Registration u/s 80G(5)(vi) denied as agreement likely to give benefit to trustees

Mauli Multipurpose Organisation Vs CIT (ITAT Pune)

ITAT Pune held that registration under section 80G(5)(vi) of the Income Tax Act not granted as the agreement gives benefit of the persons covered u/s. 13(3) of the Act.

Facts- The assessee sought registration u/s. 80G(5)(vi) of the Act. It is noted that the CIT(Exemption) opined that the assessee constructed the said building deriving funds from the trust on the land owned by the four trustees i.e. Shri balkrushna Dnyanoba Khandve, Shri Ashok Dnyanoba Khandve, Shri Bhausaheb Dnyanoba Khandve and Shri Tanaji Dnyoba Khandve. Therefore, according to the CIT(Exemption) that whatever educational activities are carried out, building constructed, funds invested in construction of building by the assessee are not protected and denied the registration u/s. 80G(5)(vi) of the Act.

Conclusion- Held that we note that the respondent-revenue vehemently contended that overall activity of construction of building as per the terms of the lease agreement direct benefit of the persons covered u/s. 13(3) of the Act which clearly violates the conditions mentioned u/s. 80G(5)(vi) of the Act. Further, the said lease agreement is not containing automatic renewal clause and the trustees can dispossess the assessee from the building constructed by the assessee from its funds. Further, it is brought to our notice that the CIT(Exemption) rejected the assessee’s application on two earlier occasions and this is the third application wherein the assessee has not made any efforts in modifying the lease deed as the case may be. As noted above as rightly pointed by the ld. DR if the registration u/s. 80G(5)(vi) of the Act is granted, the assessee is entitled to receive certain donations which are tax free being utilized for construction, development and the achievement of its objects etc. which goes to the hands of the lessors after the expiry of lease period of 30 years. We find there is no guarantee or protection given to the said tax free asset in the lease deed and will benefit the persons i.e. trustees covered u/s. 13(3) of the Act. Thus, we find no infirmity in the order of CIT(Exemption) and it is justified. Thus, the grounds raised by the assessee are dismissed.

FULL TEXT OF THE ORDER OF ITAT PUNE

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