2008 (4) TMI 396 - AT - Income Tax

Tribunal Directs CIT to Approve Section 80G Tax Exemption for Pune Society, Confirming Compliance with Charitable Conditions.

Shikshan Prasarak Mandali. Versus Commissioner Of Income-Tax.

Shikshan Prasarak Mandali. Versus Commissioner Of Income-Tax. - TTJ 117, 337, [2009] 28 SOT 50 (PUNE) (URO) Issues Involved:1. Justification of CIT-III, Pune in declining to renew approval under section 80G of the Income-tax Act, 1961 for assessment year 2006-07 onwards.2. Compliance with the conditions under section 80G(5)(i) to (v) of the Income-tax Act.3. Genuineness of the charitable activities of the assessee society.Issue-wise Detailed Analysis:1. Justification of CIT-III, Pune in Declining to Renew Approval under Section 80G:The primary issue in this appeal is whether the CIT-III, Pune was justified in declining to renew the approval under section 80G of the Income-tax Act, 1961. The assessee, a society registered under the Societies Registration Act, 1860 and Bombay Trusts Act, 1950, applied for renewal of approval under section 80G. The CIT noted irregularities in three out of 57 institutions, such as unauthorized collections, maintaining separate accounts for such collections, collecting capitation fees, and not routing development funds through the profit & loss account. The CIT rejected the renewal application based on these findings and the denial of complete exemption under sections 11 and 12 for the assessment years 2003-04 and 2004-05.2. Compliance with the Conditions under Section 80G(5)(i) to (v):To adjudicate the issue, the tribunal first examined the scheme of the Act regarding approval under section 80G. According to section 80G(5)(vi), the CIT must be satisfied that the applicant meets the conditions laid down in clauses (i) to (v) of section 80G(5). These conditions include:- The income of the institution should not be liable to inclusion in its total income under sections 11 and 12 or clause (23AA) or clause (23C) of section 10.- The instrument or rules governing the institution should not contain any provision for the transfer or application of income or assets for purposes other than charitable purposes.- The institution should not be for the benefit of any particular religious community or caste.- The institution should maintain regular accounts of its receipts and expenditure.- The institution should be constituted as a public charitable trust or registered under the Societies Registration Act, 1860, or any corresponding law.The tribunal found that the CIT's decision should be based on these objective and unambiguous tests. The tribunal also noted that the CIT has the power to call for further documents or information to satisfy himself about the genuineness of the activities of the trust or institution.3. Genuineness of the Charitable Activities of the Assessee Society:The tribunal considered the order dated 6-8-2007 issued by the Chief CIT-II Pune, granting exemption under section 10(23C) to the assessee from assessment years 2006-07 onwards. The tribunal admitted this additional evidence and noted that the exemption was granted subject to certain conditions, such as applying income exclusively to the objects of the institution, not investing funds in prohibited modes, and filing regular returns of income.The tribunal addressed the contention that the assessee's conduct did not inspire confidence in complying with these conditions. However, the tribunal emphasized that for the purpose of granting approval under section 80G, the CIT should only examine whether the conditions set out in section 80G(5)(i) to (v) are satisfied. The tribunal found that the assessee met these conditions, as the exemption under section 10(23C) was granted, and the assessee maintained regular accounts of its receipts and expenditure.The tribunal also noted that the objections raised by the Assessing Officer regarding the assessee's accounting treatment and charging of excessive fees did not challenge the genuineness of the charitable activities. The tribunal concluded that the CIT should have granted approval under section 80G, as the necessary requirements under rule 11AA(4) were satisfied.Conclusion:In view of the above discussions, the tribunal upheld the grievance of the assessee and directed the CIT to grant approval under section 80G. The appeal was allowed, and the CIT was instructed to grant the approval as the assessee met the necessary conditions under section 80G(5)(i) to (v).