2024 (3) TMI 817 - AT - Income Tax

Registration under Section 80G(5) cannot be rejected without proper analysis of trust objects and adequate hearing opportunity

Swaminarayan Bhaktidham Dwarka Charitable Trust Versus Commissioner of Income Tax (Exemption), Ahmedabad

ITAT Rajkot allowed the appeal and restored the matter to CIT(E) for fresh consideration. The assessee's application for registration under Section 80G(5) ... Registration u/s 80G(5) - application rejected as assessee has mentioned in Form No. 10AB that one of it’s objects is “religious” in nature - Assessee submitted that on perusal of the trust deed submitted before Ld. CIT(E), it can be seen that the objects of the trust which have been mentioned are medical relief, educational objects, general public utility, preservation of environment etc. - HELD THAT:- CIT(E) while rejecting the application filed by the assessee has summarily rejected the application without analyzing the facts of the assessee’s case. CIT(E) has not pointed out any specific object in the trust deed which could be termed as “religious” in nature. CIT(E) has also not analyzed whether any expenditure was incurred by the applicant towards “religious” purposes. We also observe that the applicant had filed written submissions on two occasions and there has been no non-compliance on part of the applicant trust in response to notices issued by CIT(E). CIT(E) did not confront the applicant trust with regard to it’s observation that one of the objects of the assessee trust is religious in nature and simply proceeded to dismiss the application filed by the applicant without provided any opportunity of hearing to the applicant to rebut the findings made by CIT(E) which formed the basis of rejection of application by the applicant trust. Accordingly, looking into the instant facts, in the interest of justice, the matter is being restored to the file of the Ld. CIT(E) for de-novo consideration after giving due opportunity of hearing to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purposes Issues Involved:The appeal against the order of the Ld. Commissioner of Income Tax (Exemption) rejecting the application for registration under Section 80G(5) of the Income Tax Act, 1961.Details of the Judgment:Issue 1: Contrary to Law and Erroneous on FactsThe Ld. CIT(E) rejected the application based on the observation that one of the trust's objects was 'religious' in nature, which is not in line with the provisions of Section 80G(5) of the Act. The rejection was made without specifying which specific object was considered 'religious' and without analyzing whether any expenditure was actually incurred for religious purposes. The applicant trust had submitted written submissions and there was no non-compliance, yet the rejection was summary. The Tribunal observed that the rejection lacked proper analysis and opportunity for the trust to respond, leading to the decision to restore the matter to the Ld. CIT(E) for reconsideration.Issue 2: Interpretation of ProvisionsThe provisions of Section 80G(5) of the Act require that an institution or fund must be established only for charitable purposes, without any transfer or application of funds for non-charitable purposes. The law also allows for a concession of up to 5% of total income for religious activities. The Tribunal referred to precedents and highlighted that if any object of the trust is wholly or substantially of a religious nature, it falls outside the scope of Section 80G. The Tribunal emphasized the need for proper ascertainment of purposes within the trust's overall charitable purpose to determine eligibility for Section 80G benefits.Conclusion:The Tribunal allowed the appeal for statistical purposes, directing a de-novo consideration by the Ld. CIT(E) with a proper opportunity for the trust to be heard in accordance with the law.