2011 (8) TMI 1322 - AT - Income Tax

ITAT Pune grants approval under section 80G, directing Commissioner to recognize assessee's eligibility.

The ITAT Pune allowed the appeal, setting aside the Commissioner's order denying approval under section 80G of the Income-tax Act. The ITAT ruled that the ... Approval under section 80G(5) - Condition in clause (i) of section 80G(5) - Registration under section 12A - Scope of inquiry under section 80G(5) - Assessment proceedings under section 13(1)(c) - Rule 11AA of the Income-tax RulesApproval under section 80G(5) - Condition in clause (i) of section 80G(5) - Registration under section 12A - Assessment proceedings under section 13(1)(c) - Scope of inquiry under section 80G(5) - Whether the Commissioner could reject the assessee's application for renewal of recognition under section 80G(5) by relying on the Assessing Officer's finding of violation of section 13(1)(c) in assessment proceedings - HELD THAT: - The Tribunal held that the enquiry under section 80G(5) is confined to whether, on its status and character, the applicant is such that its income 'would not be liable to inclusion' in total income within the meaning of clause (i) and that this prima facie enquiry does not require the Commissioner to undertake the role of an Assessing Officer and decide contested assessment issues. Relying on the reasoning in N. N. Desai (as approved by the bench) and its own precedent, the Tribunal explained that actual inclusion or exclusion of income in assessment (and any finding under section 13(1)(c) in assessment proceedings) relates to subsequent assessment proceedings and does not ipso facto preclude grant of recognition under section 80G(5) where the applicant is registered under section 12A and, on a prima facie basis, satisfies the conditions of clauses (i)-(v). The Tribunal found that the Commissioner's rejection was founded on considerations properly within assessment proceedings and thus irrelevant to the limited satisfaction required under section 80G(5) and Rule 11AA; since the Society continued to be registered under section 12A and no other objections were raised, the condition in clause (i) was fulfilled and the renewal ought to be granted. [Paras 5, 7, 8, 10, 11]The Commissioner's rejection of the application for renewal of recognition under section 80G(5) on the ground of an alleged violation of section 13(1)(c) in assessment proceedings is unsustainable; the assessee, being registered under section 12A and satisfying the prima facie conditions of section 80G(5), is entitled to renewal.Final Conclusion: The impugned order rejecting renewal of recognition under section 80G(5) is set aside and the matter is remitted with directions to grant recognition to the Society under section 80G(5) in terms of its application dated 19.6.2009. Issues Involved:1. Denial of approval under section 80G of the Income-tax Act, 1961.2. Alleged violation of section 13(1)(c) of the Income-tax Act, 1961.3. Relevance of the assessee's registration under section 12A of the Income-tax Act, 1961.4. Scope of enquiry under section 80G(5) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Denial of Approval under Section 80G:The appeal was directed against the order of the Commissioner of Income-tax-I, Pune, dated 30.12.2009, which rejected the Society's application in Form No. 10G for approval under section 80G of the Income-tax Act, 1961. The assessee, an Education Society registered in April 1969, had previously been granted approval under section 80G for the period 5.1.2001 to 31.3.2004. The application for renewal dated 19.6.2009 was scrutinized, and the Commissioner raised queries regarding charitable activities, proof of filing Form No. 10 for Financial Years 2005-06 to 2007-08, and the inclusion of fees under 'income from other sources'. The Commissioner was not satisfied with the responses and rejected the application, citing a violation of section 13(1)(c) during assessment proceedings for AY 2007-08.2. Alleged Violation of Section 13(1)(c):The Commissioner denied the approval under section 80G, stating that the assessee violated section 13(1)(c) of the Act, which led to the denial of exemption under sections 11 and 12 for AY 2007-08. The assessee argued that there was no violation of section 13(1)(c) and that the Commissioner should only prima facie appreciate the conditions prescribed in clauses (i) to (v) of section 80G(5). The assessee's appeal against the assessment order was pending before the Commissioner of Income-tax (Appeals).3. Relevance of the Assessee's Registration under Section 12A:The assessee was registered under section 12A of the Act, effective from 5.7.2001. The Hon'ble Gujarat High Court in N. N. Desai Charitable Trust v. CIT emphasized that once a trust is registered under section 12A, its income is not to be included in its total income under sections 11 or 12. The enquiry under section 80G(5) should not go beyond verifying this registration. The actual assessment of the trust and its liability to tax are matters for assessment proceedings, not for the enquiry under section 80G.4. Scope of Enquiry under Section 80G(5):The scope of enquiry under section 80G(5) involves verifying the fulfillment of conditions in clauses (i) to (v). The Hon'ble Gujarat High Court clarified that the Commissioner should not act as an Assessing Officer during this enquiry. The assessee's registration under section 12A should suffice to meet the condition in clause (i) of section 80G(5). The ITAT Pune found that the Commissioner's objection was based on irrelevant considerations related to assessment proceedings, not the conditions for approval under section 80G.Conclusion:The ITAT Pune concluded that the assessee fulfilled the conditions prescribed under clauses (i) to (v) of section 80G(5) of the Act. The impugned order of the Commissioner of Income-tax was set aside, and the Commissioner was directed to grant recognition to the assessee under section 80G(5) based on the application dated 19.6.2009. The appeal of the assessee was allowed, and the decision was pronounced in the open court on 30th August 2011.