2019 (6) TMI 476 - AT - Income Tax

Tribunal grants appeal, upholds trust's tax exemption eligibility under Income Tax Act, setting aside Director's order.

Khagol Mandal Versus Director of Income Tax (Exemption), Mumbai

The Tribunal allowed the appeal, condoning the delay in filing due to valid reasons, and directed the continuation of recognition under Section 80G for ... Condonation of delay of 324 days - on account of illness of one, Shri Sameer Kadam, Trustee of the assessee-trust during the relevant period - HELD THAT:- It is a settled proposition that it is not the length of the delay, but the quality of the reasons for delay, which shall prevail in order to adjudicate whether a condonation of delay is merited. The Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. [1987 (2) TMI 61 - SUPREME COURT] held that the substantive cause of justice should prevail over technical considerations, while dealing with the condonation of delay applications. Therefore we deem it fit and proper to condone the delay in filing of the appeal. Recognition u/s 80G - charitable activity of not? - Assessee-trust was granted registration as a ‘charitable institution’ u/s 12A - whether the Director was justified in denying the continuation of recognition u/s 80G ? - As per the Director, the assessee has not spent any money towards the objects of the Trust - HELD THAT:- The said objection of director is quite otiose to the requirements which are required to be evaluated by the Director at the stage of considering application u/s 80G(5). Some of the germane issues in the present case which clearly stand out are as follows; that the assessee continues to be a charitable institution u/s 12A - assessee has been regularly filing its return of income and claiming exemption u/ss 11/12 - there is no adverse order by the AO with regard to assessee’s claim for exemption u/ss 11/12 - since Assessment Year 1997-98 and till Assessment Year 2008-09, assessee was granted recognition u/s 80G there is no allegation, much less a finding by the Director, that the activities of the assessee have undergone any change from the past years, we do not find any justification on the part of the Director in denying the recognition sought u/s 80G Even otherwise, we find that the observation of the Director that the assessee is not engaged in charitable activities or that money has not been spent towards attainment of the objects is quite misplaced. Various activities being carried out by the assessee-trust, namely, weekly meetings and library, Sky observation programmes, exhibitions, slide shows, basic and advanced courses in astronomy for students, conducting of study tours, workshops, conference and special events, etc. It was also explained by the Learned Representative that since its inception 20 years ago, assessee-trust has been publishing a bulletin called ‘Khagol Warta’ in Marathi, which is very well received by the researchers and students of Astronomy. Our attention has also been drawn to the list of publications since 1986, which has been brought out by the assessee-trust. All these aspects, in our view, do not lend support to the perception of the Director that the assessee-trust is not incurring expenditure towards its objects. Assessee is earning incomes from carrying on activities which are in the field of popularising Astronomy and, therefore, to say that there is no expenditure incurred towards the furtherance of its objects is obviously an incorrect assertion on the part of the Director. In any case, we find that the Director has made only a bald assertion without referring to any specific material in support of his plea that assessee has not incurred any expenditure towards the objects of the trust. Therefore, on facts also, we are not inclined to uphold the stand of the Director - Decided in favour of assessee. Issues Involved:1. Delay in filing the appeal.2. Denial of continuation of recognition under Section 80G by the Director of Income Tax (Exemptions).3. Compliance with conditions under Section 80G(5) of the Income Tax Act.4. Evaluation of charitable activities and expenditure by the assessee-trust.Detailed Analysis:1. Delay in Filing the Appeal:The appeal was delayed by 324 days. The delay was attributed to the illness of a trustee responsible for income-tax matters. The Tribunal accepted the reasons for the delay, noting that the reasons were bona fide and not contested by the Revenue. Citing the Supreme Court's decision in Collector, Land Acquisition vs. Mst. Katiji & Ors., the Tribunal emphasized that substantive justice should prevail over technicalities. Consequently, the delay was condoned.2. Denial of Continuation of Recognition under Section 80G:The Director of Income Tax (Exemptions) rejected the assessee’s application for continuation of recognition under Section 80G, citing that no expenditure was incurred towards the objects of the trust in the last three years. The Tribunal found this reasoning flawed, noting that the Director’s scope of inquiry should be limited to eligibility for exemption under the Act, not the actual computation of income. The Tribunal highlighted that the assessee continued to be recognized as a charitable institution under Section 12A and had no adverse orders against its claims for exemption under Sections 11/12.3. Compliance with Conditions under Section 80G(5):The Tribunal observed that the assessee had complied with all the requirements under Section 80G(5). The Director’s objections were deemed irrelevant since the assessee was already registered under Section 12A and had been granted recognition under Section 80G in previous years. The Tribunal cited precedents from the Punjab & Haryana High Court, which limited the Director’s inquiry to eligibility for exemption without delving into the actual income computation.4. Evaluation of Charitable Activities and Expenditure:The Tribunal reviewed the financial statements and activities of the assessee-trust. It found that the trust was actively engaged in promoting astronomy through various programs, publications, and educational activities. The Tribunal rejected the Director’s assertion that no money was spent on charitable activities, noting substantial expenditures towards the trust’s objectives. The Tribunal also dismissed the Director’s reliance on certain judicial precedents, finding them factually distinguishable from the present case.Conclusion:The Tribunal set aside the Director’s order and directed the continuation of recognition under Section 80G, affirming that the assessee-trust was engaged in charitable activities and had complied with all statutory requirements. The appeal was allowed, and the order was pronounced on 07th June 2019.