Rajendra Singh, A.M:— This appeal by the assessee is directed against the order dated 23.11.2009 of Director of Income tax (Exemption) [DIT(E)] under section 80G of the Income tax Act, 1961 (the Act) rejecting the application of the assessee.
2. Briefly stated the facts of the case are that the assessee who is a Trust registered under section 12A of the Act had filed application dated 8.4.2009 before the DIT(E) for grant of certificate under section 80G of the Act. DIT(E) after examination of income and expenditure account for the year ending 31.3.2007 observed that the assessee had expended an amount of Rs. 11,41,685/- on religious activities out of total income of Rs. 1,48,75,083/- for the said year. The assessee had thus exceeded the monetary limit of 5% of total income to be spent on religious activities under the provisions of section 80G(5B) of the Act. The DIT(E) asked the assessee as to why application for grant of certificate under section 80G should not be rejected. The assessee explained that only in Assessment Year 2007-2008 expenses incurred were more than 5% i.e 7.68% and also explained that in the Assessment Years 2008-2009 and 2009-2010 these expenses were substantially lower than 5%. The assessee also undertook not to exceed the limit in future. It was accordingly requested that certificate may be granted. DIT(E) however did not accept the contentions raised. It was observed by him that there was no provisions to condone any infringement of the statutory provisions contained in section 80G(5B). He, therefore rejected the application filed by the assessee under section 80G, aggrieved, by which the assessee is in appeal before the Tribunal.
3. Before us the ld. AR for the assessee submitted that the applicant Trust was running a school in Pune, a hospital in Vasavad and a Gaushala at Gondal. The applicant was thus engaged in charitable activities. Some expenditure had however been incurred on religious activities. Expenditure of Rs. 11,41,685/- out of total expenditure of Rs. 1,48,75,083/- had been shown under the head religious activities. The details of such expenses, it was pointed out, were available at page-4 of the paper book. The details of expenditure show that a sum of Rs. 1.75 lacs which had been shown on account of Late TDN Charitable Trust, Rs. 19,750/- on account of Hareshbhai for donation of computer system, Rs. 5.00 lacs on account of Shree J.L Sangh and Rs. 46,435/- on account of Shree Vasavad Gram Panchayat Kacheri paid to Praful Engg. for the purchase of submersible pump and electrical items for the gram panchayat. It was pointed out that details of these expenses have not been examined and therefore, it was not clear whether expenditure also included expenditure on charitable activities. It was submitted that details of these expenses had been given but the same had not been examined. It was accordingly requested that the matter may be referred back to DIT(E) for fresh examination. The ld. DR expressed no objection in the matter.
4. We have perused the records and considered the matter carefully. The dispute is regarding grant of certificate/registration under section 80G of the Act. Sub-Section 5B of section 80G has put a limit of 5% of total income on religious activities and therefore, in case expenditure on religious activities exceeds 5% limit, the exemption under section 80G cannot be granted. In this case the assessee had shown expenditure of Rs. 11,41,865/- out of total income of Rs. 1,48,75,083/- which comes to Rs. 7.68%. Such expenditure had been shown as “religious”. However details of these expenses have not been examined. The details filed in paper book and as pointed out by the ld. AR do not show clearly whether entire such expenditure was expended on religious activities. In our view, without making any detailed examination of the expenditure, it is not possible to arrive at any conclusion, whether the entire expenditure was religious in nature. It is a settled legal position that nomenclature of the expenditure is not conclusive in deciding the true nature of expenditure. We therefore, set aside the order of the DIT(E) and restore the matter back to him for passing a fresh order after detailed examination of expenditure and after allowing opportunity of hearing to the assessee.
5. In the result, the appeal of the assessee is allowed for statistical purposes.
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