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2020 (9) TMI 405 - AT - Income TaxExemption u/s 11 - Application for approval u/s 80G rejected - assessee-applicant, a Trust registered under M.P. Public Trust Act, 1951. It is also registered as a charitable institution u/s. 12AA - HELD THAT:- The question of carrying any activity in the nature of trade, commerce or business, is applicable only to the residuary class, i.e., ‘advancement of any other object of general public utility’, and not to the other categories of charitable purpose, as defined u/s. 2(15), viz. education, medical relief, etc. There could be an angle of genuineness as well inasmuch as income could only be at a normative level of receipt, so that any income beyond the same may indicate, or at least prima facie, non-genuineness of the receipt itself. In this regard, 98% of the agricultural receipt as income was explained by Shri Gupta, to be on account of absence of agricultural activity; the receipt being by way of rent, admitting of very low expenditure. Where, then, is the scope for the activity being regarded as commercial on that score? The income component at 27% to 33% for other divisions could be relevant only where it can said to exceed, rather by far, of the normative level, not defined or delineated. The objection of surplus or commercial activity by the ld. CIT(E) is thus not valid. The objection fails. Receipt by way of ‘medical associate share’ and ‘education associate share’ - Section 13(2)(a) r/w s. 13(1) shall operate to exclude sections 11 and 12, resulting in contravention of the condition of section 80G(5)(i). Yes, the entity/s using the facility may not be covered u/s. 13(3), for s. 13 to apply, but there is neither any explanation by the assessee nor any finding by the ld. CIT(E) qua this. Further, there is also the angle of genuineness. A more than adequate compensation could, on the other hand, imply routing of perhaps taxable income into the coffers of the assessee for being claimed exempt. That is, non-adequacy is impermissible even in the case of an excess or overcharge where the payer entity is generating taxable income, and irrespective of whether it is covered u/s. 13(3) or not. There being no finding qua this aspect, the matter is set aside to the file of the ld. CIT(E) for the same. Needless to add, he shall do so per a speaking order and after allowing reasonable opportunity of being heard to the assessee. The ld. CIT(E) shall, as explained hereinbefore, record his satisfaction qua each of the conditions specified in clauses (i) to (v) of sec. 80G(5) or, as case may be, specify reason/s for his non-satisfaction of any of the said conditions. A finding as to the non-genuineness of activity/s cannot be lightly issued, particularly considering that the applicant-trust has a long history, and the matter is to be decided on an objective assessment of the obtaining facts. The onus thereof is on the Revenue. That apart, adequacy of consideration entails the technical subject of valuation. The same is therefore to be approached with utmost care, and finding/s issued on a consideration of the totality of the facts and circumstances of the case, on the touchstone of reasonability. The onus to establish and justify its’ claim of adequacy, we may though clarify, is on the appellant-applicant inasmuch as the same represents a condition precedent for the grant of exemption. As regards agricultural income, the same is exempt u/s. 10(1), and does not therefore require its application for the objects of trust for being claimed exempt, even as argued before us. The same, however, is to utilized only for its purposes, i.e., either the expenses of the trusts or its’ objects. So utilized, it gets either consumed or becomes the trusts’ property, income from which is exempt upon being applied for charitable purposes. Appeal is allowed for statistical purposes.
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