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Facts
The assessee's application for approval under section 80G(5)(iii) of the Income Tax Act, 1961, was denied by the CIT(E) because the assessee did not reply to a notice regarding its micro finance activities. The CIT(E) concluded that the genuineness of the trust's activities could not be established. The assessee appealed this decision.
Held
The Tribunal found that the issue of whether micro finance is a commercial activity or a charitable one could have been resolved at the CIT(E)'s level. The Tribunal set aside the CIT(E)'s order and remanded the case back to the CIT(E) to provide the assessee an opportunity to present its case fully.
Key Issues
Whether the CIT(E) was justified in denying the approval under section 80G(5)(iii) without giving the assessee a proper opportunity to explain the nature of its micro finance activities.
Sections Cited
80G(5), 80G(5)(iii), Rule 17A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Appearances by: Assessee represented by : P.K. Ray, Ripan Chand Haldar Trideep Nayak ARs Department represented by : Raja Sengupta, CIT-DR Date of concluding the hearing : 18.06.2025 Date of pronouncing the order : 30.06.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER
This appeal arises from an order passed by the Ld. Commissioner of Income Tax (Exemptions), Kolkata, dated 26.12.2024, u/s 80G(5) of the Income Tax Act, 1961 (hereafter “the Act”).
1.1 In this case, the Ld. CIT(E) has recorded that a notice was issued on 17.12.2024 to enquire from the assessee regarding the Micro Finance Services purportedly rendered by them. It is a matter of record that the assessee did not file any reply to the said notices. Thereafter, the Ld. CIT(E) has held that the genuineness of the activities of the trust could not be established and therefore, the approval u/s 80G(5)(iii) of the Act was denied.
“1) That the impugned Order of the Ld. Commissioner of Income Tax (Exemptions), Kolkata is arbitrary, illegal, contrary to the material on records and in excess of his jurisdiction while Issuing the Order 2) That the Rejection of Registration u/s 80G(5)(iii): The Ld. Commissioner of Income Tax (Exemptions), Kolkata erred in law and fact having not to grant the benefit for granting Permanente exemptions u/s 80G(5)(iii) of the Income Tax Act, 1961 of the Institution without any prejudice, merely quoting in the order that "the genuineness of the activities of the trust is not established" under the Income Tax Act Although, the Appellant complied necessary Rule 17A of Income Tax Rules, 1962 for application along with requisition documents for application and also complied the section 80G(5)(m) time to time for granting exemptions under section 80G(5) of the Income Tax Act, 1961 Therefore, your Appellant prays before the Hon'ble Members of the Appellate Tribunal for direction to grant Permanente exemptions u/s 80G(5)(iii) of the Income Tax Act, 1961 against decision made by the Ld. of Commissioner of Income Tax (Exemptions), Kolkata The Appellant craves the leave of the Hon'ble Members of Income Tax Appellate Tribunal to urge further ground(s) at the time of hearing and to produce the documents in support of its argument, if required.”
Before us, the Ld. AR pointed out, with the help of a detailed paper book, that the activities of the trust were genuine and there was no doubt about the charitable nature of such activities. He stated that micro finance was not a commercial activity but was intended to benefit the relatively poorer sections society.
2.1 The Ld. DR relied on the impugned order and stated that the assessee did not avail of the opportunity provided to him for presenting the facts before the Ld. CIT(E).
We have carefully considered the averments of Ld. AR/DR and have also gone through the records before us. We find that the issue of whether micro finance is a commercial activity or is very much part and parcel of the charitable activities of the trust, could have been thrashed out at the level of Ld. CIT(E). Accordingly, we set aside the impugned order and remand the same back to the Ld. CIT(E) for affording an opportunity to the assessee, who would be expected to present the full facts before him.
Order pronounced on 30.06.2025