2019 (4) TMI 833 - AT - Income Tax

ITAT emphasizes fair assessment process for section 80G recognition, sets aside CIT(E)'s rejection

The ITAT, Bangalore, allowed the appeal for statistical purposes, emphasizing the importance of aligning rejection reasons with legal requirements and ... Grant of recognition u/s 80G - grant of registration u/s 12AA - rejection of recognition as the trust has not provided details regarding future projects of renovation / improvement of the campus or any other related object of the Trust that are intended to be undertaken. Hence the necessity for donation does not arise - HELD THAT:- Reasons cited by the CIT(E) for rejection of recognition; not being the requirements mandated by the provisions of the Act, cannot be the basis for rejection of the assessee’s application. It is for the assessee to determine when which of its activities in furtherance of its objects are to be taken up and when there is a requirement for donations in this regard. Grant of approval / recognition under section 80G of the Act can act as a catalyst to encourage prospective donors to look at the intended activities / objects and possibly provide financial support through donations / contributions. Strangely, in the case on hand, on the very next day i.e., 30.01.2018, the CIT(E) has granted the assessee-trust registration under section 12AA of the Act vide order dated 30.01.2018; ostensibly, after examination of the assessee’s objects, etc., which the CIT has categorized as “Advancement of any other object of general public utility”. Following the decision of Indic Science Research Trust [2018 (7) TMI 1902 - ITAT BANGALORE] we accordingly set aside the impugned order of the CIT(E) dated 29.01.2018 passed under section 80G(5)(iv) of the Act and restore the matter to the file of the CIT(E) to examine the matter afresh in the light of his order granting the assessee registration under section 12AA of the Act and our observations hereinabove - Decided in favour of assessee for statistical purposes. Issues:1. Rejection of application for recognition under section 80G of the Income Tax Act, 1961.2. Grant of registration under section 12AA of the Act on the same day as the application for recognition under section 80G.Issue 1: Rejection of application for recognition under section 80G:The appeal was against the rejection of the assessee's application for recognition under section 80G of the Income Tax Act by the CIT(Exemption), Bangalore. The rejection was based on the grounds that the trust did not provide details regarding future projects of renovation or improvement of the campus, leading to the conclusion that the necessity for donations did not arise. The assessee contended that the rejection was arbitrary and not in line with Rule 11AA(5) of the Income Tax Rules, 1962. The CIT(E) failed to recognize that the trust's objects, including education and medical assistance, aligned with the provisions of section 80G, making it eligible for recognition.Issue 2: Grant of registration under section 12AA:Interestingly, the CIT(E) granted the assessee registration under section 12AA of the Act on the very next day after rejecting the application for recognition under section 80G. The registration was granted based on the trust's objects and establishment for charitable purposes. The assessee argued that since registration under section 12AA was granted, it indicated that the CIT(E) had verified the trust's objects and charitable nature. The CIT(E) had rejected the application for registration citing the lack of details on future projects, which the assessee argued was not a legal requirement for applying for recognition under section 80G.Judgment:The ITAT, Bangalore, considered the arguments presented by both parties and reviewed the material on record. It found that the reasons cited by the CIT(E) for rejecting the application for recognition under section 80G were not mandated by the provisions of the Act. The ITAT emphasized that it was the prerogative of the assessee to determine when to undertake activities in furtherance of its objects and seek donations accordingly. The granting of recognition under section 80G could encourage donors to support the trust's activities. Given the granting of registration under section 12AA and the nature of the trust's objects, the ITAT set aside the CIT(E)'s order and directed a fresh examination of the matter in light of the registration granted. The CIT(E) was instructed to provide the assessee with a fair opportunity to present submissions and details before making a decision. As a result, the assessee's appeal was allowed for statistical purposes.This judgment highlights the importance of aligning the reasons for rejection with the legal requirements and ensuring a fair assessment process for recognition under section 80G of the Income Tax Act. The ITAT's decision emphasizes the need for consistency and proper evaluation of trust objects while considering applications for registration and recognition under different sections of the Act.