Religious trust gets second chance for section 80G approval after denial without proper hearing opportunity

ITAT Jaipur remanded the matter to CIT(E) for fresh consideration of section 80G approval application. The application was initially rejected on grounds that religious trusts are ineligible under section 80G(5)(iii) and filing was beyond the six-month prescribed period. However, ITAT found that reasonable opportunity of being heard was not granted to the applicant before rejection. The tribunal noted that while section 80G(5)(iii) excludes institutions for particular religious communities and Explanation 3 excludes substantially religious purposes, the applicant deserved opportunity to explain that its charitable objects were not substantially religious in nature. The matter was restored for fresh decision by CIT(E).

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Issues:
1. Rejection of application for approval u/s 80G of the Income Tax Act, 1961 by Learned CIT(E) based on commencement of activities and eligibility of religious trusts under section 80G(5)(iii).
2. Lack of reasonable opportunity provided to the appellant trust to present its case before the rejection of the application.

Analysis:
1. The Appellate Tribunal addressed the first ground for rejection, emphasizing that the application was filed beyond the prescribed time limit, not due to non-commencement of activities by the trust. The appellant admitted to starting activities on 05.11.2020, but the application was filed late. The Tribunal noted that the time limit for filing was extended after the rejection, indicating a procedural oversight by the CIT(E). The AR mentioned a fresh application was submitted, leading the Tribunal to remand the matter for a fresh decision considering the time extension.

2. The second ground for rejection was the classification of the appellant trust as a religious trust, making it ineligible under section 80G(5)(iii). The AR argued that the trust was not given a fair chance to clarify its objectives, which were deemed religious. The Tribunal found that a show cause notice was issued shortly before the rejection, limiting the trust's ability to respond adequately. The AR highlighted the registration under section 12AB as a charitable activity, contrasting the rejection under section 80G. The Tribunal agreed that the trust deserved a proper hearing to explain its charitable nature, leading to the decision to remand the case for a fresh evaluation.

3. The Tribunal highlighted the distinction between registration under section 12AB and approval under section 80G, emphasizing the need for a charitable purpose without a predominantly religious nature. The lack of a thorough opportunity for the trust to present its case led to the decision to remand the matter to the CIT(E) for a fair assessment after affording the trust a reasonable opportunity to be heard. The appeal was disposed of for statistical purposes, ensuring a just process moving forward.

This comprehensive analysis of the judgment showcases the Tribunal's meticulous review of the grounds for rejection and the importance of providing a fair opportunity for the appellant trust to address the concerns raised by the CIT(E) before a final decision is made.

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