2016 (5) TMI 1510 - AT - Income Tax

Tribunal grants appeal, directs exemption under Income Tax Act.

Marathi Vidyan Parishad Nashik Vibhag Versus CIT-I, Nashik

The Tribunal allowed the appeal, setting aside the CIT's order rejecting the exemption claim under Section 80G of the Income Tax Act. The Tribunal ... Exemption u/s 80G - assessee is a Public Charitable Trust registered under the Bombay public Trust Act, 1950 and the Societies Registration Act, 1860 - assessee trust has incurred expenditure on its objects which is less than 85% of the total receipts and that the trust is charging fees for workshops and for laboratory activities - HELD THAT:- As perused the order the Ld. CIT denying grant of exemption u/s. 80G and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee trust is granted registration u/s.12A vide Certificate No. 12AA(1)/2014-15-503 dated 20-05-2014 by the CIT-I, Nashik. We find the Ld.CIT vide his order dated 22-05-2014 rejected the claim of exemption u/s.80G of the Act on the ground that the assessee trust has incurred expenditure on its objects which is less than 85% of the total receipts and that the trust is charging fees for workshops and for laboratory activities. From the various decisions filed by the the assessee we find exemption u/s.80G cannot be denied merely on the ground that the assessee trust has incurred expenditure on its objects which is less than 85% of the total gross receipts. We find the in the case of N.N. Desai Charitable Trust Vs. CIT [1999 (5) TMI 11 - GUJARAT HIGH COURT] has held that while granting exemption u/s.80G the authority granting approval cannot act as assessing authority. The enquiry should be confined to finding out if institution satisfies prescribed conditions or not. Actual assessment of institution would not affect claim for special deduction u/s.80G. CIT in our opinion is not justified in denying exemption u/s.80G on the ground that the assessee trust has incurred expenditure on its objects which is less than 85% of the total gross receipts and that the assessee Trust is charging fees for workshop and laboratory activities. We hold that the CIT is not justified in denying exemption u/s.80G. We accordingly set aside his order and direct him to grant exemption u/s.80G to the assessee Trust. - Decided in favour of assessee. Issues Involved:1. Rejection of exemption claim under Section 80G of the Income Tax Act, 1961.2. Examination of whether the trust fulfills the conditions laid down in Section 80G(5) of the I.T. Act.3. Consideration of the trust's expenditure on its objects being less than 85% of the total gross receipts.4. Charging of fees for workshops and laboratory activities by the trust.5. Impact of registration under Section 12A on eligibility for exemption under Section 80G.Issue-wise Detailed Analysis:1. Rejection of exemption claim under Section 80G of the Income Tax Act, 1961:The appeal was filed by the assessee against the order dated 22-05-2014 passed by the CIT-I, Nashik, which rejected the claim of exemption under Section 80G of the I.T. Act. The CIT's rejection was based on the grounds that the trust incurred expenditure on its objects which was less than 85% of the total gross receipts and that the trust charged fees for workshops and laboratory activities.2. Examination of whether the trust fulfills the conditions laid down in Section 80G(5) of the I.T. Act:The CIT conducted an enquiry through the concerned AO who reported that the trust's expenditure on objects was less than 85% of the receipts. The CIT, based on this report, concluded that the trust did not fulfill the conditions laid down in Section 80G(5) of the I.T. Act and thus rejected the exemption application.3. Consideration of the trust's expenditure on its objects being less than 85% of the total gross receipts:The CIT noted that the trust's expenditure on its objects was less than 85% of the total gross receipts for the financial years 2011-12, 2012-13, and 2013-14. The detailed year-wise expenditure was provided, showing a deficit or percentage expenditure below the 85% threshold. However, the Tribunal found that exemption under Section 80G cannot be denied merely on this ground, citing various judicial precedents.4. Charging of fees for workshops and laboratory activities by the trust:The CIT also noted that the trust charged fees for workshops and laboratory activities, which was another reason for denying the exemption. The Tribunal, however, observed that charging fees to meet expenditure for workshops and laboratory activities does not disqualify the trust from exemption under Section 80G.5. Impact of registration under Section 12A on eligibility for exemption under Section 80G:The Tribunal highlighted that once a trust is registered under Section 12A, its income from property, including donations, is not to be included in its total income under Sections 11 or 12. The enquiry under Section 80G(5) should be confined to finding out if the institution satisfies the prescribed conditions and not act as an assessing authority. The Tribunal referred to several judicial decisions, including those of the Hon'ble Punjab & Haryana High Court and the Hon'ble Gujarat High Court, which supported the view that the actual application of funds can be examined by the Assessing Officer at the time of framing the assessment and not at the stage of granting approval for exemption under Section 80G.Conclusion:The Tribunal concluded that the CIT was not justified in denying exemption under Section 80G on the grounds provided. The Tribunal set aside the CIT's order and directed the CIT to grant exemption under Section 80G to the assessee trust. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 20-05-2016.