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Facts
The assessee, Oriental's Ardaas Foundation, appealed against the order of the CIT(Exemption) which dismissed their applications for registration u/s 12AB(1)(b)(ii)(B) and u/s 80G(5)(iii)(B)(b). The CIT(E) was of the view that the assessee failed to provide justification for the genuineness of the charitable activity, stating that no genuine activity had been carried out.
Held
The Tribunal held that it was too early to infer commercial nature of the activity. The material on record substantiated the assessee's claim of intending to run an old age home. Therefore, the conclusions drawn by the CIT(E) could not be sustained.
Key Issues
Whether the rejection of applications for registration u/s 12AB and 80G was justified, given the stage of development of the proposed charitable activity.
Sections Cited
12AB(1)(b)(ii)(B), 80G(5)(iii)(B)(b), 2(15)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: E : NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the assessee against the orders dated 28.09.2024 of the Commissioner of Income-tax (Exemption), Delhi passed u/s 12AB(1)(b)(ii)(B) and 80G(5)(iii)(B)(b), respectively of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), where by the respective applications were dismissed.
On hearing both the sides, we find that primarily the assessee’s applications u/s 12AB(1)(b)(ii)(B) of the Act has been dismissed leading to dismissal of application u/s 80G of the Act as the ld.CIT(E) [hereinafter referred to as the ‘ld. Competent Authority’] was of the view that the assessee has failed to provide necessary justification in support of the genuineness of the charitable activity. It was concluded by the Competent Authority that no genuine activity has been carried out by the applicant towards the stated objectives and the intended activity of the applicant does not come under the purview of ‘charitable activity’ as per the provisions of section 2(15) of the Act. The relevant findings of competent authority are reproduced below; “3. On a perusal of the submissions, it is seen that the applicant has not shown any charitable activity. The primary activity as submitted by the applicant is that it intends to set up an old age home for senior citizens. Accordingly, the issues are discussed as under:
3.1 From the perusal of the submissions made by the applicant, it is seen that the applicant has shown payments/donations made to various individuals/organizations in FY 2021-22 to FY 2023-24. However, the applicant has not submitted any beneficiary details for the said donations and has also not submitted the purpose for which such payments/donations have been made. The applicant has also not submitted how these payments/donations align with its stated objects, which is of intending to start an old age home.
3.2 The applicant has submitted that it intends to build old age home for senior citizens and provide various facilities to the senior citizens. The applicant submitted copies of sale deed dated 15.04.2021 related to acquiring of land of about 4.82 acres at Dhunela, Sohna, Haryana for the purpose of construction of old age home facilities. Further, from the project details related to the setting up of old age home by the applicant, the services proposed to be provided at the old age home seemed commercial in nature. In view of the above, the applicant was asked vide questionnaire dated 23.09.2024 to "Please state the terms and conditions for the prospective residents of the old age home for senior citizens including screening/selection criteria of the residents, tariffs etc.” In response, the applicant has stated as under:
The matter shall be decided before the start of old age home facilities in AY 26-27 as it involves lots of deliberation and discussion among the shareholders and directors. The Trust will try to follow the same procedure of other running old age homes as charitable basis.
3.3 The reply of the applicant has been perused. The applicant has stated that it has taken various steps for getting approvals for setting up an old-age home such as taking building plan approval, obtaining change of land use, etc. However, the applicant has still not decided on the terms and conditions for the prospective residents, which shows that the old age home will not be an inclusive old age home but an exclusive old age home, in view of the various facilities planned. The applicant has also still not, provided the target group of beneficiaries to be covered. The applicant has also not shown any expertise/experience in related programmes/services. The proposed project document for the old age home, as is available on the internet at 3 https:/www/orientalindia.com//wp-content/upIoads/2022/07/CSR- Project-Report.pdf. shows that the project is apparently commercial in nature, where the senior citizens would be put up against payment on a rental basis or on outright sale of the accommodation, alongwith services, if at all the project takes off, since no concrete activity in this regard has yet been taken.”
Now before us, on behalf of the assessee, the ld. AR has submitted that the assessee acquired land measuring 4.82 acres for construction of old age home facilities and change of land use has been approved by the Department of Town and Country Planning on 1st February, 2024. The copy of the same is made available in the paper book at pages 98-101 of the paper book. The perusal of the same shows that the building plan of the old age home (institutional building) at subjected site was considered by the Building Plan Approval Committee Office of Sr. Town Planning as per Haryana Building Code-2017 and as per the provisions of approved zoning plan to allow the assessee to raise the old age home (institutional). Based on the expenses incurred in FY 2024-25 and FY 2025-26 till date, the ld. AR has submitted that substantial expenditures have been made towards concrete work, site approval, purchase of earth building material, etc. Thus it can be concluded that the project of assesse is at stage of development of infrastructure.
It is settled provisions of law that at this stage, the competent authority is not supposed to inquire into the actual conduct of charitable or other activities to be performed by the trust. The genuineness of the claimed charitable activity is so be seen. There appears to be no doubt with regard to the same as in the Memorandum of Association of the assesse foundation, copy of which is placed at pages 8 to 24 of the paper book in clause No.3.8 (page No.8 of the paper book), there is specific mention that one of the main objectives of the company established u/s 8 of the Companies Act, 2013 shall be for setting up old age homes, day care centres and such other facilities for children, women and senior citizens. It can be further observed that when the assessee had responded to the queries of the competent authority as annexure submissions about note of charitable activity of the foundation were provided and at page 92, there is details of the activities proposed to be undertaken by the applicant including basic selection criteria for inmates and advanced selection criteria for inmates. As for convenience, we reproduce the same:- “D. Activities proposed to be undertaken by the Applicant. Basic Selection Criteria for Inmates • Person above the age of 60 years • Person belonging to any religion, caste or class • Person having no children • Person impacted financially Advance Selection Criteria for Inmates • Person whether single / married • Person having children / no children • Person having parents / orphan • Person differently abled • Person affected (naturally / by the act of God) • Person, if Orphan, belonging tofarmer’s family • Person whether healthy / affected by chronic disease Development of Old Age Home, Sohna Road, Sohna, Haryana • The Old age home shall be a non-profit, self-sustaining institution that shall remain intact with time without resorting to external sources for Financial aid. • The Vision of this project is to create a utopian living for the senior citizens with all the physical, mental and spiritual needs of the Residents. • The mission is to achieve an active and healthy lifestyle for it’s residents via offering a secured and a rewarding • Lifestyle with a friendly, interactive and harmonious environment away from the daily hassles of life Various facilities to be provided to Senior citizens such as:- Basic Services • Adequate security and housekeeping services. • Caregiving facilities for those residents requiring special care. • Opportunities for residents to provide community services to their peers and other residents. Medical Services: • 24X7 on-site ambulance service with oxygen support facility, tied up with nearest hospital. • Basic firstaid medical facility with nurse and physiotherapy services/Geriatric Care. The emergency contact numbers for the medical facilities and ambulance services shall be displayed outside the common areas of the premises. • Mandatory tie-up with the emergency facilities with the nearest hospitals/multi- Super Specialty Hospital(s). • Regular medical check-up and follow-up for the residents as required. • Pharmacy tie-ups for medicine with door-step delivery. 6 • Wheel chair facility to be provided. Fitness Facilities • Jogging and walking tracks with non-slippery and non-skid surfaces. • Efficient signage and clearly marked hedges and boundaries to avoid collision. • Yoga, Physiotherapy, Exercise areas to be provided as feasible.”
Thus it is too early to draw any inference about the commercial nature of activity. So far the material relied substantiates the claim of assesse that intention is to run an old age home. In the light of the aforesaid discussion, the conclusions drawn by the ld. CIT(E) cannot be sustained. The grounds raised are allowed. The appeals of the assessee are allowed. The ld.CIT(E) is directed to approve the application of the assessee in accordance with the law.