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of <h1>Renewal of 80G(5) approval upheld where 12A registration shows charitable status; technical defects not grounds to refuse</h1> ITAT (Del) allowed renewal of approval under section 80G(5), holding that subsisting registration under section 12A is conclusive evidence of charitable ... - ISSUES PRESENTED AND CONSIDERED 1. Whether the Commissioner was justified in refusing renewal of approval under section 80G(5) where the trust is already registered under section 12A and there has been no change in objects of the trust. 2. Whether specific trust-deed clauses (president having veto and casting vote; absence of a dissolution clause) and alleged defects in Form No.10B justify denial of renewal of approval under section 80G(5). 3. What is the permissible scope of the Commissioner's enquiry under section 80G(5) - whether it extends to substantive income-computation and application of sections 11 and 12 or is limited to establishment for charitable purposes and registration status under section 12A. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of existing registration under section 12A on renewal of approval under section 80G(5) Legal framework: Approval under section 80G(5) is available to institutions established in India for charitable purposes, subject to conditions in clauses (i)-(vi) of that sub-section; separate registration under section 12A indicates establishment for charitable purposes and affects entitlement to exemption-related approvals. Precedent Treatment: The Tribunal followed the authoritative treatment of the jurisdictional High Court which held that registration under section 12A is strong evidence that an institution is established for charitable purposes and that approval under section 80G should not be denied on mere technicalities where section 12A registration stands. Interpretation and reasoning: The Court reasoned that the power to grant or deny approval under section 80G(5) is coupled with a duty to look beyond formalities to the real purpose of the trust; where the objects as set out in the deed are charitable and the trust has been accepted under section 12A, the Commissioner should not refuse 80G approval merely on technical objections that do not demonstrate a non-charitable purpose. The Tribunal noted that there was no change in the trust deed since initial 12A registration and that previous grants of 80G approval post-amendment of objects supported continuity of charitable character. Ratio vs. Obiter: Ratio - Registration under section 12A is a sufficient foundational proof of charitable purpose such that denial of approval under section 80G(5) is not warranted on mere technicalities when no substantive change in objects or activities is shown. (This is the binding principle applied to the facts.) Conclusion: Renewal of approval under section 80G(5) must be allowed where section 12A registration subsists and there is no showing that the objects are not charitable. Issue 2 - Relevance of specific trust-deed clauses (veto/casting vote; no dissolution clause) and defects in Form No.10B Legal framework: Conditions for approval under section 80G(5) focus on charitable objects and eligibility under related provisions (e.g., sections 11 and 12); the terms of the trust deed are material only insofar as they affect the real charitable character and the trust's compliance with statutory conditions. Precedent Treatment: The Tribunal followed the position in the jurisdictional High Court decision that technical or procedural defects do not justify denial of approval where charitable purpose and registration under section 12A are established. Interpretation and reasoning: The Tribunal examined the CIT's objections and found they were identical to those existing at the time of original 12A registration and prior 80G approvals. Since there was no change in the deed and the objections did not demonstrate that the objects were non-charitable or that income could not be considered under section 11, those clauses (veto/casting vote; absence of dissolution clause) did not justify refusal. As to defects in Form No.10B, the Tribunal held that such defects may affect entitlement to actual exemption under section 11 in computation, but do not alter the fact of registration under section 12A nor establish that the trust is not constituted for charitable purposes. Ratio vs. Obiter: Ratio - Substantive disqualification for 80G approval cannot be founded solely on pre-existing deed clauses or procedural defects in Form No.10B where those matters do not negate the charitable objects or 12A registration. Obiter - Observations that defects in Form No.10B might affect actual exemption under section 11 (on computation) but not the eligibility for 80G approval are explanatory rather than the core holding. Conclusion: The CIT's cited deed clauses and Form No.10B deficiencies do not justify refusal to renew 80G approval where section 12A registration persists and no demonstration is made that objects are non-charitable. Issue 3 - Permissible scope of enquiry by the Commissioner when considering section 80G(5) applications Legal framework: Section 80G(5) contemplates an enquiry into whether an institution is established for charitable purposes and whether conditions in clauses (i)-(vi) are satisfied; separate provisions (sections 11 and 12) govern computation and application of income of charitable trusts. Precedent Treatment: The Tribunal adhered to the jurisdictional High Court's explanation that while the Commissioner's enquiry under section 80G(5) may extend to the institution's eligibility under provisions referenced in that sub-section (e.g., registration under section 12A), it does not extend to determining the final computation of income under sections 11 and 12 at the stage of grant of approval when such computation depends on facts ascertained at the end of the relevant previous year. Interpretation and reasoning: The Tribunal emphasized that the Commissioner may examine whether the applicant is registered under section 12A and whether its objects are wholly charitable, but cannot undertake an in-praesenti determination of whether the trust will satisfy every condition for exemption under sections 11/12 at the end of the relevant previous year. The Court noted that factors like nature of contributions, accumulation and application of income require year-end factual determination and cannot be conclusively decided at the time of the donation or approval application. Ratio vs. Obiter: Ratio - The Commissioner's enquiry under section 80G(5) is limited to eligibility factors such as registration under section 12A and whether the trust is wholly for charitable purposes; it does not encompass definitive income-computation under sections 11 and 12 at the approval stage. Obiter - Remarks on specific evidentiary aspects (e.g., separate books for sale/purchase of books, expenditure on entertainment) were treated as insufficient in the absence of proof that objects were non-charitable. Conclusion: The Commissioner's enquiry must be confined to eligibility and registration/charitable character; absence of final, year-end factual determination as to income application does not warrant denial of section 80G approval. Overall Conclusion Because the trust retained registration under section 12A, the objections relied upon did not establish non-charitable objects or justify refusal of renewal under section 80G(5); the Commissioner's enquiry was impermissibly extended into technical and procedural matters rather than focusing on the core eligibility. The Tribunal allowed renewal of approval under section 80G(5).
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