2021 (2) TMI 1089 - AT - Income Tax

Tribunal clarifies conditions for tax approval, emphasizes ownership not mandatory.

The Tribunal directed the Commissioner to grant approval under section 80G(5)(vi) of the Income Tax Act to the appellant trust, emphasizing that ownership ... Rejection of grant of approval under section 80G(5) - premises from which the appellant trust is operated are not owned by the appellant trust/shared along with other trusts and accounts of the appellant trust are not reliable since accounts are not audited. Consequently, he had come to the conclusion that the genuineness of the activities of the trust was not established by the appellant - HELD THAT:- Provisions of section 80G(5)(vi) of the Act nowhere stipulate that in order to be eligible for grant of approval u/s 80G(5)(vi) of the Act, the premises from which the appellant trust is operated, should be owned by the appellant trust. The ld. Commissioner of Income Tax (Exemption) cannot introduce any new condition nor stipulate a new condition which is not prescribed under the provisions of the Statute. It is not the case of the ld. CIT (Exemption) that the appellant trust had failed to fulfil any of the conditions prescribed u/s 80G(5)(vi) of the Act r.w. Rule 11AA of the Rules. The findings of ld. Commissioner of Income Tax (Exemption) that since the accounts of the trust are not audited the activities of trust are not genuine, is not based on any material nor it is possible to come to such conclusion by the CIT (Exemption) in view of the undisputed fact that the appellant trust still continues to enjoy the registration u/s 12AA. It is settled proposition of law that during the course of enquiry u/s 80G(5)(vi) of the Act, the scope of enquiry cannot extend to the actual assessment of income. Reliance in this regard can place on the decision of the Hon’ble Gujarat High Court in the case of N.N. Desai Charitable Trust vs. CIT [1999 (5) TMI 11 - GUJARAT HIGH COURT]. In the circumstances, we are of the considered opinion that the ld. Commissioner of Income Tax (Exemption), Pune is not justified in denying the grant of approval u/s 80G(5)(vi) - Decided in favour of assessee. Issues:Grant of approval under section 80G(5)(vi) of the Income Tax Act, 1961.Analysis:The appellant trust, formed with various charitable objects, had applied for approval under section 80G(5)(vi) of the Act after being granted registration under section 12AA. The Commissioner of Income Tax (Exemption) denied approval based on concerns regarding the ownership of the premises, shared operation with other trusts, lack of audited accounts, and alleged lack of genuineness in charitable activities. The appellant challenged this decision, arguing that all conditions under section 80G(5)(vi) were met, and the Commissioner had no grounds to question the trust's activities. The Tribunal noted that the Act does not require the trust to own the premises from which it operates for approval. Additionally, the absence of audited accounts does not automatically invalidate the trust's activities, especially when it holds registration under section 12AA. Referring to legal precedent, the Tribunal emphasized that the scope of inquiry under section 80G(5)(vi) does not extend to assessing income. Consequently, the Tribunal directed the Commissioner to grant approval under section 80G(5)(vi) to the appellant trust, allowing the appeal.This judgment clarifies the criteria for granting approval under section 80G(5)(vi) of the Act, emphasizing that ownership of premises is not a mandatory condition for approval. It underscores that lack of audited accounts does not inherently discredit a trust's activities, particularly when holding registration under section 12AA. The Tribunal's decision highlights the limited scope of inquiry under section 80G(5)(vi) and the importance of adhering to statutory conditions without introducing additional requirements.