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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI TR SENTHIL KUMAR & SHRI MAKARAND V. MAHADEOKAR, ACCOUNTNAT MEMBER
आदेश/O R D E R
PER MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER:
The present appeal is filed by the assessee against the order dated 27.03.2023passed by Commissioner of Income Tax (Exemption), Ahmedabad (hereinafter referred as “Ld.CIT(E)”) rejecting the application for request to grant final registration u/s 80G(5) of the Income Tax Act, 1961 (hereinafter referred as “the Act”)
Shree Sattavis Kadva Patidar Pragati Mandal vs. CIT-Exemption Asst. Year : N.A.
The Grounds of Appeal raised by the assessee are as under:
The Ld. Commissioner of Income Tax Exemption- Ahmedabad erred in law and on facts in rejecting application seeking approval u/s 80G(5)(vi) of the Act, without appreciating facts and law of the case properly.
2. The appellant craves leave to add, amend, or alter the grounds of appeal at the time of hearing, if need arise.
Facts of the case:
The assessee is a trust registered under Gujarat Public Trust Act, 1950. The date of registration under the said act is 24.11.2015. The assessee was granted registration under section 12A of the Income Tax Act, 1961 vide Form 10AC dated 07.04.2022.
3.1 As per the application of registration u/s 12A of the Act in Form 10AB, the objects of the assessee are Education, Medical Relief and Advancement of any other object of general public utility (Clause 5 of form 10AB)
3.2 As per the translated copy of the Trust deed, the objects of the assessee trust are categorised in six heads namely Educational, Cultural, Social, Health Subjective, Rural development and Religious. Total numbers of objects are 46 out of which only 4 objects are of religious in nature.
3.3 The assessee trust was granted provisional registration u/s 80G on 07.04.2022 in Form 10AC. The application for regular registration u/s 80G (5) was filed by the assessee in form 10AB on 26.09.2022 which was rejected Shree Sattavis Kadva Patidar Pragati Mandal vs. CIT-Exemption Asst. Year : N.A. by Ld. CIT(E) stating that some of the objects of the applicant/assessee are religious in nature. While rejecting the application Ld. CIT(E) relied on some judicial pronouncements most prominently on the judgement of Hon’ble Supreme Court in the case of Upper Gange Sugar Mills Ltd. Vs. CIT, reported in 93 Taxman 645.
Aggrieved by the said rejection order, the assessee has filed an appeal before us.
On Merits:
The counsel for the assessee argued that the assessee is granted registration u/s 12A of the Act and at the time of filing application u/s 80G(5) in Form 10B it was specifically mentioned that it has not incurred any expenditure of religious nature in past three assessment years. In support of the same the assessee also submitted audited financial statements for past three assessment years i.e. FY 2019-20, FY 2020-21 and FY 2021-22 and it is clear from the profit and loss accounts of past three years that the assessee has not incurred any expenditure of religious nature.
5.1 The counsel for the assessee also argued that Ld. CIT(E) failed to appreciate that Judgement in case of Upper Gange Sugar Mills was rendered before insertion of provision of Section 80G(5B). He further argued that the said judgement cannot be made applicable to Trust which is predominately charitable in nature. Shree Sattavis Kadva Patidar Pragati Mandal vs. CIT-Exemption Asst. Year : N.A.
5.2 The counsel further argued that Ld. CIT(E) failed to appreciate that insertion of section 80G(5B) was made to nullify the effect of judgement of Hon'ble Supreme Court in case of Upper Gange Sugar Mills Ltd. and further to nullify the rigors of provision of Section 80G(5)(ii) r.w. Explanation 3 of the said section and the same is born out from the reading of CBDT Circular No.779 dated.14.09.1999 explaining provision contained in Section 80G(5B).
5.3 During the course of hearing, we asked whether any show cause notice was issued by Ld. CIT(E) to the assessee before rejecting the application for registration u/s 80G(5), to which the counsel for the assessee replied that no such notice was issued before passing the order of rejection.
On the other hand, Ld. DR relied on the order of rejection by Ld.CIT(E) and requested to uphold the same.
We have considered the rival submissions, perused the material available on record, judgement relied upon by Ld. CIT(E) and content of the CBDT Circular No.779 dated.14.09.1999. It is evident that the assessee trust is granted registration u/s 12A by the CIT(E) with the same objectives as enlisted in the trust deed.
7.1 Though the assessee trust is established with some of the objectives involved in certain religious activities, on perusal of the audited financial statements, more particularly from the Income& Expenditure account for the periods, submitted as a part of paper book and also as submitted to Ld. Shree Sattavis Kadva Patidar Pragati Mandal vs. CIT-Exemption Asst. Year : N.A.
CIT(E), it is not emanating that the assessee trust had incurred any expenditure on religious activities.
7.2 For the sake of clarity provision of section 80G(5B) is reproduced as under:
Notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply.
7.3 This non-obstante clause enables such trusts and institutions which are predominantly engaged in charitable activities, to get benefit of section 80(G). Therefore, the conclusion drawn by Ld. CIT(E) in para 8 of his order is not correct. The same is reproduced below–
“If any one of these objects is wholly, or substantially wholly, of a religious character, the institution or fund falls outside the scope of section 80G and a donation to it does not secure the advantage of the deduction that it gives.”
7.4 The judgement of Hon’ble Supreme Court in case of Upper Gange Sugar Mills Ltd. Vs. CIT (supra) is pronounced on 04-08-1997 i.e. before insertion of section 80G(5B) i.e. w.e.f. 01-04-2000.
7.5 CBDT Circular No.779, dated September 14, 1999 clarifies the intention of amending section 80G. Para 33.2 of the said circular clearly has explained the intent. Ld. CIT(E) has not taken into consideration the said circular before passing the order of rejection. For the sake of clarity the same is reproduced here –
33.2 In order to mitigate hardship to such funds or institutions, the provisions of section 80G are amended so as to provide that in case Shree Sattavis Kadva Patidar Pragati Mandal vs. CIT-Exemption Asst. Year : N.A. such institutions or funds spend up to five per cent. of their income during the relevant previous year for religious purpose, the benefit of deduction will not be denied to them.
7.6 It is specifically mentioned in the said circular that the provisions of clause (ii) of sub-section (5) of section 80G have been interpreted to deny the benefit to even such funds or institutions as are predominantly engaged in charitable activities but are either inspired to do charity by tenets of religion or spend negligible amounts on purposes other than charitable. We have taken note of this content.
7.7 At this juncture, it is also important to note that no show cause notice was issued to the assessee before rejecting the application under section 80G of the Act by Ld. CIT(E). The show cause notice holds immense significance in income tax proceedings, ensuring procedural fairness and safeguarding the rights of taxpayers. There are many judicial pronouncements which have reinforced the indispensability of this notice, emphasizing that orders issued without its adherence may be deemed invalid.
7.8 On perusal of financials, facts, and circumstances of the present case, after thoughtful deliberations, we are of the opinion that the order passed by Ld. CIT(E) is bad at law. We are of the considered view that the assessee trust having not spent any money on religious purposes, is eligible for grant of approval u/s 80G(5) of the Act, thus, set aside the order dated 27.03.2023 passed by Ld. CIT(E) with a direction to grant exemption/approval to the assessee trust, accordingly. In the result grounds of the appeal involving the sole issue raised by the assessee in the present case are allowed. Shree Sattavis Kadva Patidar Pragati Mandal vs. CIT-Exemption Asst. Year : N.A.
In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 8th May, 2024 at Ahmedabad.
Sd/- Sd/- (TR SENTHIL KUMAR) (MAKARAND V.MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad, Dated 08th /05/2024 आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ! / The Appellant 2. �"यथ! / The Respondent. 3. संबं&धत आयकर आयु(त / Concerned CIT 4. आयकर आयु(त ( अपील ) / The CIT(A)- (NFAC), Delhi 5. �वभागीय ��त�न&ध , आयकर अपील�य अ&धकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड1 फाईल /Guard file.