Whether Registration u/s 12AA results in approval u/s 80G(5)-ITAT orders grant of certificate based on consistent judicial opinion
ABCAUS Case Law Citation:
ABCAUS 2243 (2018) (03) ITAT
The appellant assessee society was aggrieved by the order passed by the CIT(Exemption) rejecting its application seeking grant of approval u/s 80G(5)(vi) of the Income Tax Act, 1961 (the Act)
The CIT(E) while rejecting the application observed that mere submission of documents is not the sole criteria for approval u/s 80G(5) of the Act. The approval u/s 80G(5) is not a mechanical process wherein the according of registration of u/s 12AA/10(23C) of the Act and filing of documents at one end would result in the issuance of approval u/s 80G(5) at the other end.
CIT(E) noted that the society had received hefty donations but failed to furnish any details regarding complete addresses and the PANs of the alleged donors which according to him proved that there was a mala fide attempt on part of the applicant to introduce the unaccounted money into the trust income as donations. Further CIT(E) observed that the applicant failed to provide any cogent proof regarding the activities carried on in pursuance of the objects set forth in the memorandum of the trust. Also, the high profit percentages that the applicant trust was taken as the trust being engaged in non-Charitable and commercial activities.
The Tribunal observed that the registration u/s 12AA(1)(b)(i) of the Act was granted to the appellant Institution which had not been revoked or cancelled.
The CIT(E) had observed, interalia, that approval u/s 80G(5) of the Act is not a mechanical process, wherein the according of registration u/s 12AA of the Act at one end would result in the issuance of approval u/s 80G(5) at the other. According to the Tribunal, consistent judicial opinion in this regard, however points otherwise.
Before the Tribunal, the assessee contended that the rejection was based on all such reasons as were duly examined by the CIT(Exemption) while granting registration under section 12A of the Act by the same learned CIT(Exemption). It was submitted that the learned CIT (Exemption) rejected the application of the Society for grant of approval under section 80G(5)(vi) on irrelevant considerations, ignoring the provisions of law that approval under that section could be refused if, and only if, the conditions laid down under clause (i) to (v) of sub-section (5) of section 80G of the Act were not met by the applicant. It was also contended that the approval has been denied without affording due and reasonable opportunity of hearing and the impugned order has been passed on the same day on which the case was fixed for hearing, which is in direct conflict with decision of the Hon’ble Madras High Court.
The Tribunal proceeded to examine the following decisions:
|Gujarat High Court||
The Hon’ble High Court held that once registration u/s 12AA of the Act was granted, the order rejecting the application u/s 80G(5) of the Act was liable to be quashed. The Hon’ble High Court took into account the submissions that once registration u/s 12A of the Act is granted, a grant of benefits under the act cannot be denied; that the ITO was not justified in refusing the benefits under the act which would otherwise accrue under the registration; that if there was no registration, the Revenue would have been justified in submitting that the benefit cannot be granted, but where the application for registration is submitted and the registration has been granted, the benefit cannot be denied.
When the CIT has granted registration u/s 12AA of the Act after examining the genuineness of the activities of the Trust, it is not proper for the CIT to reject the application of the trust for the benefit of exemption u/s 80G(5) of the Act by holding that the activities of the trust are not genuine.
|Gujarat High Court||
It is well settled that at the time of granting the application u/s 80G, what is to be examined is whether the trust is registered u/s 12A and the objects of the trust; that so far as the aspect of income is concerned, the same can be very well examined by the Assessing Officer at the time of framing assessment; and that the Authority examining the question whether a trust/Institution is eligible to be certified for the purposes of Section 80G is not to act as an AO.
Following Gujarat High Court, the ITAT held that when the CIT is to examine an application seeking recognition u/s 80G, he is not required to act as an AO and decide upon the claim of the assessee in respect of his assessment of income; that the actual assessment of the assessee and its actual liability to tax are matters to be decided only in the assessment proceedings; and that since the assessee was registered u/s 12A of the Act and such registration continued, the assessee fulfilled the conditions prescribed u/s 80G(5)(i) of the Act.
|ITAT Rajkot||Following Gujarat High Court, the ITAT held similarly|
The ITAT observed that the CIT(E) had not referred to any decision contrary to the above case laws in the order nor before it.
Therefore, following the above decisions, the Tribunal opined that the CIT(E) was not justified in rejecting the application on the very same date as that of the hearing, which is clearly in direct contravention of the decision of the Hon’ble Madras High Court.
The ITAT noted that appellant’s application seeking grant of approval u/s 80G(5)(vi) was rejected despite the fact that the applicant was granted registration u/s 12AA of the Act and that too, by the same CIT(E) on examining the Institution’s objects and the genuineness of its activities, and such registration continued and undisputedley the appellant duly fulfils all the conditions prescribed u/s 80G(5)(i) to (v) of the Act.
Accordingly, the order was reversed and it was directed that the appellant be granted approval u/s 80G of the Act forthwith.