Sec. 80G Approval Rightly Rejected as Trust Wants to Construct Building Diverging from Granted Charitable Objectives

Case Details: Gurjar Kalyan Parishad v. Commissioner of Income-tax (Exemption) - [2023] 155 taxmann.com 170 (Delhi-Trib.)

Judiciary and Counsel Details

• • Pradip Kumar Kedia, Accountant Member & Yogesh Kumar U.S., Judicial Member
  • Waseem Arshad, CIT (Ld. DR) for the Respondent.

Facts of the Case

The assessee had been given registration under section 12AA. It applied for approval under section 80G. The application filed by the assessee was rejected by the Commissioner (Exemption) on the ground that the assessee’s true intention was primarily to construct a building, with no clear alignment with its stated charitable objectives for which section 12AA registration was granted.

Notably, the assessee accumulated substantial funds for building construction, even though the funding was supposed to come from MPLADS and the construction was to be carried out by the Government of Haryana. Moreover, the assessee failed to provide evidence that the funds raised were transferred to the Government of Haryana as intended. Consequently, the Commissioner rejected the approval under section 80G.

Aggrieved by the order, the assessee filed an appeal to the Delhi Tribunal.

ITAT Held

The Tribunal held that the Commissioner (Exemption) while deciding the application for approval under section 80G, found that as per the agreement between the assessee and the Government of Haryana, the Government shall construct Patel Gurjar Bhawan. On the recommendation of the Member of Parliament as per the guidelines of the Member of Parliament Local Area Development Scheme(MPLADS), the constructed building was to be handed over to the assessee.

By examining the clauses of the agreement, the CIT found that the expenditure for the building was to be financed from the MPLAD Scheme, and construction was to be undertaken by the Government of Haryana till the building was handed over to the Society.

Even though funding was supposed to come from the Member of Parliament local area development scheme and construction was to be carried out by the Government of Haryana, the assessee’s true intention was primarily to construct a building with no clear alignment with its charitable objectives.

Accordingly, there was no error or infirmity in the Commissioner’s order (Exemption) rejecting the application for approval under section 80G.