Loading judgment…
Facts
Narayanasharma Tapovanam, a charitable trust registered u/s 12A, applied for regular approval u/s 80G. The CIT(E) rejected the application, citing the trust's involvement in religious activities (allegedly exceeding 5% of expenditure) and the application being time-barred, as it was not filed within six months from the commencement of activities.
Held
The Tribunal clarified that the 5% limit for religious activities under Section 80G(5) applies to total income, not expenditure, and the CIT(E) failed to provide details of religious activities. Citing a precedent, the Tribunal ruled that the application was not time-barred for trusts that commenced activities before provisional approval. The matter was remanded to the CIT(E) for a de novo disposal on merits.
Key Issues
1. Whether the application for 80G approval was time-barred. 2. The correct interpretation of the 5% expenditure limit for religious activities under Section 80G(5).
Sections Cited
12A, 80G, 80G(5)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Exemption), Kochi [CIT (E)] dated 28.03.2024.
Brief facts of the case are that the appellant is a public charitable trust formed with the object of dissemination of Brahmavidya and it was duly registered u/s. 12A of the Income Tax Act, 1961 (the Act) vide order dated 27.10.1998. The same was renewed under the new regime. The appellant trust was also granted
Narayanasharma Tapovanam provisional approval under the new regime for the period 2022-23 to 2024-25. The appellant made an application for grant of regular approval u/s. 80G of the Act on 28.09.2023 which was rejected vide the impugned order, primarily on the ground that the appellant trust was involved in religious activities and the application filed for regular approval was time barred. The application was rejected as the appellant failed the said application within 6 months from the commencement of activities.
Being aggrieved, the appellant is in appeal before us in the present appeal.
It is submitted that the order passed by the CIT(E) is illegal and arbitrary, inasmuch as, the CIT(E) misunderstood the term “religion” and it is further submitted that the application cannot be termed as time barred in view of several judgements of this Tribunal.
On the other hand, the CIT-DR vehemently opposed the arguments of the learned A.R. and submitted that no interference in the order of the CIT(E) by this Tribunal is warranted.
We have heard the rival contentions of both the parties and perused the material available on record. The appellant trust made application in Form 10AB under clause (iii) of first proviso to section 80G(5) of the Act on 28.09.2023 seeking regular approval. The said application came to be rejected on the ground that the appellant trust
Narayanasharma Tapovanam spent more than 5% of the total expenditure for religious activities and the application filed by it is barred by limitation. The CIT(E), vide para 4.3.2 gave a finding that more than 5% of the total expenditure was spent on religious activities. Firstly, the finding of the CIT (E) is erroneous, inasmuch as, what is to be considered is 5% of the total income, not 5% of the total expenditure as provided by sub-section 5 of section 80G of the Act. Secondly, the learned CIT(E) had failed to give the break-up of the expenditure incurred on religious activities. Thirdly, the learned CIT(E) had not given any details of the activities which are in the nature of religious activities. Thus the order passed by the learned CIT(E) suffers from ambiguity.
7. As regards the issue whether the application is barred by limitation, the issue is now stands settled by the decision of the Pune Bench of the Tribunal in the case of R.L. Education Sanstha vs. Commissioner of Income Tax (Exemption) [2024] 165 taxmann.com 577 (Pune Trib), the relevant portion is extracted as under: -
“6. We heard the Id. Departmental Representative and perused the material on record. In the present case, admittedly, the appellant trust has commenced the activities on 16.03.2011 even as on the date of grant of provisional approval on 01.10.2021. In this connection, for better appreciation relevant provisions of proviso to section 80G are extracted below: "Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner Narayanasharma Tapovanam to the Principal Commissioner or Commissioner, for grant of approval,- (i) (ii) (iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier; The literal interpretation of clause (iii) of proviso means that in case the institution has been provisionally approved, application in the prescribed form for grant of the requisite approval w/s.80G(5) is required to be made six months prior to expiry of the provisional approval or within six months of commencement of the activities whichever is earlier.
There can be two categories of institutions; (1) the institutions which had commenced the activity subsequent to the grant of provisional approval (2) the institutions which had commenced the activity much before the date of grant of provisional approval (2). No doubt, in the case of former category the literal interpretation of clause (iii) of proviso to section 80G(5) does not lead to any hardship, absurdity or injustice. It is only in the case of later category the literal interpretation leads to hardship, absurdity or injustice as it is impossible to comply with the time limits prescribed under the proviso which had commenced the activities six months prior to the date of grant of provisional approval. Thus, the provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature. In such a situation, it is now a settled rule of construction that the courts may modify the language used by the Legislature or even "do some violence" to it, so as to achieve the obvious intention of the Legislature and produce a rational construction vide Luke V. IRC (1996) 54 ITR Narayanasharma Tapovanam 692. The court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision.
In our considered opinion, in the light of the above discussion, a fair and reasonable construction clause (iii) of proviso to section 80G(5) would be to read into it a condition that in the place of word 'earlier' word "later" be substituted and can be read as under: "(iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is later, 9. We are also fortified in adopting the above construction by the decision of Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [198117 Taxman 13/131 ITR 597 (SC).
Adverting to the facts of the present case, undisputedly, the appellant trust commenced its actual activities on 16.03.2011 and in view of the above construction of clause (iii) of proviso to section 80G(5) the appellant trust is entitled to file the application for regular approval prior to six months of expiry of the provisional approval, ie., on or before 31.03.2024. Therefore, it cannot be said that the application filed by the appellant trust for grant of regular approval is barred by limitation prescribed under the proviso to section 80G(5). Therefore, the Id. CIT(Exemptions) is not justified in denying the grant of approval u/s.80G(5) to the appellant trust on the ground of delay in submission of Form No. 10AB. In the circumstances, we remand the matter to the file of CIT(Exemptions) with a direction to dispose of the denovo application on merits.”
8. In the light of the above decision, it cannot be stated that the application is barred by limitation. Hence, we are of the considered
Narayanasharma Tapovanam opinion that the matter requires remand to the file of the CIT(E) for de novo disposal of the application in accordance with law.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 28th January, 2025. 10.