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Facts
The assessee, M/s. Natya Niketan School of Bharatanatyam Trust, appealed against the rejection of its application for approval under Section 80G of the Income Tax Act. The rejection was based on the observation that the trust's activities were commercial in nature.
Held
The Tribunal found that charging fees for imparting education in an art form does not necessarily make the activity commercial. The Tribunal noted that the assessee was registered under Section 12AB and was involved in charitable activities. A discrepancy in the financial statement was observed, and the case was remitted back to the CIT(E) for fresh consideration.
Key Issues
Whether the activities of the trust in imparting education in Bharatanatyam, for which fees are charged, are commercial in nature, thereby disentitling it to 80G approval?
Sections Cited
80G, 10(23C), 11, 12AB, 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER
PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
This is an appeal filed by the assessee against the rejection of 80G95)application filed by the assessee in form 10AB dated 23/04/2024 observing that the activity of the assessee is commercial in nature by the Ld.CIT(E) and noted that the assessee was mandated to submit the necessary documents to prove the genuineness of the activities of the trust or institution and fulfilment of all the conditions laid down in clause 1 to 5 of section 80G. Accordingly, the approval u/s. 80G of the IT Act was rejected and approval cancelled vide order dated 29/10/2024.
In addition to the above, the assessee has filed paper book containing pages 1 to 196 including the case law and submitted that once the registration u/s. 12AB has been granted to the assessee, the approval u/s. 80G(5) is academic. If the assessee is found that the activity is not in the nature of commercial activity and is beyond the purview of the object clause.
The Ld. Counsel further submitted that the trust is charging very few fee from the students who are coming for learning of Bharatanatyam which cannot be considered as a commercial activity. The students are acquiring knowledge about the form of such an art and thereby enhance the cultural heritage of India as a whole. Bharatanatyam has been often referred to as the national dance of India and by embarking upon the activity of providing education to the students in the dance form of Bharatanatyam, the assessee is involved in an indubitable charitable activity. The ld. CIT(E) provided only one hearing i.e. 26.08.2024 Therefore, he requested that if a chance is given to the assessee, and undertook that the assessee will be able to prove that the activity of the assessee trust is not in commercial in nature and engaged in the charitable activity. The audited statement prove that there is no commercial activity and the founder members are not getting any benefit from this institution. In support, he relied on the following judgments: a. Decision of Hon’ble Mumbai Tribunal in case of Green Acres Educational Trust vs. DCIT reported in [2016] 70 taxmann.com 347 b. Judgment of Hon’ble Gujarat High Court in case of CIT(E) vs. Shree Tapeshwar Hanumaji Bajrang Charity Trust reported in [2020] 122 taxmann.com 98 c. Decision of Hon’ble Mumbai Tribunal in case of Huhtamaki Foundation vs. CIT(E) reported in [2024] 163 taxmann.com 174 d. Decision of Hon’ble Mumbai Tribunal in case of Olive Development Foundation vs. CIT(E) reported in [2023] 155 taxmann.com 605 e. Judgment of Hon’ble Karnataka High Court in case of PCIT(E) vs. Embassy Charitable Trust reported in [2022] 137 taxmann.com 449 f. Decision of Coordinate Bench of this Tribunal in case of DCIT vs. JMJ Education Society reported in [2021] 128 taxmann.com 315
On the other hand, the Ld.DR relied on the order of the Ld.CIT(E) and noted that the activities are commercial in nature as observed by the Ld.CIT(E) and therefore the approval u/s. 80G(v) should not be granted to the assessee.
Considering the rival submissions, we noted that the assessee has received fees from students which is denoted as a contribution and incurred expenditure which is clear from the receipt and payment account quoted by the ld.CIT(E) in his order. The assessee has also not distributed any dividend and has organised a programme as per synopsis of assessee, students are getting training of Bharatanatyam and charging fee as per the list placed at page no. 87 where the fee is in the range of Rs. 1,000/- to Rs. 12,000/-. Bharatanatyam is a classical dance which is popular all over India and as per the submission of the assessee, the assessee counsel, we noted that the students are getting training of Bharatanatyam, then how the Ld.CIT(E) has observed that the assessee’s activities are commercial in nature. On observation of the financial statement quoted by the assessee, we noted some difference in opening and closing balance of the case in hand in bank at the end of 31st March, 2024 and 1st April, 2024. This has to be reconciled which is quoted by the Ld.CIT(E) in his order at pages 4 and 5. Considering the facts of the case and in the interest of justice, we remit the issue back to the file of Ld.CIT(E) for fresh consideration and decision as per law. The Ld.CIT(E) is directed to give a reasonable opportunity of being heard to the assessee and assessee is directed to produce the necessary documents for substantiating its case and not to seek unnecessary adjournment for early disposal of the case. In case of failure, the second leniency shall not be granted to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 26th February, 2025.