Swaminarayan Bhaktidham, Dwarka Charitable Trust, Dwarka V. The CIT(Exemption), Ahmedabad, Ahmedabad

ITA 102/RJT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3676 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-02-2024
• Assessment Year: misc
• Appeal Filed On: 17-04-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL DATTANI
• Keywords: Charitable institution
• Section: 80G; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o .1 0 2 /R j t /2 02 3 ( A s s e s s me nt Y ea r : N. A .) S w a min ar a ya n B h a k ti dh a m D w ar k a C h a r ita bl e Tr u s t , S w a min ar a ya n B h a k ti dh a m D w ar k a, A mb uj a N a ga r, D w ar k a-36 13 3 5 V s .Co mm i s s i on er of I n c o m e Ta x (Ex e m pt io n ) , Ah me da b ad [ P A N N o. A A U T S2 60 7 R ] (Appellant) .. (Respondent) Appellant by : Shri Vipul Dattani, A.R. Respondent by: Shri Shramdeep Sinha, CIT DR D a t e of H ea r i ng 13.02.2024 D a t e of P r o no u n ce me nt 23.02.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (in short “Ld. CIT(E)”), Ahmedabad vide order dated 21.02.2023. 2. The assessee has taken the following grounds of appeals:- “1. The order of the Learned Commissioner of Income Tax (Exemption) is contrary to the provision of law and is bad in law. 2. The order of the Learned Commissioner of Income Tax (Exemption) is erroneous on facts and in law. 3. The Learned Commissioner of Income Tax (Exemptions) is erred in drawing incorrect conclusions from facts. ITA No.102/Rjt/2023 Swaminarayan Bhaktidham Dwarka Charitable Trust vs. CIT(E) Asst.Year –N.A. - 2 - 4. The Learned Commissioner of Income Tax (Exemptions) has erred that activities and objectives of Trust are of religious in nature. In fact, activities and objectives of trust are charitable in nature. 5. In the facts and circumstances of the case and in law the Ld. CIT (Exemption) erred in rejecting the application of registration made by the appellant u/s 80G(5)(vi) of the Income Tax Act, 1961. 6. Appellant craves liberty to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. The brief facts of the case are that the assessee filed application for approval of trust under Section 80G of the Act in Form No. 10AB on 16.08.2022. In response to the application filed by the assessee, Ld. CIT(E) issued notice dated 17.11.2022 and another notice dated 23.12.2022, in response to which the assessee filed it’s replies. On perusal of the details / documents filed by the assessee, Ld. CIT(E) observed that the assessee has mentioned that one of the objects of the trust is “religious” in nature. Accordingly, Ld. CIT(E) rejected the application of the assessee with the following observations:- “7. The provisions of sec 80G(5) stipulates that the said section applies to any donation or any institution or fund referred to in sub-clause (iv) of clause (a) of subsection (2), only if it is established in India for a charitable purpose and if it fulfils other conditions mentioned therein. The provisions of sec 80G(5)(ii) of the Act, stipulates that the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose and the sec 80G(5)(iii) of the Act stipulates that the institution or fund is not expressed to be for the benefit of any particular religious community or caste. The plain reading of said provisions of the Act makes it evident that the provisions of sec 80G(2)(a)(iv) of the Act is applicable only to such institution or fund which is established in India for Charitable purposes, there is no provision for transfer or application of fund for any purposes other than a charitable purpose. However, the sec 80G(5B) of the Act further prescribes that 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. 8. The Hon'ble Supreme Court in the case of Upper Ganges Sugar Mills Ltd vs CIT, reported in 93 Taxman 645, while adjudicating similar issue u/s 80G of the Act has held as under: ITA No.102/Rjt/2023 Swaminarayan Bhaktidham Dwarka Charitable Trust vs. CIT(E) Asst.Year –N.A. - 3 - 8. Section 80G applies to donations to any institution or fund established in India ‘for a charitable purpose’.’ Charitable purpose, for the purposes of the section, does not include any purpose the whole or substantially the whole of which is of a religious nature’. [Emphasis supplied] Explanation 3, which uses this phraseology, takes note of the fact that an institution or fund established for a charitable purpose may have a number of objects. 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. 9. The judgment of this Court in Addl CIT v. Surat Art Silk Cloth Mfg. Association [1980] 121ITR 1/[1979] 2 Taxman 501 , cited by the learned counsel for the assessee, was delivered with reference to the true meaning of the words 'not involving the carrying on of any activity for profit' occurring at the end of the definition of 'charitable purposes' in section 2(15) of the Act. This Court said that if the primary or dominant purpose of the trust was charitable, another object which by itself may not be charitable but which was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or the institution from being a valid charity. The judgment is of no assistance in construing Explanation 3 of section 80G. 10. To reiterate, 'Explanation 3 does not require the ascertainment of whether the whole or substantially the whole of the institution or fund's charitable purpose is of a religious nature. If it did, it would read differently. It requires the ascertainment of whether there is one purpose within the institution or fund's overall charitable purpose which is wholly, or substantially wholly, of a religious nature. There is little doubt that clause 2(h) of the trust deed which permits the trustees 10 support prayer halls and places of worship sets out a purpose the whole or substantially the whole of which is of a religious nature, and this has not been seriously disputed. Therefore, in our view, the Trust and the donation by the assessee to it fall outside the scope of section 80G." The above referred provisions of sec 80G of the Act make it amply clear that the applicant/assessee has to be established only for charitable purposes and there is no transfer or application of funds for any purposes, other than a charitable purpose, subject to concession granted to the extent to the extent of 5% of total income as per sec 80G(5B) of the Act. It is not the case, that the provisions of sec 80G(5B) of the Act is applicable to any trust/fund established for any purposes other than charitable purpose, i.e. religious or charitable cum religious purposes. Similar law has been laid down by the Hon'ble ITAT Agra in the case of Yug Chetna Parmarth Trust, reported in 44 taxmann.com 446, wherein the Hon'ble Tribunal has held as under. "Section 80G(5B) is also not in contravention of provisions of section 80G(5) of the IT Act because it clarifies the position that the assessee trust when incurred expenditure on religious activities, which is less than 5% of the total income would be deemed to be Institution or fund, to which the provisions of this section apply. The small percentage of amount not exceeding 5% provided in this section clearly prove that the assessee shall have to establish on record that it existed and established for charitable purpose only and while incurring the expenditure during any previous year, which is of a religious nature for an amount not exceeding to 5% of its total income for that previous year, shall be deemed to be an Institution or fund to which the provisions of section shall apply. The benefit of section 80G(5B) is thus provided to limited extent to the Institution or trust or fund, established for charitable purpose only when it incurs expenditure on religious activities not exceeding 5% of its total income in that previous year. This provision did not say that the assessee trust or fund should not exist or establish for charitable purpose." ITA No.102/Rjt/2023 Swaminarayan Bhaktidham Dwarka Charitable Trust vs. CIT(E) Asst.Year –N.A. - 4 - 9. As discussed above, the applicant/assessee, itself has accepted that one of its objects is religious in nature. Therefore, the applicant/assessee has violated the above referred provisions of the Income Tax Act and hence the applicant/assessee is not entitled to get approval u/s. 80G(5) of the Income Tax Act therefore the present application filed in Form 10AB is liable to be rejected. 10. Looking to the above facts, the present application filed in Form No. 10AB for the approval u/s. 80G(5) of the IT. Act, 1961, is "rejected".” 4. The assessee is in appeal before us, against the order passed by Ld. CIT(E) rejecting it’s application for grant of registration. The Counsel for the assessee submitted that Ld. CIT(E) has rejected the application for registration under Section 80G(5) by holding that assessee has mentioned in Form No. 10AB that one of it’s objects is “religious” in nature. Before us, the Counsel for the assessee submitted that on perusal of the trust deed submitted before Ld. CIT(E), it can be seen that the objects of the trust which have been mentioned are medical relief, educational objects, general public utility, preservation of environment etc. It was submitted that there was a mistake in Form No. 10AB (Point No. 5) wherein the assessee had selected one of the objects as “religious” object, inadvertently. However, the fact that the assessee is carrying out religious activities is evident from copy of trust deed, which was submitted before Ld. CIT(E). Further, the Counsel for the assessee submitted that in the order passed by Ld. CIT(E) there is no mention as to which specific object of the trust is being considered as “religious” in nature. Further, the Counsel for the assessee submitted that in Form No. 10AB at Point No. 3, the applicant had mentioned that the nature of activities are charitable only. Further, in the said Form No. 10AB at Point Nos. 27a, 27b (at Page 114 of the Paper Book), the applicant trust had specifically mentioned that the trust has not incurred any expenditure of “religious” nature. However, Ld. CIT(E) simply rejected the application filed by the applicant without properly ITA No.102/Rjt/2023 Swaminarayan Bhaktidham Dwarka Charitable Trust vs. CIT(E) Asst.Year –N.A. - 5 - analyzing the application for grant of registration under Section 80G(5) of the Act, without even specifying which of the objects of the applicant trust, as per the trust deed submitted before Ld. CIT(E), was religious in nature. Further, the Counsel for the assessee also submitted before us that no expenditure towards religious activities was incurred by the applicant trust during the previous year under consideration. Accordingly, it was submitted that the action of Ld. CIT(E) in rejecting the application of the assessee was wholly misconceived since Ld. CIT(E) summarily rejected the application filed by the assessee without analyzing the facts of the assessee’s case. 5. In response, Ld. D.R. relied on the observations made by Ld. CIT(E) in the order passed by him. 6. We have heard the rival contentions and perused the material on record. On the perusal of the order passed by the Ld. CIT(E), we observe that Ld. CIT(E) while rejecting the application filed by the assessee has summarily rejected the application without analyzing the facts of the assessee’s case. Ld. CIT(E) has not pointed out any specific object in the trust deed which could be termed as “religious” in nature. Further, Ld. CIT(E) has also not analyzed whether any expenditure was incurred by the applicant towards “religious” purposes. We also observe that the applicant had filed written submissions on two occasions and there has been no non- compliance on part of the applicant trust in response to notices issued by Ld. CIT(E). However, Ld. CIT(E) did not confront the applicant trust with regard to it’s observation that one of the objects of the assessee trust is religious in nature and simply proceeded to dismiss the application filed by ITA No.102/Rjt/2023 Swaminarayan Bhaktidham Dwarka Charitable Trust vs. CIT(E) Asst.Year –N.A. - 6 - the applicant without provided any opportunity of hearing to the applicant to rebut the findings made by Ld. CIT(E) which formed the basis of rejection of application by the applicant trust. Accordingly, looking into the instant facts, in the interest of justice, the matter is being restored to the file of the Ld. CIT(E) for de-novo consideration after giving due opportunity of hearing to the assessee, in accordance with law. 7. In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 23/02/2024 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 23/02/2024 TANMAY, Sr. PS TRUE COPY 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 आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation 21.02.2024 2. Date on which the typed draft is placed before the Dictating Member 21.02.2024 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 22.02.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement .02.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 23 .02.2024 7. Date on which the file goes to the Bench Clerk 23 .02.2024 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Dispatch of the Order.......................................