No conditions may be imposed on section 80G approval
Fact and Issue of the case
Briefly stated facts necessary for adjudication of the controversy at hand are: both the assessees being a charitable trust sought to grant approval with effect from assessment year A.Y. 2022-23 to A.Y. 2026-27 under section 80G of the Income Tax Act, 1961 after compliance with the necessary formalities. However, the PCIT vide impugned order granted the registration under section 80G of the Act, however, subject to the conditions to be complied with by the assessee which is under challenge before the Bench.
The appellants, Sir Ratan Tata Trust and Sir Dorabji Tata Trust by filing the present appeals, sought to set aside the impugned orders dated 01.010.2021 & 02.10.2021 passed by Principal Commissioner of Income Tax, Mumbai [hereinafter referred to as the PCIT] qua the assessment year 2022-23 to 2026-27on on identically worded grounds inter alia that :-
1. The Learned Principal Commissioner of Income-Tax (PCIT)/ Commissioner of Tncome-Tax (CIT) grossly erred in issuing order granting registration under section 80G of the Income Tax Act, 1961 (ITA) dated 02.10.2021 which imposed conditions on the basis of which the registration was granted, even though there is no provision in the ITA which permits the PCIT to grant conditional registration.
2. The PCIT failed to appreciate that there is no provision in ITA which permits withdrawal / cancellation of section 80G certificate / order.
3. The PCIT grossly erred in holding that the order granting registration is liable to be withdrawn in the circumstances specified in the order.
4. The appellant craves leave to add to, alter, amend and/or delete in all the foregoing grounds of appeal.
Observation of the court
The Court has heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. Undisputedly, the PCIT has granted the approval applied for by the assessee under section 80G of the Ac, however, subject to the conditions.
By examining the questions raised by the assessee trust qua according of approval sought for under section 80G of the Act, granted by the PCIT subject to certain conditions in the light of the provisions contained in the scheme of Income Tax Act, 1961 consequent upon the registration under section 12A, approval under section 80G of the Act sought for by the assessee cannot be subjected to any condition as there is an “inbuilt mechanism” to be complied with by the assessee after getting registration/approval under section 12AA and 80G of the Act. Furthermore, compliance of the conditions for section 11 & 12 of the Act by the assessee is to be examined by the Assessing Office (AO) during the assessment proceedings. The role of PCIT while according registration and approval under section 12A & 80G is only to make himself satisfied about the genuineness of the activities to be carried out by the assessee trust and compliance of such requirement of any other law for the time being in force by the trust or institution material to achieve its object and then to accord the registration and approval.
Moreover, assessee in this case has applied for approval under section 80G of the Act in form No.10AC as explained in column six of the impugned order i.e. 11-Clause (i) of first proviso to sub-section (5) of section 80G. Had the assessee moved to the PCIT under clause II & III of proviso 2 to section 80G then he would have been empowered to impose the condition. When in the instant case assessee has come up under clause I of sub section v of section 80G, no such condition can be imposed by the Ld. PCIT. So we are of the considered view that impugned order passed by the Ld. PCIT is not sustainable to the extent of imposing conditions in para 10(a) to (j) of the impugned order, in the eyes of law.
Consequently, approval granted by the Ld. PCIT under section 80G of the Act to the assessee is made absolute sans conditions laid down in para 10 of the impugned order. Hence, both the appeals filed by the assessee are allowed.
The tribunal ruled in favour of the assessee as tribunal was of the view that approval under section 80G of the Act sought for by the assessee cannot be subjected to any condition as there is an “inbuilt mechanism” to be complied with by the assessee after getting registration/approval under section 12AA and 80G of the Act.Ratan-Tata-Trust-Vs-CIT-ITAT-Mumbai-1