2025 (7) TMI 1487 - AT - Income Tax

Rejection of application for approval of trust u/s 80G(5) - application assessee was rejected by CIT(E) pointing out certain clauses of their object which includes III(B)(1) - To establish and open branches in India or abroad. III(B)(9) - Objects of the company extend to the whole of India or anywhere for the interest of India - assessee vehemently urged that the assessee trust has amended their object/memorandum of association by removing such words abroad or anywhere wherever they appear in their object clauses and prayed for consideration of their application. HELD THAT - Considering the fact that assessee has now amended such portion of their object clauses about the places of activities and that application of assessee for approval of fund was not considered on merit therefore matter is restored back to the file of ld. CIT(E) to reconsider the matter afresh and to pass the order in accordance with law. Needless to direct that before passing the order CIT(E) shall allow reasonable opportunity to the assessee. The assessee is also directed to provide all necessary information to prove their object and activities of the ld. CIT(E). Appeal of assesseeis allowed for statistical purpose.

Summary

ISSUES:

Whether the rejection of the application for approval under section 80G of the Income Tax Act on the ground that the memorandum of association (MOA) contains clauses indicating intention to receive or utilize funds outside India is justified.Whether the assessee should have been given an opportunity to amend the MOA/object clauses before rejection of the application under section 80G(5).Whether the assessee fulfills the conditions for obtaining approval under section 80G(5) after amending the object clauses.

RULINGS / HOLDINGS:

The rejection of the application under section 80G(5) solely based on the presence of clauses in the MOA indicating possible receipt or utilization of funds outside India was not justified without allowing the assessee an opportunity to amend those clauses.The assessee was not given a reasonable opportunity to amend the object clauses before the rejection, which is contrary to principles of natural justice.Since the assessee has now amended the object clauses by removing references to activities "abroad or anywhere," the matter is restored to the file of the CIT(E) for fresh consideration on merits.

RATIONALE:

The court applied the statutory framework of section 80G of the Income Tax Act, 1961, which governs approval of trusts for tax exemption purposes, emphasizing the necessity for the objects of the trust to align with the provisions of the Act.The decision underscores the principle that before rejecting an application on technical grounds related to the MOA, the assessee must be given a reasonable opportunity to rectify or amend the object clauses.The ruling reflects adherence to the doctrine of natural justice, requiring that an applicant be heard and allowed to make amendments before adverse orders are passed.No dissenting or concurring opinions were recorded; the judgment directs reconsideration in accordance with law after allowing the assessee to provide necessary information and amendments.