M/S BABA KUNDAN SINGH JI,LUDHIANA vs. COMMISSIONER OF INCOME TAX (EXAMPTION), CHANDIGARH

The CIT(E) while rejecting registration for the applicant trust, had observed as under:

The Ld. counsel for the assessee submitted that the CIT(E) was not justified in arbitrarily denying the claim of registration u/s 12AA of the Income Tax Act, 1961 to the appellant Trust by holding that the genuineness of the activities of the society could not be verified. He further submitted that the trust was created by Baba ji Bhai Gurmail Singh resident of Gurudwara Nanaksar, Tehsil Jagraon, District Ludhiana to start educational activity for poor and needy people besides running a creche for poor students who are unable to live in the slum area where maintenance of creche is a part of educational activity and hence, it was charitable in nature. No doubt, the trust has been in operation since 2007 but the actual implementation of the project i.e., setting up of a school could not materialize. The appcllant has started the construction of the building and spent a sun of’ Rs. 38.54 lakhs upto 31 .03.2016 and Rs. 66.80 lakhs upto 31.03.2020. No doubt in answer to one of the queries made by the Ld. Assessing Officer, one of the trustees had commented that the trust intends to set up a creche and in my view that factor, the Ld. Commissioner of Income Tax (Exemption), Chandigarh to deny the claim of registration to the appellant trust was not justified. He submitted that for purposes of granting of registration, it is the objects which needs to be verified and the

The defendant Ld. DR placed reliance on the impugned order. He contended that provisions necessitate examination of two basic conditions for grant of registration u/s 12AA. The same include, apart from the examination of objects of the society, satisfaction of the competent authority in respect of genuineness of activities.

We have heard the rival contentions and perused the material on record. In the case of the applicant, it would be pertinent to point out the provisions guiding the grant of exemptions under section 12A. The provisions of section of 12AA are as under:

The assessee trust applied for registration under section 12AA, which was rejected by the Commissioner concluding that the assessee had not proved its case whether the activities were being run in a charitable manner and the genuineness of the activities of the society cannot be verified and in absence of any concrete reply from the applicant the activities of the trust cannot be termed to fall within the realm of "charitable purpose". The reasons which prevailed with the Commissioner was that no evidence had been furnished to prove that there was any provision for free education for poor and that the building under construction was being constructed to carry out educational activities or not. The claims of the applicant that the constructed building will be used for benefit of poor and needy students by way of providing education does not hold ground in absence of cogent evidence in the reply provided by the applicant to the Query (b) at "Para 6" where the query clearly seeks the clarification 'how the education for poor and needy is sought to be pursued?'.

The CIT(E) has discussed that that there was a clear absence of pursuance of the objects for almost 10 years, where the trust is claiming to undertake the activities in future and that too without producing any concrete evidence about the same and then how they would be related to the objects. Likewise, he further discussed the applicant was to establish the creche but no activity has yet been conducted. This response, again, proves the point that the applicant trust has nothing concrete on the except making empty claims.

In the instant case, neither has any evidence been produced for undertaking any activity as mentioned in the trust deed even after a lapse of ten years nor has any evidence been produced in support of its future claims of imparting education to poor and needy; establishment of a creche etc. In absence of any evidence and

Admittedly, the factum of the additional information being asked for was never denied by the assessee. In appeal, the assessee had only raised the issue as to whether the order of the Commissioner is arbitrary and unjustified and whether the activities of the trust did not qualify in the nature of charity. The Ld. Counsel that the additional information being asked for, as such, was never contravened. It was not contended that the information had been supplied but was not taken into consideration.

A perusal of section 12AA, (Supra) would go on to show that the Commissioner has to satisfy himself of the objects of the trust and the genuineness of the activities and after giving an opportunity of being heard to the trust or the institution, a refusal can be made to register the trust. Thus, the section gives power to the Commissioner to look into the genuineness of the activities of the trust and to satisfy himself about its activities. Under section 12A, the provisions of sections 11 and 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled. Section 2(15) defines charitable purpose and the same includes relief in education and advancement of any other object of general public utility. In case the utility is carried out in the nature of trade, commerce, business, the proviso provides that the same will not be a charitable purpose.

We are of the considered opinion, that the power of the Commissioner is to look into the objects of the Society and the genuineness of the same cannot be doubted when the basis is of non-supply of information. In such circumstances, it would be appropriate that the Commissioner undertakes the exercise afresh, on the basis of the application which has already been filed, keeping in view the material which can be produced by the assessee.

In the case of CIT-I, Chandigarh Vs. Sri Guru Gorakh Nath Charitable Educational Society, [2015] 60 taxmann.com 56 (Punjab & Haryana) held that- “Section 12AA of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure (Non supply of information) - Assessment year 2013-14 - Application made for registration under section 12AA by assessee society was rejected by Commissioner on ground that assessee had not proved its case whether activities were being ran in a charitable manner and that no fresh evidence had been furnished to prove that there was any provision for free subsidised education for poor and an element of public benefit - However, on appeal Tribunal directed to allow registration to assessee - Whether power of Commissioner to look into objects of society and genuineness of same could not be doubted when basis was of non-supply of information and as such it would be appropriate for Commissioner to undertake exercise afresh on basis of application which had been filed keeping in view material which could be produced by assessee.

Accordingly, the impugned order is set aside with a direction to the file of the CIT(E) to decide the application, filed under section 12AA, afresh with the following directions.

In result, the appeal is treated allowed for statistical purposes in the terms indicated as above.