2015 (10) TMI 2766 - AT - Income Tax

ITAT overturns Commissioner, grants 80G approval based on correct expenditure criteria

M/s Bhartiya Jan Shiksha Sewa Nyas, M/s Vidya Bharti Uttar Kshetra Versus The C.I.T. (Exemption), Chandigarh

The rejection of approval under section 80G of the Income Tax Act based on expenditure criteria was found to be incorrect by the Income Tax Appellate ... Grant of approval u/s 80G(5)(vi) - assessee is a society registered under the Society Registration Act and was granted the registration under section 12AA - HELD THAT:- We find that the finding given by the learned Commissioner of Income Tax (Exemption) that neither the assessee had spent 85% of gross receipts, nor has it made a declaration in Form No.10 is factually incorrect. In these circumstances, the order of the learned Commissioner of Income Tax (Exemption) rejecting the application under section 80G of the Act is not as per law. There is one more sound reason for quashing the said order of the Commissioner of Income Tax (Exemption) rejecting the application for approval under section 80G of the Act. The provisions of section 11(2) are not relevant for granting approval under section 80G of the Act. This aspect of granting approval under section 80G of the Act has been very aptly discussed in the order of the Chandigarh Bench of the I.T.A.T. in the case of Shri Krishna Kirpa Gaushala Samiti Vs. CIT(E) [2015 (9) TMI 1563 - ITAT CHANDIGARH] where on the issue of anonymous donation as appearing in Section 115BBC of the Act, the approval sought by the assessee under section 80G of the Act was rejected. In the present case also, the only reason given by the Commissioner of Income Tax(Exemption) is the provision of section 11(2) of the Act, which is not at all relevant for the said purpose, which otherwise is also factually incorrect. In view of the above, we direct the learned Commissioner of Income Tax (Exemption) to grant the assessee approval under section 80G of the Act. Issues: Rejection of approval under section 80G of the Income Tax Act based on expenditure criteria and relevance of section 11(2) for granting approval under section 80G.Analysis:1. Rejection based on expenditure criteria: The appeals were filed against the order of the Commissioner of Income Tax (Exemption) rejecting the approval under section 80G of the Act due to the assessee not meeting the expenditure criteria. The Commissioner relied on the fact that the assessee did not spend 85% of gross receipts for charitable purposes and did not furnish the declaration in writing as required by section 11(2) of the Act. However, during the hearing, it was revealed that the assessee had set apart the unspent portion of receipts as per Form No.10 under Rule 17 of the Income Tax Rules. The Assessing Officer's order also confirmed this, showing that the rejection was factually incorrect. The ITAT found that the rejection based on this ground was not in accordance with the law.2. Relevance of section 11(2) for granting approval under section 80G: The ITAT highlighted that the provisions of section 11(2) are not relevant for granting approval under section 80G of the Act. It referenced a previous case where it was clarified that the approval under section 80G should only be rejected if the conditions specified in clauses (i) to (v) of sub-section (5) of section 80G were not fulfilled. The ITAT emphasized that there is no provision in section 80G or its rules regarding rejection based on institutions accepting anonymous donations or the provisions of section 115BBC of the Act. Therefore, the ITAT directed the Commissioner to grant approval under section 80G to the assessee, as the rejection solely based on section 11(2) was irrelevant and incorrect.3. Similarity to a previous case: The judgment noted that the facts and circumstances of the case were similar to another case involving Bhatiya Jan Shiksha Sewa Nyas, where the findings in that case were deemed applicable with equal force. Consequently, both appeals of the assesses were allowed, and the orders were pronounced in favor of the assesses on October 27, 2015.