(5) - Whether the Tribunal is justified in law and on facts in directing to grant recognition u/s 80G(5) of the Income Tax Act to the assessee trust – Held that:- Following the decision in NN. Desai Charitable Trust Versus Commissioner Of Income-Tax [1999 (5) TMI 11 - GUJARAT High Court] - inquiry should be confined to finding out if institution satisfies prescribed conditions as mentioned in Section 80G of the Act - the Commissioner refused the application for registration u/s 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 - in the past for some period the petitioner has not applied 75 per cent of the income of the trust for the purposes of the trust, therefore, the income of the assessee was liable to be included in the taxable income and the assessee did not fulfill the condition of s. 80G(5)(i) of the Act - it cannot be said that the Tribunal has committed any error in quashing and setting aside the order passed by the Commissioner refusing to grant recognition u/s 80G(5) of the Act to the respective assessee trust – Decided against revenue. Issues Involved:1. Whether ITAT is justified in law and on facts in directing to grant recognition under Section 80G(5) of the Income Tax Act to the assessee trust.Issue-wise Detailed Analysis:1. Whether ITAT is justified in law and on facts in directing to grant recognition under Section 80G(5) of the Income Tax Act to the assessee trust:Background and Facts:- The assessee trust applied for approval under Section 80G(5) of the Income Tax Act, 1961.- The application was accompanied by the trust deed and the registration certificate.- The main objects of the trust included educational, social activities, and medical purposes.- The Assessing Officer issued a notice calling for certain details and upon inspection found that the trust failed to make expenditure to the extent of 85% of its income, which was deemed necessary under Section 80G(5) of the Act.- Consequently, the Commissioner of Income Tax, Rajkot(I) rejected the application for approval under Section 80G(5).Tribunal's Decision:- The Tribunal allowed the appeal by the assessee trust, quashed the order of the Commissioner, and directed to grant recognition under Section 80G(5).- The Tribunal relied on the decision of the Punjab and Haryana High Court in CIT vs. O.P. Jindal Global University, which held that at the time of granting approval under Section 80G, the object of the trust should be examined, and the application of funds can be examined by the Assessing Officer during assessment.Revenue's Argument:- The revenue argued that the Tribunal erred in granting recognition as the trust failed to meet the condition of expending 85% of its income, as stipulated under Section 80G(5)(i).- The revenue emphasized that the Tribunal ignored the provisions of clause (i) of subsection (5) of Section 80G.Respondent's Argument:- The respondent trust argued that the issue is covered by the decision of the Division Bench in N.N. Desai Charitable Trust vs. Commissioner of Income Tax, which held that the inquiry for certification under Section 80G should be confined to whether the institution satisfies the prescribed conditions.- It was argued that the Commissioner should not act as an Assessing Authority at the time of granting certification.Court's Analysis:- The court noted that the main objects of the trust were educational, social activities, and medical purposes.- The court referred to the decision in N.N. Desai Charitable Trust, which clarified that the inquiry for certification under Section 80G should be limited to whether the institution satisfies the prescribed conditions and should not extend to the actual assessment of income.- The court observed that the Commissioner exceeded his jurisdiction by acting as an Assessing Authority and deciding on the pending assessments.Conclusion:- The court concluded that the Tribunal did not err in quashing the Commissioner's order and directing to grant recognition under Section 80G(5) to the assessee trust.- The court agreed with the Tribunal's view and dismissed the appeals, answering the question in favor of the assessee trust and against the revenue.Final Judgment:- All the appeals were dismissed, and the Tribunal's decision to grant recognition under Section 80G(5) of the Income Tax Act to the assessee trust was upheld. No costs were awarded.