DIVYA DRUSHTI CHARITABLE TRUST,THANE vs. COMMISSIONER OF INCOME TAX (EXEMPTIONS), PUNE

The assessee in the present case is a trust which is registered under the Bombay Public Trusts Act, 1950 on 10.02.2014. The main objects of the trust inter-alia, are to provide Special Hospital and Speciality in Eye Diseases for common people and to arrange Catrus Retina check up camps, blood camps, Eye checking camps, diabetes check up camps, etc. for common people. After its failure to get registration u/s 12AA of the Act in response to couple of applications filed earlier, a fresh application was filed by the assessee for registration u/s 12AA of the Act on 31.08.2018. The said application was rejected by the Ld.CIT(Exemptions), Pune vide its order dated 28.02.2019 on the ground that its activities were not genuine in as much as the correct income was not disclosed in the audited Income & Expenditure Account as well as in the return of income. Against the said order of the Ld.CIT(Exemptions), Pune, an appeal was preferred by the assessee before the Tribunal and the Tribunal vide its order dated 01.07.2019 passed in set aside the order of the Ld.CIT(Exemptions), Pune, dated 28.02.2019 observing that the scope of enquiry to be conducted by the Ld.CIT(Exemptions), Pune while granting registration u/s 12AA of the Act was limited. The Ld.CIT(Exemptions), Pune accordingly, was directed by the Tribunal to dispose of the application of the assessee for registration u/s 12AA of the Act afresh after granting reasonable opportunity of hearing to the assessee. As per directions of the Tribunal, the matter relating to the application of the assessee for registration u/s 12AA of the Act was reconsidered by the Ld.CIT(Exemptions), Pune and the said application was again rejected by him for almost the same reasons as given earlier that non disclosing correct income in audited Income & Expenditure Account and in the return of income could not qualify the assessee trust as genuine and its conduct / activities could not be treated as genuine. Aggrieved by the order of the Ld.CIT(Exemptions), Pune rejecting its application for registration u/s 12AA of the Act, the assessee has preferred this appeal before the Tribunal.

The Ld. Counsel for the assessee contended that the corpus funds received by the assessee trust constituted receipt of capital in nature and since the said receipts were not chargeable to tax, the same did not reflect in the Income & Expenditure Account of the assessee trust as well as in the income declared by the assessee in the return of income. In support of this contention, he relied on the decision of Coordinate Bench of this Tribunal in the case of ITO (Exemptions) Vs. Serum Institute of India, rendered by its order dated 29.01.2018 passed in wherein it was held that corpus specific voluntary contributions are outside the scope of income as defined in section 2(24)(iia) of the Act due to their capital in nature even in case of unregistered trust.

The Ld. DR on the other hand, submitted that there was no evidence filed by the assessee to show that the amount in question was in the nature of corpus donation. He also submitted that the assessee even did not declare this amount in its Income & Expenditure Account.

We have considered the rival submissions and also perused the relevant material available on record. It is observed that while remitting the matter relating to the assessee‟s application for registration u/s 12AA of the Act, it was specifically observed by the Tribunal in its order dated 01.07.2019 (supra) that the scope of enquiry to be conducted by the Ld.CIT(Exemptions), Pune while granting registration u/s 12AA of the Act was limited and he was required to look into the objects of the trust whether the same are charitable in nature and the genuineness of the activities of the trust. A perusal of the impugned order passed by the Ld.CIT(Exemptions), Pune shows that there was no doubt raised by him about the charitable nature of the objects of the assessee trust. He however, raised doubts about the genuineness of the activities of the trust on the ground that the funds of Rs.88,65,496/- raised by the assessee trust for the purpose of acquiring fixed assets were not offered to tax and the said income was not reflected in the Income & Expenditure Account of the assessee trust. As rightly contended by the Ld. Counsel for the assessee by relying on the decision of Coordinate Bench of this Tribunal in the case of ITO (Exemptions) Vs. Serum Institute of India (supra), the said receipts representing contribution towards corpus funds were capital in nature and the same therefore, were not chargeable to tax. Similarly, the said receipts of capital in nature representing corpus funds were directly taken to the Balance Sheet by the assessee trust and there was no question of reflection of the same in its Income & Expenditure Account. At the time of hearing before the Tribunal, the Ld. DR contended that no evidence was filed by the assessee to show that the said receipts were in the nature of corpus donations. However, as pointed out by the Ld. Counsel for the assessee from the submissions made before the Ld.CIT(Exemptions), Pune vide letter dated 20.12.2019 (copy at pages 33 and 34 of paper book), details of corpus donations were furnished by the assessee before the Ld.CIT(Exemptions), Pune and even the utilization of the same for purchase of assets was also duly established. Keeping in view all these facts of the case, we are of the view that there was no justifiable reason for the Ld.CIT(Exemptions), Pune to doubt the genuineness of the activities of the trust and to deny it registration u/s 12AA of the Act. We therefore, set aside the impugned order passed by the Ld.CIT(Exemptions), Pune rejecting the application of the assessee for grant of registration u/s 12AA of the Act and direct that the registration u/s 12AA of the Act as applied by the assessee trust be granted to it.

In the result, the appeal of assessee is allowed.