Donations are Lifeline of Charitable Trust: AO cannot deny Approval without verifying Activities, rules ITAT [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the donations are the lifeline for starting charitable activities of the assessee trust and the CIT(E) cannot deny approval without verifying the activities.

The assessee-trust had applied for a grant of recognition under section 80G of the Income Tax Act on 22.01.2020. The CIT(E) rejected the application under section 80G(5)(vi) of the Income Tax Act by holding that the assessee has not produced sufficient proof on the activities of the assessee-trust. The CIT(E) relied on the judgment of the Kerala High Court in the case of Self Employers Institution v. CIT and held that it is not possible to verify the genuineness of the activities of the assessee-trust.

The two-Member bench comprising Shri George George K, JM & Ms.Padmavathy S, AM found that the CIT(E) has refused to grant approval u/s 80G of the Act primarily for the reason that the assessee has not produced the necessary proof as regards the activities of the assessee-trust and in absence of the same it is not possible to verify the genuineness of the activities of the assessee-trust.

“We fail to understand how registration u/s 12AA of the I.T.Act has been granted on 23.03.2021 when the Officer concerned has not been able to examine the genuineness of the activities of the assessee-trust. The starting of activities of the trust is not a condition precedent for grant of approval u/s 80G of the I.T.Act. On receipt of the approval u/s 80G of the I.T.Act, the assessee would be receiving donations. The receipts of money through donations are the lifeline for starting the charitable activities of the assessee-trust. In the interest of justice and equity, we are of the view that the matter needs to be examined afresh by the CIT(E). Accordingly, the issue raised in this appeal is restored to the files of the CIT(E) for de novo consideration. It is ordered accordingly,” the Tribunal said.

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