2020 (12) TMI 490 - AT - Income Tax

Tribunal overturns denial of approval for tax exemption due to trust's charitable status.

Maharashtra Institute of Research and Development Versus CIT (Exemption)

The Tribunal partly allowed the appeal against the denial of approval under section 80G(5)(vi) of the Income Tax Act. The Commissioner's decision to ... Approval u/s 80G(5) denied - CIT- A rejecting renewal of recognition in the absence of income and expenditure account for the financial year 2017-18 not having been satisfied about the charitable nature of activities of the trust or genuineness of its activities - trust was granted registration u/s. 12AA on 16.03.1984 - HELD THAT:- It is a matter of record that the due date for filing of the return of income for the assessment year 2018-19 had not expired as on the date when the notice calling for the information was issued. In any event, it is the case of the appellant that he had filed the financial statement for the financial year 2017-18 also during the course of proceedings before the ld. Commissioner of Income Tax (Exemption). Moreover, it is undisputed fact that the appellant society continues to enjoy the registration u/s. 12AA of the Act, therefore, it cannot be said that the objects of the appellant society are not charitable in nature. In any event, since the order of the ld. Commissioner of Income Tax (Exemption) is premised on the wrong assumption that the financial statements for the financial year 2017-18 were not filed. We direct the ld. Commissioner of Income Tax (Exemption) to examine the financial statements afresh and then come to conclusion as to the genuineness or otherwise of the activities of the appellant society and decide the application afresh after affording reasonable opportunity of being heard to the appellant society. Issues:Appeal against denial of approval under section 80G(5)(vi) of the Income Tax Act, 1961.Analysis:The appellant society appealed against the order of the ld. Commissioner of Income Tax (Exemption) denying approval under section 80G(5)(vi) of the Income Tax Act. The society was formed with the objective of establishing educational institutions. The Commissioner raised concerns about the genuineness of the activities carried out by the trust, citing instances where the trust failed to provide evidence of funds utilization for educational purposes and did not submit financial statements for a specific year. Consequently, the Commissioner rejected the grant of recognition under section 80G(5)(vi) of the Act.The main issue in the appeal was whether the Commissioner was justified in denying recognition under section 80G(5)(vi) of the Act. The Commissioner's decision was primarily based on the absence of income and expenditure account for a specific financial year, leading to doubts about the charitable nature and genuineness of the trust's activities. However, it was noted that the due date for filing the income tax return had not expired when the information was requested. The appellant claimed to have submitted the financial statement for the relevant year during the proceedings. Additionally, since the trust was registered under section 12AA of the Act, indicating charitable objectives, the denial of recognition solely based on missing financial statements was deemed incorrect. The Tribunal directed the Commissioner to reexamine the financial statements and make a fresh decision after providing a reasonable opportunity for the appellant to be heard.In conclusion, the appeal was partly allowed for statistical purposes, emphasizing the importance of proper examination of financial statements to determine the genuineness of activities for approval under section 80G(5)(vi) of the Income Tax Act.