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Income Tax Appellate Tribunal, DEHRADUN BENCH, DEHRADUN
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(Exemption), Lucknow dated 09.12.2020.
Following grounds have been raised by the assessee: “I. That the Ld. CIT (Exemptions) has erred in law and on facts in rejecting the application for grant of registration under section 12AA of the Income-tax Act, 1961 (‘the Act’).
II. That the Ld. CIT (Exemptions) erred in law and on facts in passing an order, without appreciating and fully considering the information and submissions dated 31.08.2020 filed online on the portal of the Ld. CIT (Exemptions).
ITA No. 02/DDN/2021 2 Child Care & Youth Development Society III. That the impugned order passed by Ld. CIT (Exemptions), dated 09.12.2020 u/s 12AA of the Act is contrary to the principles of natural justice and equity, in so far as No Show Cause Notice was served on to The Appellant before passing the rejection order.
The rejection order is in complete violation of the Proviso to Section 12AA (1) which reads –
‘Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard’.
The Rejection Order merits to be set aside on this ground alone.
IV. That the Ld. CIT (Exemptions) while rejecting the application for grant of registration dated 31.08.2020 has mis-directed itself in so far as –
(a) That the Ld. CIT (Exemptions) has erred in law and on facts (Para 7 of the Order) in invoking the provisions of section 115BBC of the Act without reading into the Main Objects of the Appellant Society and without appreciating that the Main Objects fall under the first limb of section 2 (15) namely providing ‘relief to the poor'. Whereas the provisions of section 115BBC can only be invoked in the case of Societies/ Institutions, providing Education or running/ maintaining a Hospital covered under sub-clauses of section 10(23)C.
(b) That the Ld. CIT (Exemptions) has erred in law (Paras 4; 5 and 6 of the impugned order) in considering that The Appellant has not considered donation of Rs. 16,00,000/- as income in the Income & Expenditure Account but treated the same as Corpus Donation and hence in concluding that the resultant tax liability has not been discharged and hence the application u/s 12AA cannot be considered.
ITA No. 02/DDN/2021 3 Child Care & Youth Development Society (c) That the Ld. CIT (Exemptions) has erred in law (Para 9 of the Order) in rejecting the application of The Appellant on the ground - ‘that applicant has not paid the legitimate taxes.”
Brief facts of the case are that the assessee e-filed an application for registration u/s 12A(1) of the Income Tax Act, 1961 in Form 10A on 14.03.2020 with the Commissioner of Income Tax (Exemptions), Lucknow. The same has been rejected by the ld. CIT (E).
Aggrieved the assessee filed appeal before us.
We have gone through the reasons given by the ld. CIT (E) and observed as under:
On perusal of the submissions made by the applicant, it is observed that the applicant has shown substantial amount of Rs.16,00,000/- in the corpus fund and filed the return of income with Nil income during A.Y. 2016-17 and 2017-18 and with loss of Rs.2,24,731/- in A.Y. 2019-20. The trust should have been taken the corpus fund as income in the Income & Expenditure account in respective financial year and should have been filed return of income accordingly.
1(a) The issue of treatment of receipt of the donation as to the corpus fund are non-corpus cannot be determined by the revenue authorities but at the behest of the donor. The revenue authorities cannot direct as to how a particular donation is to be treated. Further, we hold that it is beyond the jurisdiction of the ld. CIT (E) to direct that the corpus fund be taken to income & expenditure statement.
ITA No. 02/DDN/2021 4 Child Care & Youth Development Society 2. As per the provisions of the Income Tax Act, corpus donation would be exempt only u/s 11(1)(d) and an assessee can claim benefit u/s 11 only when such assessee is registered u/s 12A or 12AA.
2(a) The prerequisite for granting of registration u/s 12AA is to examine as to whether the trust deed, the Articles, the Memorandum are in alignment of the provisions of the Act with regard to chartable purpose and general public utility or not. The disallowances, if any, are a matter of assessment but cannot be a subject matter of verification for granting the registration.
Moreover, the applicant trust has also received cash donation exceeding Rs.2000/- in F.Y. 2018-19 but did not submit any confirmation of donation w.r.t the point No. 10 of this office questionnaire.
3(a) Verification of donation is not the subject matter of examination for granting registration u/s 12AA as per the established judicial pronouncements.
The provisions to Section 12AA(1) reads as under:
“Provided that no order under sub-Clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.”
4(a) In the instant case, the ld. CIT (E) failed to adhere to the clear provisions envisaged in the Income Tax Act while passing the order dated 09.12.2020.
ITA No. 02/DDN/2021 5 Child Care & Youth Development Society 6. Hence, keeping in view the entire facts on record, we do not hesitate to hold that the order passed by the ld. CIT (E) needs to be set aside with directions to consider the application of the assessee de novo.
In the result, the appeal of the assessee is allowed for statistical purposes. Order Pronounced in the Open Court on 23/09/2021.
Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 23/09/2021 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR