2025 (5) TMI 1074 - AT - Income Tax

Denial of Registration u/s 80G(5) - donation was made to support Cultural activities and National Building activities but the assessee failed to submit documentary evidences in support of the same and thereby denied registration u/s. 80G(5)(iii) - HELD THAT - Submissions of the assessee are without proper materials and no evidences placed before us in support of the claim made by the assessee that the amount of Rs. 1, 00, 000/- used for the Celebration of Independence Day. In the absence of the same we do not find any merits in the claim made by the assessee Trust. Thus the ground raised by the assessee is devoid of merits and the same is liable to be dismissed. Appeal filed by Assessee is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal were:

• Whether the denial of registration under section 80G(5) of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption) was justified on the ground that the Trust made a donation to a political party during the relevant financial year.
• Whether the donation made to a political party could be construed as an activity in furtherance of the Trust's charitable objectives under education, health, cultural activities, social services, and rural development, thereby qualifying for exemption under section 80G(5)(iii).
• Whether the assessee Trust had discharged its burden of proof by submitting adequate documentary evidence to substantiate that the donation to the political party was for cultural and nation-building activities such as the celebration of Independence Day and distribution of national flags under a government scheme.
• Whether the rejection of registration due to the alleged failure to provide documentary evidence was legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of denial of registration under section 80G(5) due to donation to political party

Relevant legal framework and precedents: Section 80G(5) of the Income Tax Act, 1961, governs the registration of charitable trusts for the purpose of allowing donors to claim deductions on donations made to such trusts. The section mandates that the trust must apply its funds solely for charitable purposes and not for political activities or donations to political parties. The Act explicitly excludes donations to political parties from eligible charitable activities.

Court's interpretation and reasoning: The Tribunal noted that the Commissioner of Income Tax (Exemption) denied registration primarily because the assessee Trust had made a donation of Rs. 1,00,000 to a political party during the financial year 2022-23, as revealed in the audit report. The Tribunal acknowledged the statutory prohibition on donations to political parties qualifying for exemption under section 80G(5).

Key evidence and findings: The audit report clearly recorded the donation to the political party. The Trust contended that the donation was for cultural and nation-building activities, specifically the Independence Day celebrations and distribution of national flags under the "Har Ghar Tiranga-Azadi Ke Amrit Mahotsav" scheme. However, the Trust failed to produce any documentary evidence to substantiate this claim.

Application of law to facts: The Tribunal emphasized that mere assertions without documentary proof cannot override the statutory prohibition. The donation to a political party, regardless of the Trust's stated intention, is outside the permissible scope of charitable activities under section 80G(5).

Treatment of competing arguments: The Trust argued that the donation was inadvertent and intended for non-political, cultural purposes. The Tribunal found this argument unsubstantiated due to lack of evidence and held that the statutory framework does not permit such exceptions.

Conclusions: The Tribunal upheld the denial of registration under section 80G(5) on the ground that the Trust made a donation to a political party, which is impermissible.

Issue 2: Whether the Trust fulfilled conditions under section 80G(5) apart from the disputed donation

Relevant legal framework and precedents: Section 80G(5) requires compliance with various conditions including proper maintenance of books of accounts, application of funds solely for charitable purposes, and adherence to the objectives stated in the Trust deed.

Court's interpretation and reasoning: The Tribunal noted the assessee's submission that it complied with conditions (i) to (v) of section 80G(5), including proper accounting and filing of returns. However, the Tribunal observed that the critical issue was the disallowed donation.

Key evidence and findings: No documentary evidence was produced to support the claim that the donation was applied for cultural and nation-building activities. The Tribunal found that the absence of such evidence undermined the claim of compliance.

Application of law to facts: The Tribunal held that compliance with other conditions cannot compensate for the violation of the prohibition on donations to political parties. The Trust's failure to produce evidence on the use of the disputed donation was fatal to its claim.

Treatment of competing arguments: The Tribunal rejected the plea that the donation was made in good faith for public welfare purposes, emphasizing the strict statutory bar on donations to political parties under section 80G(5).

Conclusions: The Tribunal concluded that the Trust did not satisfy all conditions for registration under section 80G(5) due to the impermissible donation and lack of supporting evidence.

Issue 3: Whether the matter should be remanded for reconsideration

Relevant legal framework and precedents: Principles of natural justice and procedural fairness allow remand where there is a possibility of fresh evidence or reconsideration on relevant grounds.

Court's interpretation and reasoning: The assessee prayed for remand in the alternative. However, the Tribunal found no basis to remand since the assessee failed to place any documentary evidence before the Tribunal and did not indicate any new material to be produced on remand.

Key evidence and findings: Absence of any fresh evidence or indication of willingness to produce such evidence.

Application of law to facts: The Tribunal exercised discretion to dismiss the appeal rather than remand, as the fundamental legal bar on donations to political parties was clear and undisputed.

Treatment of competing arguments: The Tribunal did not find merit in the request for remand.

Conclusions: The appeal was dismissed without remand.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"The donation to a political party, irrespective of the stated intention of the Trust, is not eligible for exemption under section 80G(5) of the Income Tax Act, 1961."

"In the absence of documentary evidence to substantiate that the donation was applied for cultural and nation-building activities falling within the charitable objectives of the Trust, the claim for registration under section 80G(5) cannot be sustained."

"Compliance with other conditions of section 80G(5) is immaterial if the Trust has made donations to a political party, which is expressly prohibited under the statutory provisions."

The core principle established is the strict interpretation of section 80G(5) prohibiting donations to political parties for trusts seeking registration for tax exemption purposes. The Tribunal affirmed that bona fide intentions or inadvertent mistakes do not override statutory prohibitions.

Final determination: The appeal filed by the assessee was dismissed, and the denial of registration under section 80G(5) by the Commissioner of Income Tax (Exemption) was upheld.