MAHAWAR VAISHY SEWA SANSTHA,JAIPUR vs. CIT(EXEMPTION), JAIPUR

The ld AR submitted that the assessee society is registered under Rajasthan Sanstha Registration Act, 1958 vide registration certificate dated 13.01.2003. The main object of the society is to carry out various welfare activities for the students and for society at large. In pursuance to these objects, the assessee society is operating a hostel at B-3, Deepak Marg, Adarsh Nagar, Jaipur which is the property of Mahawar Vaishya Sewa Sangh, Alwar.

It was submitted that the assessee filed an online application for seeking registration u/s 12AA of the IT Act, 1961 in Form No.10A on 07.06.2019. Thereafter, in pursuance to a detailed show cause notice dated. 03.10.2019, the assessee field reply vide letter dated. 11.11.2019 explaining the nature of activities carried out by it as per its objects. After receipt of the said reply, it appears that the ld. CIT(E) vide communication dated 18.11.2019 again sent a questionnaire. In response to same, the assessee informed that it has not received any attachment of questionnaire as mentioned and therefore, it was requested to kindly re-issue the same. The ld. CIT(E) vide its letter dated 28.11.2019 informed the document Identification number through which questionnaire dated 18.11.2019 was stated to have been sent. The assessee again informed that it has not received any attachment as mentioned. The ld. CIT(E), without supplying the questionnaire, passed the impugned order on 19.12.2019 by making following observations:-

It was submitted that against the questionnaire dated 03.10.2019 containing 26 issues, the assessee filed point wise reply dated 11.11.2019. In this reply at Point No. 7, 22 & 23, it was explained that it is running a hostel where the students from small cities are provided accommodation at very low cost to help them take better education which is not available at their native place. Further, it is organizing blood donation camp and other motivational lecture for the students. All these activities are as per the object of the trust. It was submitted that providing hostel facility to the students is part of educational activities as held by Ahmedabad Bench of the Tribunal in case of Shree Ahmedabad Lohana Vidyarthi Bhavan vs. Income Tax Officer (Exemption) 172 ITD 11 where the Assessing officer held that running a hostel by charging fees from the students does not fall within the ambit of charitable purpose U/s 2(15) of the Act. The Tribunal after examining the facts as also the law held that providing hostel facility is one of the essential components of an educational institution and is to be considered as imparting education.

It was further submitted that the various objections raised by Ld. CIT(E) cannot be a basis for denying registration U/s 12AA of the Act to the assessee. It is submitted that Rule 17A substituted by the Income-tax (first amendment) Rule, 2018, w.e.f. 19.02.2018 provides that an application U/s 12A for 3 Mahawar Vaishya Sewa Sanstha vs. CIT(E) registration of a charitable or religious trust or institution shall be made in form No. 10A accompanied by self certified copy of the instrument creating the trust or establishing the institution, where the trust is created or institution is established under an instrument. The assessee has filed the certified copy of the bye laws of trust and annual accounts of three years along with the application. Thus, when neither the Act nor the Rules provide for producing the original document as a condition precedent for granting registration, the same should not be denied on this ground. So far as running of the hostel is concerned, as explained above, it is as per the object of trust and no commerciality is involved as evident from the audited accounts. The assessee has submitted all the evidence in support of a charitable activity carry out by it in which no discrepancy was found by Ld. CIT(E). So far as the questionnaire dated 18.11.2019 is concerned, the same was not provided to the assessee even when requested twice. In any case since detailed reply has been furnished in response to the earlier questionnaire, it is incorrect on part of ld. CIT(E) to held that assessee has failed to provide details and documents in support of his claim for registration U/s 12AA of the Act. In view of the above, the ld. CIT(E) may be directed to grant registration U/s 12AA to the assessee society.

Per contra, the ld. DR submitted that a letter dated 03.10.2019 was issued at the e-mail address provided in the application requiring the assessee to submit certain documents/explanations along with original trust deed for verification however, no compliance was made by the assessee. Further, another opportunity was provided vide letter dated 27.11.2019 fixing the date for hearing on 05.12.2019. Again there was no compliance on the part of the assessee and thereafter, the CIT(E) decided the matter on the basis of material available on record. It was further submitted that the assessee did not submit original documents regarding establishment of the trust and as required under Rule 17A, Mahawar Vaishya Sewa Sanstha vs. CIT(E) the certified copy of instrument establishing the trust needs to be verified with originals. It was further submitted that on perusal of the accounts of the assessee for the financial year 2015-16 to 2017-18, it was noticed that the applicant has indulged in commercial activities of running of hostels and getting receipts from the hostels. Further, the applicant has not submitted any details about the charitable activity carried out by it before the CIT(E), therefore, it cannot be known that the applicant is actually carrying out any charitable activities as per its objects. It was accordingly submitted that sufficient opportunity was provided to the applicant to produce details and documents in support of its claim for registration U/s 12AA of the Act but the applicant has failed to do so. Accordingly, the application seeking registration U/s 12AA of the Act was rightly rejected by the ld. CIT(E). It was accordingly submitted by the ld CIT DR that no interference is called for in the order so passed by the CIT(E). Alternatively, it was submitted that where the Bench so decide, the matter may be remanded back to the file of ld. CIT(E) to examine the same afresh.

We have heard the rival contentions and gone through the material available on record. To our mind, given the advent of e-filing of application and where all further correspondence need to be done through an online-platform, there are certain teething technological problems which needs to be addressed as observed in the present case where there are claims and counter-claims regarding seeking information and filing of submissions in relation to the processing of application filed by the assessee trust for seeking registration u/s 12AA. Therefore, in the interest of justice and fair play, we deem it appropriate to set-aside the matter to the file of the ld CIT(E) to examine the application of the assessee trust afresh after granting appropriate opportunity to the assessee trust to appear in person through its authorized representative. The assessee shall be at liberty to raise the various contentions as advanced by the ld AR Mahawar Vaishya Sewa Sanstha vs. CIT(E) including the decision of the Coordinate Bench referred supra before the ld CIT(E) and is also directed to submit necessary information/documents as called for by the ld CIT(E) and the latter shall decide the same afresh as per law.