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

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 Tribunal (ITAT). The Commissioner's decision was deemed factually incorrect as the assessee had set apart the unspent portion of receipts in accordance with the rules. Additionally, the ITAT clarified that section 11(2) is not relevant for granting approval under section 80G, directing the Commissioner to grant approval to the assessee. The outcome favored the assesses, similar to a previous case, with the orders pronounced in their favor on October 27, 2015.

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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.

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