2022 (9) TMI 1568 - AT - Income Tax

Grant of approval u/s.80G - Rejection of application observing that the activities of the assessee company are commercial in nature and the company has also not specified or explained for requirement of 80G approval for the company - Assessee granted registration u/s 12AA and the same is continuing - HELD THAT - Admittedly, the company was granted registration u/s 12AA and is still enjoying the same, in such a situation, finding of the authorities below that the activities of the trust are not charitable, holds no ground and are liable to be held erroneous. Another ground for rejection of the approval u/s 80G was that the company is involved in commercial activities selling of books/college bags/ etc apart from generating income from tuition fee/hostel fee/bus fee. On this aspect we are of the view that these are the activities incidental to the main and predominant object of the assessee company, which are for survival and fulfilment of the main objects, thus approval u/s 80G cannot be denied on this argument. This view of ours is find support from the finding of the coordinate bench of ITAT Mumbai in the case of Green Education Trust 2016 (6) TMI 979 - ITAT MUMBAI - CIT(E) has took a wrong stand in rejecting the application of the assessee in granting approval u/s 80G. We therefore of the view that the order of the Ld CIT(E) deserves to be set aside with a direction to grant approval u/s 80G to the assessee, as sought vide its application in form 10G. Consequently, the sole ground of the appeal of the assessee is allowed.

Summary

Issues:

1. Rejection of application for approval u/s.80G by CIT(E)
2. Charitable activities vs. commercial nature of the company
3. Consideration of generating surplus for denial of approval u/s.80G

Issue 1: Rejection of application for approval u/s.80G by CIT(E):

The appeal was filed against the CIT(E)'s order rejecting the application for approval u/s.80G. The CIT(E) observed that the company's activities were commercial and lacked justification for 80G approval. The appellant argued that it was involved in charitable activities and had not used income for non-charitable purposes. The appellant also highlighted the registration u/s 12AA and cited judicial precedents supporting eligibility for 80G approval. The Tribunal found the rejection unjustified, considering the company's charitable nature and activities.

Issue 2: Charitable activities vs. commercial nature of the company:

The CIT(E) based the rejection on the perceived commercial nature of the company's activities, including selling items and generating income from fees. The Tribunal disagreed, stating that such activities were incidental to the main charitable objectives. Citing a Mumbai ITAT case, it emphasized that educational activities, even if fees are charged, are considered charitable. The Tribunal also referred to a Supreme Court ruling that earning a surplus does not disqualify an educational institution from charitable status.

Issue 3: Consideration of generating surplus for denial of approval u/s.80G:

The CIT(E) denied approval based on the company's surplus generation and lack of demonstrated need for donations. However, the Tribunal referenced an Amritsar ITAT case, emphasizing that registration under 12AA and subsequent genuine activities should qualify for 80G approval. It highlighted the need for a positive satisfaction of stipulated conditions for approval. The Tribunal found the CIT(E)'s concerns regarding donations and potential misuse insufficient to deny 80G approval, directing the grant of approval to the appellant.

In conclusion, the Tribunal allowed the appeal, setting aside the CIT(E)'s order and directing the grant of approval u/s.80G to the appellant. The decision was based on the company's charitable nature, incidental commercial activities, and compliance with registration requirements under 12AA. The Tribunal emphasized the importance of genuine activities and positive satisfaction of conditions for 80G approval, rejecting concerns over surplus generation and donation needs as grounds for denial.