2014 (5) TMI 1193 - AT - Income Tax

Tribunal Grants Approval to Trust for Recognition Under Income-tax Act

Pujya Shri Jalarambapa Ane Matushri Virbaima Charitable Trust Versus The Commissioner of Income-tax, Rajkot

The Tribunal set aside the Commissioner's order rejecting the application for recognition under Section 80G(5) of the Income-tax Act by the ... Recognition u/s 80G(5) - relevance of object of a trust - stage of registration and for exemption under Section 80G - charitable activity u/s 2(15) - HELD THAT:- Stated object of the trust is required to be examined. Whether the funds are properly applied or not, can be examined by the Assessing Officer at the time of framing the assessment.” Hon’ble Punjab & Haryana High Court in the case of CIT v. O.P. Jindal Global University [2013 (5) TMI 364 - PUNJAB & HARYANA HIGH COURT] held that at the time of granting approval for exemption u/s 80G, object of the trust is required to be examined and application of funds can be examined by Assessing Officer at the time of framing assessment. - Decided in favour of assessee Issues:1. Rejection of application seeking recognition u/s 80G(5) of the Income-tax Act, 1961 by the Commissioner of Income-tax, Rajkot-III, Rajkot.2. Interpretation of provisions under Section 11(2) of the Act regarding the utilization of income for charitable purposes.3. Consideration of legal aspects related to the approval under Section 80G(5) of the IT Act.4. Examination of the role of the Assessing Officer in assessing the application of funds in the context of granting approval for exemption u/s 80G.Issue 1: Rejection of application seeking recognition u/s 80G(5):The appeal was filed by an assessee-trust against the order of the Commissioner of Income-tax, Rajkot-III, Rajkot, rejecting the application for recognition u/s 80G(5) of the Income-tax Act. The rejection was based on the trust's failure to spend 85% of its expenditure in specific financial years. The Commissioner's decision was challenged by the assessee-trust on various grounds, asserting that they deserved approval under Section 80G(5).Issue 2: Interpretation of provisions under Section 11(2):The Commissioner's decision was primarily based on the non-utilization of 85% of the trust's income towards its objects, as required by Section 11(2) of the Act. The trust had accumulated funds for a specific project, but failed to provide sufficient documentation to justify the non-utilization. The rejection was supported by the argument that the trust did not comply with the conditions specified under Section 11(2), leading to the denial of recognition u/s 80G(5).Issue 3: Legal aspects related to approval under Section 80G(5):During the appeal hearing, the Authorized Representative for the assessee-trust cited relevant judgments, including one from the Hon'ble Punjab & Haryana High Court, emphasizing that the object of the trust should be the primary focus during the approval process under Section 80G. The argument was centered on the idea that the application of funds could be examined during the assessment by the Assessing Officer, not at the stage of granting approval for exemption u/s 80G.Issue 4: Assessing Officer's role in assessing application of funds:The Assessing Officer's role in evaluating the application of funds was highlighted during the appeal. The contention was that the examination of fund application should occur during the assessment proceedings, as per legal precedents. The Tribunal referred to the judgment of the Hon'ble Punjab & Haryana High Court to support the argument that the object of the trust should be the primary consideration during the approval process, rather than the immediate utilization of funds.In conclusion, the Tribunal set aside the Commissioner's order and directed the grant of recognition u/s 80G(5) to the assessee-trust, emphasizing the importance of focusing on the trust's objectives during the approval process and leaving the assessment of fund application to the Assessing Officer at a later stage.