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Facts
The assessee, a registered society, applied for approval under Section 80G(5), which the CIT(E) denied on the grounds of insufficient expenditure towards its objects. Previously, the CIT(E) had also rejected the assessee's application for registration under Section 12AB, citing similar reasons, but this rejection was overturned by the Tribunal, which directed the grant of 12AB registration.
Held
The Tribunal condoned the delay in filing the appeal. It found that the CIT(E)'s rejection of 80G(5) approval based on meagre expenditure was incorrect, especially given that the Tribunal had already set aside a similar denial for Section 12AB registration in the assessee's own case. The Tribunal held that 80G(5) approval is consequential to 12AB registration and directed the CIT(E) to grant the approval.
Key Issues
Whether the denial of approval under Section 80G(5) for not incurring substantial expenditure was justified, especially when the assessee's Section 12AB registration (denied on similar grounds) had been restored by the Tribunal.
Sections Cited
80G(5), 12AB
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of Ld.CIT(E) dated 23/12/2024 in which the approval sought for u/s. 80G(5) was denied and raised the following grounds: “1. The order passed by the learned Commissioner of Income Tax (Exemptions) ("CIT(E)"), under section 80G of the Income Tax Act, 1961 ("the Act"), insofar as it is against the Appellant, is opposed to law, weight of evidence, natural justice and probabilities on the facts and circumstances of the Appellant's case.
2. The learned CIT(E) erred in law by rejecting the approval under section 80G of the Act without issuing a show cause notice proposing such rejection and consequently, the impugned order grossly violates the principles of natural justice on the facts and circumstances of the case.
3. The learned CIT(E) erred in law by rejecting the approval under section 80G of the Act by holding that substantial expenditure is not incurred towards the objects of the trust despite no such requirement necessary as per the provision and consequently, passed a perverse order on the facts and circumstances of the case.
4. The learned CIT(E) failed to properly consider the documentary evidence and failed to appreciate that the Appellant fulfills all the necessary conditions for approval under section 80G of the Act on the facts and circumstances of the case, The Appellant craves to add, alter, modify, substitute, change and delete any or all of the grounds before the appeal is finally being heard or disposed of. In the view of the above and other grounds that may be urged at the time of the hearing of appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity.”
The assessee filed this appeal with a delay of 59 days and filed an application to condone the said delay. In the said application, the assessee had submitted that both the orders rejecting the application for registration u/s. 12AB as well as the approval u/s. 80G(5) were passed on the same date and therefore the assessee was under the impression that a single appeal challenging the rejection of the 12AB registration would be enough and therefore filed an appeal before this Tribunal as against the rejection order made u/s. 12AB of the Act. Subsequently, the assessee came to know that a separate appeal should also be filed against the rejection of the approval and thereafter the present appeal has been filed before this Tribunal with a delay of 59 days.
We have considered the said submissions made by the assessee and we are satisfied that the assessee had sufficient reasons for not presenting the appeal in time before this Tribunal and therefore we are condoning the
The brief facts of the case are that the assessee is a registered society engaged in charitable and social welfare activities, including public awareness programs, social work, and community engagement initiatives as per its stated objectives. The provisional registration was granted in Form 10AC by the ld. PCIT/CIT on 16/02/2022 vide unique Registration No. ABKAS9854NE20216 from AY 2022-23 to AY 2024-25. Thereafter the assessee Trust submitted an application in Form 10AB on 28.06.2024, seeking final registration under Section 12AB of the Act. On receipt of the application, the ld. CIT(E) assigned the case to the Jurisdictional Assessing Officer (JAO) for verification. On perusal of the submissions made by the assessee, both Range Head and JAO did not recommend for registration and therefore the Ld.CIT(E) had rejected the application seeking final registration u/s. 12AB of the Act. The Ld.CIT(E) also observed that the assessee trust has not made substantial amount of expenditure towards the objects. The assessee also filed an application for approval u/s. 80G(5) of the Act before the Ld.CIT(E). The Ld.CIT(E) vide his order dated 23/12/2024 after verifying the financials of the assessee had observed that the assessee has not made any substantial expenditure towards the objects of the trust. Therefore the Ld.CIT(E) had come to the conclusion that the assessee had not commenced its activities towards the attainment of the objects and rejected the application for approval. The said order of the Ld.CIT(E) is under challenge before this Tribunal.
At the time of hearing, the Ld.AR submitted that the Ld.CIT(E) had accepted that some expenditures were made towards the objects of the trust which shows that the trust had commenced its activities. Not incurring a substantial expenditure is not a valid reason to conclude that the assessee had not commenced its activities. The Ld.AR also filed a paper book enclosing the various documents including the order of this Tribunal in
The Ld.DR relied on the order of the Ld.CIT(E) and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the rejection order passed by the Ld.CIT(E) in which the only allegation levelled by the Ld.CIT(E) is that the assessee had received donations from last 3 years, however the expenses were less towards the objects of the trust and on that basis, the Ld.CIT(E) had come to the conclusion that the assessee had not commenced its activities. Therefore, the Ld.CIT(E) had rejected the application for approval only on the ground that a meagre amount was spent towards the objects of the trust. We do not find that the said finding is correct and in fact similar reasons given by the Ld.CIT(E) for denying the registration u/s. 12AB of the Act in respect of the assessee was set aside by the Tribunal in dated 25/06/2025 in which the Tribunal in paragraph 7.1 had held as follows: “7.1 Respectfully following the above decision of the coordinate Bench, we are of the opinion that the ld. CIT(E) grossly erred in not granting registration merely on the basis of not incurring the substantial amount of expenditure and accordingly, we allow the appeal of the assessee and direct the ld. CIT(E) to grant registration u/s 12AB of the Act as applied by the assessee trust on 28.6.2024 in form No. 10AB. It is ordered accordingly.”
The approval u/s. 80G(5) is in consequential to the registration granted u/s. 12AB of the Act. In the present case, this Tribunal had directed to grant the registration u/s. 12AB of the Act after rejecting the allegations levelled by the Ld.CIT(E). In such circumstances, we are in total agreement with the reasoning given by the Tribunal in the assessee’s own case in respect of the registration sought for u/s. 12AB of the Act and
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 31st July, 2025.