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Income Tax Appellate Tribunal, VARANASI CIRCUIT BENCH, VARANASI
Before: SHRI. B. R. BASKARAN & SHRI AMIT SHUKLA
PER AMIT SHUKLA, A.M.:
The aforesaid appeal has been filed by the assessee-trust against the order dated 30.3.2023, passed by ld. CIT (Exemption), Lucknow rejecting the application of the assessee for registration under section 12AB of the Income Tax Act, 1961. The assessee has raised the following grounds:
That on the facts and circumstances of the case and in the Law, the CIT (Exemptions) has grossly erred in denying/rejecting registration to the assessee u/s 12AB of the Income Tax Act, 1961 (the Act) as claimed.
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That the learned CIT has erred in law and on facts in not granting a reasonable opportunity of hearing and has thus violated the laws of natural justice.
3 That the Learned CIT erred in relying on the case laws which are distinguishable and not at all applicable to the facts of the case of the assessee while denying registration to the assessee.
That the observation of Learned CIT that the assessee has not incurred on charitable activities as per object mentioned in the Trust Deed is totally incorrect and improper.
That the Learned CIT erred in holding activities of the Trust are not genuine and the documentary evidence with regard to charitable activities of the Trust has not been furnished by assessee.
That the appellant craves leave to Add to and / or Amend, modify or withdraw the grounds outlined above before or at the time of hearing of the appeal.
The brief facts are that the assessee is a charitable trust, which was formed in the year 1958 by Guru Mahant Harsevanand Chela Shri 108, Mahant Swamy Atma Vivekandand Ji Paramhans, for the welfare of the people and to provide medical facilities to the poor. Since then, it has been carrying out charitable activities as per its objects. On 30.12.2000, a supplementary trust deed was made after carrying out certain amendments. Accordingly, it had applied for registration under section 12A of the Act before the CIT, Varanasi and the same was granted vide Certificate dated 3.7.2000. Thereafter, assessments were completed under section 143(3) of the Act giving benefit of
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the provisions of section 11 of the Act and it continued to hold registration under section 12A of the Act and in all the assessments, it was found that the assessee was carrying out the activities as per the objects of the trust and at no point of time, it was ever found that the activities of the assessee-trust are not genuine or are not in accordance with the objects of the trust. Before us, certain assessment orders passed under section 143(3) of the Act for various Assessment Years have been filed along with Certificate under section 12A of the Act dated 3.7.2000.
Now, in accordance with the new provisions of the Act, the assessee was required to file an application for registration of the trust under section 12AB of the Act in form No.10AB in terms of Rule 17A of the Income Tax Rules, 1961. The applicant- assessee-trust filed form No.10AB on 28.9.2022. Thereafter, a notice was issued by ld. CIT (Exemptions) to the applicant- assessee requiring the assessee to submit the details of note and activities of the trust during the last three years till 30.6.2022 and a note specifying the main area of charitable/religious activities, etc. In response, the assessee filed a detailed submission before ld. CIT (Exemptions) along with various documents running into 772 pages. In sum and substance, the assessee submitted the activity report and details of what kind of charitable activities are being carried out in terms of object clause of the trust deed, such as providing free medical and food facilities to the poor, providing free dress, uniform and books to the students belonging to the backward classes of the society, etc. The assessee had also filed certified copy of the original trust deed along with supplementary trust deed. The detailed reply
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along with documents submitted before the ld. CIT(Exemptions) has also been filed before us.
The ld. CIT(Exemptions) noted that as per the trust deed, no expenditure has been incurred on charitable activities as per the objects mentioned in the said trust deed. From the Income and Expenditure account for the year ending on 31.3.2021, he noted that all the expenses, incurred for Rs.1,32,13,386/- are not related to charitable objects of the trust. The relevant observations of the ld. CIT (Exemptions) for rejecting the application read as under:
“As per trust deed no expenditure has been incurred on charitable activities as per object mentioned in the trust deed. As per Income & Expenditure account filed for year ending 31.03.2021, following expenses have been shown to have incurred, but not related to charitable object of the trust.
A perusal of income/expenditure account of the assesse for 31.03.2021, shows that expenses of Rs 1,32,13,386/- have been incurred but not related to charitable object of the trust. Assessee trust earn income from sale of agriculture products and expenses are incurred on donation, administration, audit fee, bank charges, photography etc. but not related to the object mentioned in the trust deed. Therefore, activities of assesse trust not found genuine. Assessee failed to file supporting documentary evidences with regard to charitable activities as per object of the trust.
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Therefore no verification of the object as per the trust deed with the activities carried out if any could be made. Thus the genuineness of the activities does not get established. Section 12AB makes it very clear that before granting registration under this section, the Commissioner has to satisfy himself about the genuineness of the activities of the trust or institution and also he has to verify that these activities are in consonance with the object of the trust or institution. Reliance in this regard is also placed on the judgment delivered by the Humble Supreme court in the case of commissioner of Income Tax, Ujjain Vs Dawoodi Bohara Jamat Civil appeal no 2492 of 2014.
As discussed above, the applicant has failed to file documentary evidences to enable me to satisfy about the, genuineness of its charitable activities and to verify these activities are in consonance with its objects and also.
7, Considering to the above facts, I am unable to arrive at the satisfaction about the charitable nature of activities. Hence, the application filed in Form No. 10AB for the registration u/s. 12AB of the I.T. Act, 1961, is hereby rejected. However, no adverse inference is drawn against the assesse, and provisional registration granted u/s 12AB dated 27.05.2021 No. AAAATM8310ME20206is held to be valid.”
Before us, the ld. Counsel for the Assessee, giving the entire background of the activities of the trust since last six decades and also pointed out that, before the ld. CIT (Exemptions) detailed submissions/documents were filed with
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respect to each and every query raised, along with Income and Expenditure account and proof of incurring expenditure. He drew our attention to the Income and Expenditure account for the financial years 2019-20, 2020-21 and 2021-22 and pointed out that most of the expenditures are for carrying out the charitable activities and administrative expenses for smooth running of the trust. He further submitted that all the administrative expenses have been incurred for achieving the main objects of the trust only. The allegation of the ld. CIT (Exemptions) that the assessee has not filed voluminous documentary evidence is incorrect. It is evident from the record that the assessee had filed voluminous documentary evidence containing the details of each and every expense as well as reply to all the queries raised by the ld. CIT (Exemptions).
On the other hand, the ld. CIT (D.R.) strongly relied upon the order of the ld. CIT (Exemptions) and submitted that it was incumbent on the assessee to substantiate not only the expenditure incurred as per the objects of the trust but also the genuineness of the activities and the expenditure incurred thereon. The ld. CIT has pointed out that certain expenditure debited do not relate to carrying out the charitable activities. Therefore, the registration has rightly been denied by the ld. CIT (Exemptions).
We have heard the rival submissions, perused the relevant material placed on record and also the observations of the ld. CIT(Exemptions) denying registration under section 12AB of the Act. As noted above, the assessee has come into existence in the year 1958 and since then it has been found to be carrying
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out charitable activities as per its objects for more than six decades. Again, in the year 2000, a supplementary trust deed was filed and registration under section 12A of the Act was sought. The ld. CIT (Exemptions), after examining the details, has granted registration under section 12A of the Act, vide Certificate dated 3.7.2000. Thereafter, various assessments have been completed under section 143(3) of the Act, wherein the assessee was given benefit of the provisions of section 11 of the Act, as all the income and expenditure related to the activities carried out for the objects of the trust. It is also a matter of fact that neither the objects have been changed nor the activities of the trust have been found to be non-genuine or it has been found that the expenditure incurred were not for charitable purposes. In the present proceedings, the ld. CIT (Exemptions), without examining the records, has simply drawn a conclusion that in financial year 2020-21, an expenditure to the tune of Rs.1,32,13,386/- does not relate to charitable work. On a perusal of the Income and Expenditure account for the year ending on 31.3.2021, we find that under the income side, the assessee had shown total income of Rs.4,06,81,896/- and total expenditure incurred was of Rs.1,32,13,386/- and excess of income over expenditure had also been disclosed, How can the entire expenditure have been held to be for non-charitable activities. On a perusal of the nature of expenditure, it is seen that it is divided under various heads, i.e. expenditure related to medical, expenditure related to poor, expenditure related to charity and expenditure related to administration. Under these heads, various expenditures have been shown. None of these expenditures can be said to be not for carrying out activities as
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per the objects of the trust. For the sake of ready reference, the photo scan of Income and Expenditure Account for the financial years 2019-20, 2020-21 and 2021-22 are reproduced as under:
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From a perusal of the above, we do not find as to which expenditure incurred are not for charitable activities and whole of the expenditure, as has been classified has been held to be not related to charitable objects. The expenditures are clearly related to medical aid, providing various help to the poor, doing charity to sadhus and public, including administrative work for carrying out the activities of the trust and building repairs, etc. The major expenditure relates to charitable activities. Even the expenditure under the head administrative expenses, nowhere it has been pointed out that there is any violation of the provisions of section 13(1)(c) of the Act. Thus, the administrative expenditure cannot be said to be outside the ambit of charitable activities, because these are expenditures incurred for carrying out the activities of the trust, for which registration was granted earlier. Once the similar nature of activities have been accepted in the past and also exactly similar nature of expenditures have been held to be incurred for carrying out the charitable activities, then how these expenditures can be held to be not for charitable purpose or carrying out charitable activities.
The ld. CIT (Exemptions) has not considered the details which were filed along with replies to various show cause notices, in which all these aspects have duly been explained. Thus, the finding and observation of the ld. CIT (Exemptions) is set aside. Accordingly, we direct the ld. CIT (Exemptions) to grant registration to the assessee-trust under section 12AB of the Act.
The ld. CIT has cited the judgment of the Hon'ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat, 364 ITR 31 (SC). We are unable to understand as to why the ld.
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CIT has referred to this judgment, as this is judgment is squarely in favour of the assessee, wherein the Hon'ble Apex Court has held that if the assessee-trust is formed with both religious and charitable objects, the claim for registration under section 12AA of the Act cannot be denied and only in cases where the objects are carried out purely for the benefit of a particular religious community or caste, it can be denied. Here in this case, there is no finding that the activities of the trust have been carried out for a particular religious community or caste. Thus, this judgment relied upon by the ld. CIT is wholly out of context. Accordingly, the appeal of the assessee is allowed and the ld. CIT (Exemptions) is directed to grant registration to the assessee-trust under section 12AB of the Act.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29.9.2023.
Sd/- Sd/- [B. R. BASKARAN] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED: 29th SEP, 2023 JJ: