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Facts
The appellant trust applied for approval under Section 80G of the Income Tax Act, 1961. The CIT(E) rejected the application on two grounds: commencement of activities and ineligibility of religious trusts under Section 80G(5)(iii). The Tribunal noted that the application was filed beyond the prescribed time limit, but a circular extended this limit. The primary issue became whether the trust was religious, and if a reasonable opportunity to be heard was provided.
Held
The Tribunal held that the applicant trust was not granted a reasonable opportunity of being heard before the rejection of its application. The short time between the show cause notice and the hearing date was insufficient for the applicant to respond adequately. Therefore, the case was fit for remand.
Key Issues
Whether the applicant trust was denied a reasonable opportunity to present its case regarding its eligibility for approval under Section 80G, and whether the rejection based on its religious nature was justified without proper hearing.
Sections Cited
80G, 80G(5)(iii), 12AB
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Income Tax Appellate Tribunal, JAIPUR BENCHES, “ A-Bench” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 780/JPR/2024
vkns'k@ORDER PER: NARINDER KUMAR, JUDICIAL MEMBER Appellant trust applied to Learned CIT(E), Jaipur on 30.09.2023 by filing an application in Form No. 10AB, for approval u/s 80G of the Income Tax Act, 1961(hereinafter referred to as “the Act”). Vide impugned order dated 28.03.2024, Learned CIT(E) rejected said application on the following two grounds:- Commencement of activities. Religious trust are not eligible u/s 80G(5(iii).
Parasmal Jain Bilaspuriya (Barjatya) Parmarthik Charitable Trust At the same time, it was clarified in the impugned order that the provisional approval dated 02.10.2021 under clause (iv) of first proviso to sub-section (5) of Section 80G of the Act was also being cancelled thereby.
That is why, the appellant is before this Appellate Tribunal, by way of this appeal.
Arguments heard. File perused.
As noticed above, the first ground for rejection of approval u/s 80G of the Act is that the applicant accepted to have been begun its activities from 05.11.2020, whereas the application in Form No. 10AB came to be filed beyond the prescribed period of six months, and as such, said application was not maintainable. Therefore, the first ground for rejection of the application actually was that the same was filed beyond the prescribed period of limitation, and not the ground of non-commencement of activities by the trust-applicant.
In the course of arguments, on behalf of the appellant, it has not been disputed that the appellant trust began its activities from 05.11.2020 itself. It is true that time limit has been prescribed under sub-section (5) of Section 80G of the Act for filing of such like application. Learned CIT(E) observed in the impugned order that CBDT never extended the time limit for filing of application under clause (iii) of first proviso to Section 80G of the Act.
Parasmal Jain Bilaspuriya (Barjatya) Parmarthik Charitable Trust 6. At this stage, it is pertinent to mention that the time limit for filing of application under clause (iii) of first proviso to section 80G of the Act came to be extended upto 30.6.2024, vide circular No.7, dated 25.4.2024 issued by CBDT. It is true that the application rejected vide impugned order came to be rejected on 28.3.2024 i.e. before the issuance of abovesaid circular. Learned AR for the applicant has submitted that already a fresh application under section 80G, in Form No.10AB has been presented before CIT(E). As noticed above, vide impugned order the application was rejected on merits i.e. on the ground that religious trusts are not eligible under section 80G(5)(iii) of the Act. But, as we are going to discuss hereinafter, reasonable opportunity of being heard was not granted to the applicant before disposal of the application, and the matter needs to be remanded. Therefore, having regard to the extension of period by CBDT vide circular No.7 dated 25.4.2024, we deem it a fit case where the application rejected deserves to be restored to its original number for fresh decision by learned CIT(E), so far as the second ground is concerned.
The second ground for rejection of the application of the appellant trust, as per impugned order, is that religious trusts are not eligible u/s 80G(5)(iii) of the Act and the applicant being a religious trust does not fall Parasmal Jain Bilaspuriya (Barjatya) Parmarthik Charitable Trust within scope of section 80G of the Act. In this regard, Learned CIT(E) has referred to the objects of the applicant trust as available in the original trust deed dated 05.11.2020 and the amendments dated 29.1.2024 made in the constitution of the Trust.
Ld. AR for the applicant has submitted that the applicant was not provided reasonable opportunity to explain its objects and that in case one more opportunity is provided to the applicant, the applicant would take steps to satisfy Learned CIT(E) that actually the applicant is not a religious trust. Therefore, he has urged that matter may be remanded to learned CIT(E) for decision afresh.
As per observations made in para 3.7 of the impugned order, show cause notice dated 11.03.2024 was issued to the applicant to furnish explanation, particularly, as regards the objects mentioned at Serial No. 1 and 2 of the amended Vidhan dated 29.01.2024, which revealed that the said objects were religious. As further observed in the impugned order, the applicant did not respond to the show cause notice as regards the activities which appeared to be religious in nature. Accordingly, he concluded that the applicant is actually a religious trust falling beyond the scope of section 80G of the Act.
Parasmal Jain Bilaspuriya (Barjatya) Parmarthik Charitable Trust 10. Impugned order is dated 28.03.2024. Show cause notice was issued to the applicant on 11.3.2024. Having regard to this short time between the date of issuance of the notice and the date of hearing, we find that had a reasonable opportunity been granted to the applicant of being heard, it might have been able to respond and explain its activities/objects particularly mentioned at Serial No. 1 and 2 of the amended Vidhan dated 29.01.2024. Ld. AR for the appellant has submitted that applicant trust has already been registered under section 12AB of the Act; that in that application nature of the activities of the applicant trust was specifically mentioned as “charitable activity” and there was no objection from the department like the one raised while passing the impugned order, and as such, the impugned order rejecting approval under section 80G deserves to be set aside. Learned AR has placed on record copy of application for registration submitted in Form No. 10AB i.e. under section 12 AB of the Act, where in column 3, nature of the activities have been described as “charitable”. In the course of arguments, Ld. DR for the Department has not disputed the factum of registration of the applicant-trust u/s 12AB of the Act, but, added that essential ingredients for grant of registration u/s 12AB of the Act are different from the essentials for approval u/s 80G of the Act, and as Parasmal Jain Bilaspuriya (Barjatya) Parmarthik Charitable Trust such, fact of registration u/s 12AB of the Act of the applicant does not come to the aid of the applicant while challenging the impugned order.
As per section 12AB of the Act, on an application under clause (ac) sub-section 12A of the Act, Principal of Commissioner or Commissioner is empowered to pass an order registering the trust or institution for a period of 5 years after specifying about genuineness of activities of the trust or institution. Section 80G(5)(iii) of the Act provides that the institution or fund established in India, should be for a charitable purpose and the institution or fund is not expressed to be for the benefit of any particular religious community or caste. It is true that as per Explanation 3 to section 80G, “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature. To explain the objects of the trust or to explain that the same are charitable purposes and do not include any purpose the whole or substantially the whole of which is of a religious nature, the applicant trust deserved reasonable opportunity of being heard. But, as noticed above, reasonable opportunity cannot be said to have been granted to the applicant trust before the application came to be rejected by Learned CIT(E).