S. 80G registration can be rejected for conducting Bhagwat Katha if expense exceeds 5% of income
The assessee-trust registered under section 12A and also approved under section 80G(5) was found to have more then 3/4th of of its total receipt for organizing ‘Bhagwat Katha’; section 80G(5B) limits expenditure on activities of religious nature to 5% of income for year; since expenditure in instant case exceeded 5% and violated section 80G(5B), approval under section 80G was withdrawn with observation that Bhagawat Katha is religious notwithstanding its public character and being open to all castes and religions.
INCOME TAX APPELLATE TRIBUNAL, JAIPUR
ITA No.1242/ JP/2010 Section 80G
M/s. Shiv Ratan Rathi Foundation Vs. The CIT
PER N.L. KALRA, AM:-
The assessee has filed an appeal against the order of the ld. CIT, Kota dated 14-09-2010.
2.1 The grounds of appeal raised by the assessee are as under:-
1. That the ld. CIT, Kota has grossly erred in rejecting application filed by Shiv Ratan Rathi Foundation (wrongly mentioned as Shri Ratan Rathi Foundation in the grounds of appeal) for grant to exemption u/s 80G(5) of Income Tax Act, 1961.
2. That the ld. CIT, Kota has erred in holding that the activities of the Shiv Ratan Rathi Foundation (wrongly mentioned as Shri Ratan Rathi Foundation in the grounds of appeal) are in-genuine and it is not engaged in charitable activities.
2.2 The assessee was granted registration u/s 12A(a) of the Act vide order dated 10th March, 1999. The assessee was also given approval u/s 80g for the period from 1-4-2007 to 31-03-2010. For further extension of approval u/s 80G, the assessee filed an application on 19-03-2010. On this application, the ld. CIT has not allowed approval. The ld. CIT noticed that the assessee in the financial year 2007-08 received the donation of Rs. 14.53 lacs and out of which a sum of Rs. 11,34,061- was spent on ‘Bhagwat Katha’. The ld. CIT was of the opinion that assessee is not a charitable trust but a religious trust and accordingly has not approved the trust for the purpose of Section 80G of the Act.
2.3 We have heard both the parties. The assessee has filed the income and expenditure account for the financial year 2006-07, 2007-08 and 2008-09. It is true that the assessee received donations of Rs. 14,53,300/- in the financial year 2007-08. It was stated that the programme of ‘Bhagwat Katha’ was for all the persons of different religions and the donations was received for conducting such ‘Bhagwat Katha’. It is not the case of the revenue that the persons who have given the donations have claimed the deduction out of taxable income. In other financial years, the donations are to the extent of Rs. 1,65,700/- and Rs. 72,307/-.
2.4 The CBDT vide its circular No.7/2010 dated 27-10-2010 has referred to the amendment made in Section 80G(5) as proviso to Section 80G(5)(vi) has been omitted . Earlier ld. CIT was to allow the approval u/s 80G for five years. Due to removal of proviso, the Board has clarified that the existing approval expiring on or after 1-10-2009 shall be deemed to have been extended in perpetuity unless specifically withdrawn. Thus the assessee was not required to request for approval u/s 80G of the Act and the approval granted earlier upto 3 1-03-2010 is to be treated as in perpetuity. Thus the order of the ld. CIT is not valid in view of Board’s Circular no. 7/2010. Hence the order of the ld. CIT is cancelled as there is no requirement of granting approval. It is not a case where 80G approval has been withdrawn.
3. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 08-07-2011