TMI Blog2015 (1) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... in issuing direction to grant recognition to the Trust u/s 80G(5) – Decided against revenue. - TAX APPEAL NO. 1191 of 2014 - - - Dated:- 11-11-2014 - MR. KS JHAVERI AND MR. K.J.THAKER, JJ. MR PRANAV G DESAI, ADVOCATE FOR THE APPELLANT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is an appeal by the appellant- revenue, challenging the order of the ITAT, Rajkot (for short, the Tribunal), Dated : 29.05.2014, rendered in ITA No. 168/Rjt/2014, whereby, the Tribunal allowed the appeal filed by the Respondent-Trust. 2. The brief facts of the case are that the Respondent-Trust made an application for recognition under Section 80G(5) of the Income Tax Act, 1961 ( the Act , for short), in the prescribed format before the appellant. A report was called by the appellant from its field office and pursuant thereto the application of the Respondent-Trust came to be rejected on the ground that the Respondent-Trust had failed to spent 85 per cent of the amount for the A.Y. 2013-14 relevant to F.Y. 2012-13. Being dissatisfied with the same, the Respondent-Trust preferred an appeal before the CIT(A), which dismissed its appeal. Therefore, the Respondent- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refused the application for registration under Section 80G(5) of the Act on the ground that in the past for some period the petitioner had not applied 75% of the income of the trust for the purpose of trust. While considering the aforesaid and the scope of the inquiry at the time of recognition under Section 80G(5) of the Act by the appropriate authority, the Division Bench has observed and held as under: From the aforesaid it appears that the sole ground that has prevailed with the CIT in refusing the application is that because in the past for some period the petitioner has not applied 75 per cent of the income of the trust for the purposes of the trust, therefore, the income of the assessee was liable to be included in the taxable income and the assessee did not fulfill the condition of s. 80G(5)(i) of the Act. It would be apposite here to reproduce the relevant provisions of s. 80G(5)(i) of the Act. Where the institution or fund derives any income such income would not be liable to inclusion in its total income under the provisions of ss. 11 and 12 [or clause (22) or clause (22A) or clause (23) or clause (23AA) or clause (23C) of s. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund would ultimately be liable to inclusion in its total income at the close of assessment year or not cannot be determined at the time of making of donation. The eligibility of the donation for deduction has to be considered with reference to the point of time at which donation is made and not with respect of the time in future depending on assessment of the donee. That is where the use of the verb in future tense 'would' has been used and not in present or past perfect tense so as to take into consideration the actual inclusion or exclusion or the extent of inclusion or exclusion. The direct nexus of clause (i) of subs. (5) of s. 11(1), appears to us, is to the eligibility of the institution or the fund to claim that its income is not liable to be included in computation of total income. The two are different concepts. First, whether an institution or fund is such whose income is not liable to be included in the computation of total income it depends on its status or character. The second is actual assessment of income, which necessarily takes place in future after donation is received by the donee on fulfillment of other conditions about application of income by the el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses under a trust is not included in the total income of the previous year of the persons in receipt of the income where any such income has accumulated or set apart for application to such purposes in India to the extent to which the income so accumulated or set apart is not in excess of 25 per cent of the income from such property. In clause (d) of subs.(1) of s. 11 income in the form of voluntary contributions made with a specific direction that they shall for part of the corpus of the trust or institution, that is to say, donations made with directions that the donation shall form part of corpus of the trust or institution are also not includible in the income of the trust. It may be further observed that merely because the accumulation of the income from property exceeds 25 per cent it does not result in inclusion of the entire income in the taxable income of the assessee. The two conditions speak out, firstly, that income derived from property to the extent to which such income is applied to such purposes in India is not to be included in the computation of total income and it is only where there is accumulation of income, such accumulation exceeds 25 per cent shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for what benefit approval is accorded. Explanation 2 to s. 80G(5) which tells in no uncertain terms that a deduction to which the assessee is entitled in respect of donation made to an institution or fund to which subs. (5) applies shall not be denied merely on either or both the following grounds, namely, that any part of income of the institution or fund has become chargeable to tax due to noncompliance with any of the provisions under s. 11, s. 12 and/or s. 12AA and under clause (c) of subs. (1) of s. 13 the exemption under s. 11 or 12 can be denied to an institution or fund in respect of income accruing or arising to it from any investment referred to in clause (h) of subs. (2) of s. 13. Likewise, the institution or fund whose income is not to be included in the taxable income of the recipient under provisions of s. 10, namely, clause (22) or clause (22A) or clause (23) or clause (23AA) or clause (23C) would go to show that these clauses identified different institutions for the purpose of granting exemptions, some of which require approval by publication in Official Gazette, some of which require to bear a particular character or the like. Once that character or the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it is registered under s. 12A, whether it is a trust wholly for charitable purposes or religious purposes, and whether income received by it is liable to be considered under s. 11, but it does not go beyond that to examine as an AO whether the income received by it at the close of any particular year or years was or was not actually be included in taxable income in the past. This consideration must be whether the income receivable by it will or will not be liable to be considered for exclusion under s. 11. Such enquiry obviously cannot include in enquiry whether at the close of previous year the donee will actually be able to sustain such claim because of fulfillment of some conditions by him as to applicability or accumulation of income, as it is not possible to predicate that in praesenti when donation is made. As we have noticed above, that question would depend upon the facts existing at the close of the assessment year and at the time of considering the application it cannot be examined in the light of what is going to happen in pending assessments in respect of which approval certificate was already existing and assessment of which would not affect the donations made to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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