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Income Tax Appellate Tribunal, AGRA BENCH: AGRA
Before: SHRI LALIET KUMAR,AND DR. MITHA LAL MEENA
Per Laliet Kumar, J.M.:
This appeal has been filed by the assessee trust against the order dated 30.08.2019 passed by the Commissioner of Income Tax, (Exemption), Lucknow,
wherein the assessee has taken the following grounds:
“1. That on the facts and circumstances of the case and in law, the impugned order is based upon conjectures, surmises and assuming incorrect facts and therefore, is bad in law.
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That on the facts and circumstances of the case and in law, the Hon'ble CIT(Exemption) has erred in rejecting the application filed by the Appellant for registration u/s 80G of the Act, inter alia because:
2.1.The activities performed by the Appellant are covered under the ambit 'relief to the poor limb of charitable purpose as defined under the provisions of the Act.
2.2. The Appellant is registered under section 12AA of the Act and fulfils all the conditions as mentioned under clause (i) to clause (v) of sub-section (5) of section 80G, a fact which has not been challenged by the Hon'ble CIT(Exemption).
2.3. As held by various judicial forums, there was no justifiable cause for the Hon'ble CIT(Exemption) to look into the objects or activities carried out by the Appellant.
That on the facts and circumstances of the case and in law, the Hon'ble CIT(Exemption) has erred in holding that the activities of the Appellant do not fall within the ambit of charitable activities, inter alia because-
3.l. The objects of the Appellant had already been examined and held to be charitable in nature at the time of its registration under section 12AA of the Act.
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That on the facts and circumstances of the case and in law, the Hon'ble CIT(Exemption) has erred in holding that the Appellant is not involved in the charitable activities and has not been able to prove their genuineness, inter alia because:
4.1. Activity of donating receipts to institutions which carry out charitable activities is charitable in nature, a proposition which has been upheld by various judicial forums but not appreciated by the Hon'ble CIT(A)
4.2.The Appellant trust has applied funds towards purchase of books for children and providing hearing aids for poor deaf people.
The above grounds are without prejudice to one another. Further, the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of these grounds.”
At the outset, the ld. AR has also drawn our attention to the paper book where the assessee has placed the evidence of rendering of the following three i) grant of scholarship for the girl child ii) distribution of books after purchasing from NCERT iii) distribution of hearing aids (62-65).
On the basis of above said document it was submitted that the observation made by the ld. CIT(Exemption) in para 4 is contrary to record as the documents
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and evidences were available with the CIT(E) which shows doing all the charitable
activities.
The ld. AR for the assessee has submitted a written submissions (containing
pages 1 to 7) for buttressing his case, which reads as under:
Broad Propositions
1 That an application was filed by the Appellant before the Commissioner of
Income Tax (Exemptions), Lucknow ['CIT(E)'] for grant of approval under section
80G(5) of the Act.
Vide order dated 30.8.2019. (copy placed at pg1-2/PB.) the said approval was
denied by CIT(E) inter alia holding that:
From a perusal of the notes on activities submitted by the assessee trust it is noticed that the trust is getting CSR fund from Varuna Integrated logistics Pvt. Ltd. The applicant is, in the name of charity, donating its receipts to other trusts. The applicant has made donations to other trusts/societies like Warne Baby Fold, Salaam Balaak Trust and Jeevan Dhara Trust etc., to do charity work on it behalf. From a perusal of material available on record the assessee itself was not involved in any of the charitable activities.
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Thus there is no material available so as to form any satisfaction regarding the genuineness of the activities carried out, if any, by the applicant. It is imperative on the part of the applicant trust to provide corroborating evidence that form the satisfaction regarding the genuineness of the activities of the applicant which is mandated by law. In absence of such satisfaction, the applicant loses its eligibility for consideration for according the said approval.
In view of the above discussion, it is clear that the applicant society is not entitled for approval u/s 80G of the IT Act 1961. Accordingly the application in form no, 10G seeking approval u/s 80G is hereby rejected.
The crux of the CIT(E)'s finding was that the Appellant has made donations to
other trusts/societies, namely Warne Baby Fold, Salaam Balaak Trust and Jeevan
Dhara Trust and has not done any charitable activities itself. The CIT(E) has
either ignored or not appreciated the entire gamut of activities undertaken by the
Appellant since its inception.
That the activities of the Trust since inception as were explained to the Hon'ble
CIT(E) since inception are placed at pg.61/PB.
That the Appellant enjoys exemption u/s 12AA of the Act vide registration no.
CIT(E) Lucknow/12AA/2018-19/A/1181-A dated 23.7.2018, The order of
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registration u/s 12AA of the Act is placed at pg 151-152/ PB. The Appellant places
reliance on the decision of the jurisdictional Allahabad High Court in the case of
Commissioner of Income Tax, Allahabad v Lok Sewa Sansthan Samiti Sonebhadra
(2019) 105 taxmann.com 202 (All.). The Revenue's SLR against the said judgment
has been dismissed by the Hon'ble Apex Court as reported in 263 Taxmann 495. In
the said judgment the Hon'ble jurisdictionai High Court has held that where "as of
today the assessee stands registered as a charitable institution under section 12-A
of the Act, the natural corollary is that this application under section 80G(5) of the
Act also becomes liable to be allowed"
The Appellant further pleads that its main objects as enshrined in its Trust
Deed dated 25th August 2015 allow it to grant aid in cash or in kind to hospitals,
medical schools, medical colleges, nursing institutions, dispensaries, maternity
homes, child welfare centres, combating human immune deficiency virus, acquired
immune deficiency syndrome, malaria and other diseases., (please refer pg.44-
52/PB.)
That the three institutions in question which were granted aid by the Appellant
are involved in following activities;
Warne Baby Fold is a registered orphanage in Bareilly which is involved in
education of poor and orphaned children.
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Salaam Baalak Trust, is an A/GO which provides sensitive and caring environment
to street and working childr^. and other children on the margins of society. It puts
in efforts to take care of the medical and psychological needs of the street children
who are exposed to innumerable infections and diseases. . It provides full time and
short stay facility to the children in need of care and protection. It also encourages
the use of creative and performing arts to exhibit talents of children such as
photography, theatre, dance and puppetry. Further it strengthens the independence
will of children and prepare them for a life of their own forms
Jeevan Dhaara Trust runs a charitable hospital in Bareilly.
It is also worth noting that all the aforesaid institutions are themselves registered
u/s 12AA of the Act.
The Appellant pleads that once the registration u/s 12AA of the Act was in
existence, the approval under section 80G of the Act could not be denied on mere
suspicion and conjecture until and unless there was violation of the rules specified
in that behalf. The Hon'ble CIT(E) has not alleged that the Appellant has violated
any specified rules nor has he alleged that the funds of the Trust were utilised for
private purposes.
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The Appellant also places reliance on the judgment of the Hon'bte jurisdictional Allahabad High Court in Hardiyal Charitable & Educational Trust v. Commissioner of Income Tax-11, Agra reported in 355 ITR 534 which was rendered in the context of registration u/s 12AA. -It is humbly submitted that the conditions for grant of registration u/s 12AA and approval u/s 80G of the Act are pari materia the same and therefore the ratio of the above judgment applies to the present case with equal force. The Hon'ble Court held that:
“The preponderance of the judicial opinion of all the High Court including this court is that at the time of registration under Section 12AA of the Income-tax Act, which is necessary for claiming exemption under Sections 11 & 12 of the Act, the Commissioner of Income Tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under Section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage only the genuineness of the objects has to be tasted and not the activities, which have not commenced. The enquiry of the Commissioner of Income Tax at such preliminary stage should
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be restricted to genuineness of the objects and not the activities unless such activities have commenced. The Trust or society cannot claim exemption, unless it is registered under Section 12AA of the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused.
It is not denied that for subsequent year the appellant has been granted exemption under Section 12AA and has also been approved under Section 80G of the Act, subject to certain conditions. If the Commissioner of Income Tax was satisfied with the genuineness of the objects of the trust for the subsequent assessment year, the refusal of the registration for the previous assessment year 2011-12 was not justified.
The question of exemption of the application of income received by way of donation, is a separate issue and which may be required to be considered, when the return is filed by the Trust and is examined by the Income Tax Officer. The question as to whether the donations by the societies was the expenditure of the Trust for charitable and religious purposes will be examined at the time of examining the return.
In the result the income tax appeal is allowed. All the three substantial questions of law formulated as above are decided in favour of the assessee, and against the revenue with a clarification that the registration under Section 12AA and approval under Section 80G would not by itself entitle the Trust for exemption of the income of its donors or of the Trust for the assessment year 2011-12, For claiming
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such exemption the returns of the donor and the Trust will be examined, for orders to be made in accordance with law."
The Appellant places reliance on the Hon'ble Supreme Court's ruling in CIT(E) v/s Seth Vinod Kumar Somani Charitable Trust in SLP no. 45836 of 2018 reported in (2020) 113 taxmann.com 143 (SC) wherein it has been held that: "Section 80G, read with section 12AA, of the Income-tax Act, 1961 - Deductions - Donations to certain funds, charitable institutions (Sub- section (5)) - Assessment year 2016-17 ~ Assessee-trust was granted registration under section 12AA - For relevant year, assessee filed application for grant of approval under section 80G(5)(vi) ~ Commissioner (Exemptions) declined approval under section 80G(5)(vi) on ground that activities of assessee-trust were not for charitable purposes and 50 per cent of donations was from trustees themselves - Tribunal noted that no action under sub-section (3) of section 12AA had been initiated for cancellation of registration of assessee-society - Tribunal further opined that Commissioner (Exemptions) before denying approval under section 8QG(5)(vi) was required to record a definite finding of fact that funds were utilised for private purposes and not for charitable purposes - On account of failure of revenue authorities to bring any such evidence on record, Tribunal concluded that order passed by Commissioner (Exemptions) was not sustainable- Accordingly, Tribunal granted approval to assessee- trust under section 80G(5)(vi) - High Court upheld order passed by Tribunal -Whether, on facts, SLP filed against order of High Court was to be dismissed - Held, yes [Para 3] [In favour of assessee]"
On identical facts the Hon'ble Delhi Benches of ITAT in the case of Bharat
Bhushan Jain Charitable Trust v. Commissioner of Income-tax (Exemptions), New
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Delhi reported in 175 ITD 729 had set aside and the C!T(E) was directed to grant
approval to me assessee. The head notes of the said judgment read as under;
"Section 80G, read with section 12AA, of the Income-tax Act, 1961 -Deductions -
Donations to certain funds, charitable institutions - Assessee-trust was granted
registration under section 12AA - It filed an application seeking for
approval/exemption under section 80G - Commissioner (Exemptions) found that
assessee failed to provide any cogent proof that could verify that assessee was
actually carrying out activities in pursuance of objects set forth in trust deed - It
was further noticed that except for donation given to 'Kenya Gurukul
Mahavidyalaya' nothing substantial or concrete had been done by assesseo in field
of charity - Commissioner (Exemptions), therefore, found application of assessee
to be premature and same was accordingly rejected - It was noted that
Commissioner (Exemptions) had not disputed that assessee satisfied conditions of
section 80G(5) - Moreover, assessee had carried out some of charitable activities
in furtherance to its objects - Whether in aforesaid circumstances, there was no
bvsis for Commissioner (Exemptions) to reject application under section 80G(5) -
Held, yes - Whether, therefore, impugned order was to be set aside and
Commissioner (Exemptions) was to be directed to grant approval to assessee-trust
under section 80G(5) - Held, yes [Paras 5 and 5.1] [In favour of assessee]"
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Reliance is also placed on the Hon'ble Punjab and Haryana High Court's
judgement in CIT(E) Vs. M/S Sant Girdhar Anand Parmhans Sant Ashram 1TA no.
50 of 2018, wherein the court observed that;
"Accordingly, it was recorded by the Tribunal that since assesses had
been granted exemption under Section 12AA of the Act which was in
existence and in case of any violation, the same ! ., subject to
variation/withdrawal 4 of 5 by the CIT(E), there was no logic in
denying approval under Section 80G 5(vi) of the Act We do not find
any reason to differ with the view taken by the Tribunal. Needless to
say, in case, in subsequent years, the revenue is satisfied that the
activities of the respondent-assessee are not qualified for charitable
purposes, it shad be open for the department to initiate action for
cancellation of registration under Section 12AA of the Act and also
for passing appropriate orders regarding approval granted under
Section 80G(5)(vi) of the Act in accordance with law."
In light of the aforesaid, it is humbly pleaded that the decision of the CIT(E)
declining approval under section 80G(5) of the Act is unreasonable and legally not
sustainable and deserves to be reversed. The Appellant prays that it may be
granted registration u/s 80G(5) of the Act.
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On the other hand, the ld. DR has submitted that the notes of the activities submitted by the assessee, the above said fact was not cleared rather it would shows assessee was merely a facilitator between the donor and actual charitable trust. As such case may be the above said aspect has not been examined and the finding of the ld. CIT(E) was based on the premises that the assessee was not involved any charitable activities.
The ld. DR further submitted a note (containing of 4 pages), for supporting his case which reads as under:
“Under the Income Tax Act separate procedures have been provided for registration u/s 12AA and approval u/s 80G respectively. Thus grant of registration u/s 12AA does not automatically lead to the approval u/s 80G. Granting approval u/s 80G entails wider ramifications as compared to the grant of registration u/s 12AA. Whereas by virtue of the registration u/s 12AA, an assessee becomes eligible for exemption from taxation of its own income, the grant of approval u/s 80G entails giving tax benefits to all the numerous donors. Therefore utmost caution is necessary while giving approval u/s 80G. Probably this is the reason why in the extant provisions, the registration u/s 12AA is granted for an unlimited period but the approval u/s 80G is granted only for a limited period.
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While considering a case for the approval u/s 80G the CIT is required to make necessary enquiries in order to ascertain genuineness of the activities of the entity seeking such approval. This is clearly laid down under Clause 3 of Rule 11AA
"The Commissioner may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund." In view of the above, it is clear that despite the registration u/s 12AA, the assessee would not be entitled to an approval u/s 80G without establishing genuineness of its activities.
Facts of the Case:
On perusal of the documents filed in the paper-book it is apparent that the assessee has no material to establish genuineness of its activities. The assessee trust has received donations from the sole donor M/s Varuna Integrated Logistics Private Limited which apparently is a company related to the trustees. It may be observed that M/s Varuna Integrated Logistics Private Limited did not make any "Voluntary" contributions and instead it has given only the CSR funds which are mandatory under the Company Law. The assessee instead of performing charitable activities with these funds, chose to be just a pass-through entity and diverted the funds to some other organizations which are claimed to be charitable. However
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there is no evidence to prove genuineness of the activities undertaken by these organizations.
A perusal of the documents filed in support of the claim of charitable activities creates a serious doubt about the nature and purpose of such expenses. A few observations in this regard are as under:-
As per page 65 of the paper-book certain amount has been paid for college fees and mess fees of two girls through M/s Warne Baby Fold. However it has not been clarified how these two beneficiaries were selected and whether they have some relationship with the trustees or M/s Varuna Integrated Logistics Private Limited. Though in the written submission the assessee has claimed that its objects empowered it to give donations to other charitable organizations, it must be noted that as per the objects, such donations could be utilized only for the public at large and not for specific beneficiaries. It has also not been clarified as to how these beneficiaries were selected and which economic/social parameters were considered for this purpose.
On page 65(B) there is a payment voucher on the stationery issued by M/s Varuna Integrated Logistics Private Limited which shows payment of school fees and tuition fees of the three children of Sh. Mahendra Saxena namely Tanya, Ananya and Prince. The relationship of Mr. Mahendra Saxena with the trustees or with M/s Varuna Integrated Logistics Private
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Limited has not been disclosed and it is also not clear why three children of the same person were chosen as beneficiaries and why children from other families in need were ignored.
On page 66 the receipt shows that M/s Varuna Integrated Logistics Private Limited have given Activa scooty to M/s Jeevan Dhara, Dharuhera. If the scooty has been given by M/s Varuna Integrated Logistics Private Limited, it is unfathomable how the assessee is claiming credit for the same.
Page 66B shows that the Activa has been purchased in the name of Sh. Asha Ram but it is not clear how this beneficiary was selected and whether he is related to the trustees/M/s Varuna Integrated Logistics Private Limited.
The receipt on page 76 shows that M/s Madhu Juneja has paid cash of Rs. 20,000/- to M/s Jeevan Dhara, Dharuhera. However it is not clear why the assessee is claiming credit for the same.
On page 78 there is a voucher made on the stationery of M/s Varuna Integrated Logistics Private Limited showing payment of coaching fees for the three children of Mr. Mahendra Saxena. Again it is not clear why all the children of Mr. Mahendra Saxena deserve this kind of support and how Mr. Mahendra Saxena is connected with M/s Varuna Integrated Logistics Private Limited.
The same observations can be made with regard to the payment voucher at paper-book 78(B).
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The documents at page 79(B), 80, 81, 82, 83, 84, 85, 86 are relating to payment of school fees and coaching fees of Ms. Bharti Sharma. It is not clear on what basis this girl was chosen to be a beneficiary and whether she has some connection with the trustees/M/s Varuna Integrated Logistics Private Limited.
Similarly other vouchers also show that the payments have been made for specific beneficiaries and not for the benefit of the public at large. The method of selection of such beneficiaries is not transparent and hence genuineness and purpose of expenses becomes suspect. It is observed that not only the school fees, even the coaching fees have been paid for the chosen few. The assessee has nothing to demonstrate that it has performed any activity for a genuine furtherance of its stated objects.
In view of the above, the denial of approval by the CIT(Exemption) is fair and reasonable. The assessee trust has become merely a tool for the purpose of diverting the mandatory CSR contribution of M/s Varuna Integrated Logistics Private Limited.”
We have heard the respective arguments of both side and have also gone through the record. the commission exemption, has rejected the application of the assessee, for various reasons including the reason that, that the assessee has not carried out any charitable activities. The assessee has drawn our attention to the
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various activities (three) which were carried out by the assessee for charitable
purposes. The above said aspect has not been denied by the ld CIT DR, however he
had raised some objection to that activities and sought to justify the act of the CIT
exemption. In our view the order impugned before us is conspicuous silent on the
carrying out of the activities by the assessee rather the order has not dealt with any
of the activities carried out by the assessee. In our considered opinion, the interest
of justice requires that the ld. CIT(E) should examine the documents (already on
record) mentioned hereinabove and other documents , Which according to the
assessee shows that, the assessee was involved in its own capacity of doing the
charitable activity . For the purposes of granting the registration, if the CIT
exemption on examination of the document referred hereinabove, satisfy that the
assessee was involved in carried out a charitable activities then the CIT(E)
individually as well, then the CIT exemption, shall assess the impact of carrying
out of these activities and also contributing substantially to other trust for carrying
out of the charitable activities in accordance with law. we are also of the opinion that the CIT exemption shall also examine in other attending Circumstances
Like the major activities of the charitable work carried out by the other
charitable institute and only part of it were carried out by the assessee by doing three activities namely i) Warne Baby Fold ii) Salaam Balaak Trust iii)
Jeevan Dhara Trust. We may also mentioned that the ld. CIT(E) while Examining a
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fresh may also examine the effect of section 56( x) , which was inserted in statute
w.e.f. 1.4.2010 more (viii).
In the light of above the matter is remanded back to the file of the ld. CIT(E). It is
expected that the ld. CIT(E) shall follow the principles of natural justice while
passing the order and shall also afford reasonable opportunity of hearing to the
assessee and shall further grant opportunity of assessee any other documents
which necessary in support of its claim.
Any observation made in the above said paragraph by the Bench shall not be
treated as an expression on the merits of the case or facts or law as the same were
necessary for remanding the matter to the file of this commission exemption. The
ld. CIT(E) shall decide the matter afresh without being influenced by any of the
observation/s made by us .
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 22/09/2020.
Sd/- Sd/-
(Dr. M.L. Meena) (Laliet Kumar) ACCOUNTANT MEMBER JUDICIAL MEMBER *doc* Copy forwarded to: 1. Assessee
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Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT Sr. Private Secretary, ITAT, Agra