2019 (6) TMI 1082 - AT - Income Tax

Tribunal grants exemption under Income Tax Act, directs fair review for recognition application

The Tribunal overturned the rejection of the appellant's application for exemption under section 80G(5)(vi) of the Income Tax Act, 1961. It held that ... Exemption u/s.80G(5)(vi) - CIT(E) has rejected the recognition u/s 80G by mentioning that charitable activities are not carried out by the assessee - grant of registration u/s 12AA already done - HELD THAT:- Prima facie, the CIT(E) has rejected the recognition u/s 80G by mentioning that charitable activities are not carried out by the assessee. We found that the CIT(E) has granted registration u/s 12AA to the assessee and the ld.R has furnished copy of registration u/s 12AA of the Act dated 27/09/2018. We found that when the registration u/s 12AA of the Act was granted by the CIT(E) after verifying and satisfying requisite conditions complied by the assessee which is not disputed by the revenue and therefore, the assessee is eligible for recognition u/s 80G of the Act. As decided in M/S. KUNCHAM MOHAN RAJ AND MANJULA CHARITABLE TRUST VERSUS THE COMMISSIONER OF INCOME TAX (EXEMPTION) , BENGALURU. [2019 (3) TMI 1163 - ITAT BANGALORE] restore this disputed issue to the file of the CIT(E) to adjudicate afresh granting of recognition u/s 80G of the Actin the light of grant of registration u/s 12AA and further the assessee should also be provided an adequate opportunity of hearing and shall cooperate in submitting information for early disposal of the application filed for recognition u/s 80G of the Act and allow the grounds of appeal for statistical purposes. Issues:1. Rejection of application for exemption u/s.80G(5)(vi) of Income Tax Act, 1961.2. Determination of charitable activities for granting recognition u/s.80G.3. Grant of registration u/s.12AA but rejection of recognition u/s.80G.Issue 1: Rejection of application for exemption u/s.80G(5)(vi) of Income Tax Act, 1961:The appellant filed an appeal against the order of the Commissioner of Income-tax (Exemption) rejecting the application for exemption u/s.80G(5)(vi) of the Income Tax Act, 1961. The appellant argued that social and sports activities were conducted by the Trust, submitting relevant documents and photographs. The Tribunal found that the appellant had obtained registration u/s.12AA of the Act, indicating compliance with necessary conditions. The Tribunal held that since registration u/s.12AA was granted after verification by the CIT(E), the appellant was eligible for recognition u/s.80G. The Tribunal referred to a similar case where rejection based on the absence of noticeable activities was deemed subjective and set aside the order, directing the CIT(E) to reconsider the recognition application.Issue 2: Determination of charitable activities for granting recognition u/s.80G:The CIT(E) rejected recognition u/s.80G citing the absence of noticeable charitable activities by the appellant. However, the Tribunal noted that the registration u/s.12AA was granted after due diligence by the CIT(E), indicating the appellant's eligibility for recognition u/s.80G. The Tribunal emphasized that the determination of noticeable activities is subjective and should not be the sole basis for rejection. The Tribunal directed the CIT(E) to reevaluate the recognition application in light of the registration u/s.12AA, providing the appellant with a fair hearing and opportunity to submit relevant information.Issue 3: Grant of registration u/s.12AA but rejection of recognition u/s.80G:The appellant had applied for registration u/s.12AA and recognition u/s.80G, with registration being granted but recognition being denied by the CIT(E). The Tribunal found the denial of recognition inconsistent with the grant of registration, indicating a lack of coherence in the decision-making process. Referring to a previous case, the Tribunal set aside the rejection of recognition and instructed the CIT(E) to review the application considering the grant of registration u/s.12AA. The Tribunal emphasized the importance of providing the appellant with a fair opportunity to present their case for the timely resolution of the recognition application.This detailed analysis of the judgment highlights the issues of rejection of exemption application, determination of charitable activities for recognition, and the inconsistency between registration and recognition decisions, providing a comprehensive overview of the Tribunal's decision and reasoning.