TaxTMI 
TaxTMI 
2024 (1) TMI 483
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.... heard together and are being decided by this common order. 2. Heard the learned Representatives of both sides at length and case-records perused. We would first take up appeal relating to registration u/s 12AB and thereafter appeal relating to approval u/s 80G. ITA No. 138/Ind/2023 - relating to registration u/s 12AB: 3. Ld. AR for assessee carried us to the impugned order and demonstrated that initially, Ld. CIT(E) raised multiple objections vide Para No. 2 to 5 of show-cause notice but ultimately while passing order, deleted his objections in Para No. 2, 4, and 5 by accepting assessee's submission. Therefore, Ld. CIT(E) rejected assessee's application only on the objection raised by him in Para No. 3 of the show-cause notice. The said objection, as detailed by PCIT, is such that in Para No. 4(p) of the trust-deed, the assessee has incorporated following object-clause: "4. Without prejudice to the generality of the preceding clause IT IS HEREBY DECLARED that the trustees shall be entitled to pay, utilize or apply the Trust Fund or the income thereof for all or any one or more of the following purposes, that is to say:- XXXX (p). For giving loan....
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....n reading of Clause 4(p) of trust-deed, that the trustees have full freedom to give loans to any person without any accountability or responsibility. Ld. DR strongly contended that the order of CIT(E) is very much correct and must be upheld. 7. In rejoinder, Ld. AR submitted that even otherwise, under the provisions of Indian Trust Act or MP Trust Act, the Trustees of a Trust are having a safeguard against responsibility and accountability as long as they work within their authority for charitable purposes and hence mentioning same thing in the trust-deed, should not be viewed otherwise. 8. We have considered rival submissions of both sides. We find that the sole reason of rejecting assessee's application by CIT(E) is the last part of Clause 4(p) in the trust-deed which prescribes "without being responsible or accountable for any loss caused thereby". Based on this, Ld. CIT(E) has inferred that the trustees have unlimited authority to divert funds of trust by giving loans to any 'related or favourable party'. So is the inference being taken by Ld. DR for revenue who feels that the trustees have authority to give loans to 'any person'. But if we carefully look into the said Cl....
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....l sections of the public will have access. (s). To aid and assist by way of donations for the renovations or repairs of temples, mosques, and churches, gurudwaras or other places as notified by the Central Government in the Official Gazette for the purpose of Section 80-G of the Income-tax Act, 1961, to be historic, archaeological or artistic importance or to be a place of public worship of renown through out any State or States in India." 12. Ld. AR submitted that the CIT(E) has stated that these objects are in the nature of religious purposes and hence they are violating following provisions of section 80G(5)(ii) and Explanation 3 to section 80G: "Section 80G: (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :- (i) XXX (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of....
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....vations does not mean that the Trust is engaged in any religious activity. (ii) It is submitted that since incorporation, the assessee-trust has not spent a single penny for the objects mentioned in impugned clause 4(r) and 4(s). (iii) It is further submitted that section 80G(5B) overrides section 80G(5)(ii) as well as Explanation 3 to section 80G and provides that if the expenditure of religious nature does not exceed 5%, the trust shall be deemed to be covered u/s 80G(5). Therefore, the assessee could very well incur expenditure on religious nature upto 5% and still remain entitled for approval u/s 80G(5). It is also pointed out that the decision in Upper Ganges Sugar Mills Ltd. (supra) was pronounced on 04.08.1997 and subsequent thereto, the section 80G(5B) giving over-riding effect was introduced in law through Finance Act, 1999 w.e.f. 01.04.2000. Reliance is placed on the decision of ITAT, Chennai in KVC Trust Vs. DIT(E), Chennai (2011) 11 taxamann.com 91 where an identical controversy has been decided in favour of assessee: "5. We have perused the orders and heard the rival submissions. Ld. DIT(E) had denied registration sought under section 12AA....
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....ssee has not mentioned any particular community or caste as mentioned in clause (iii) of subsection (5) of section 80G. None of the prior clauses of clauses (i) to (x) of the objects mention anything regarding any benefit accruing to any particular religious community. In our opinion, a mere mentioning of application of a limited part of the income for religious activity per se, will not render the trust a non-charitable one, when the clause is one among many and all other clauses are purely charitable in nature. As mentioned by us, there is nothing in the trust deed which would show that the trust was established for the benefit of any particular religious community or caste. When the activities are not pertaining to any particular religion, a mere mentioning of a religious activity without specifying any religion would not by itself make the trust a non-charitable one. Especially so, since sub-section (5B) opens with a non obstante clause. If we look at Explanation 3 to sub-section (5C) of section 80G of the Act, it clearly says the charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature. A reading of the object claus....
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....petitioner-trust but because of the said object the trust was held to be having partly religious purposes. 3. Learned counsel for the petitioner has invited our attention to a number of decisions to urge that it is the substance of the objects of the trust in locality and the principal activity of the trust only should be taken into consideration and merely because one of many activities have been stated to be construction of the trust which in fact is not the basic purpose of formation of the trust, that should not be the sole criteria of rejection of the application. He also relied on the amendment brought in section 80G by inserting sub-section (5B) of section 80G by the Finance Act, 1999, with effect from 1-4-2000, which was in consonance with the submissions made by learned counsel for the petitioner which, inter alia, provided an overriding provision that where an institution or fund which incurs expenditure in the relevant year which is of religious nature for an amount not exceeding 5 per cent of its total income in that previous year then for that previous year, the institution or fund shall be deemed exempted under section 80G by deeming it to be so. 4. ....