SIWACH FOUNDATION JAN SEVA SANSTHAN,JODHPUR vs. CIT(EXEMPTION), JAIPUR

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ITA 875/JODH/2024Status: DisposedITAT Jodhpur13 May 20268 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that at the stage of registration, the CIT(E) should not have examined the genuineness of activities. The assessee had provided explanations and supporting documents for payments made to specified persons.

What were the facts?

The assessee, Siwach Foundation Jan Seva Sansthan, applied for registration under Section 12AB and approval under Section 80G. The CIT(E) rejected the application citing non-genuineness of activities and benefit to interested persons.

What were the issues?

Whether the CIT(E) was justified in rejecting the application for registration and approval based on the genuineness of activities and payments to interested persons at the initial stage.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 80G,Section 13(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR

Before: DR. MITHA LAL MEENA, HON’BLE & SHRI SUDHIR PAREEK, HON’BLE

For Appellant: Shri Mohit Soni Advocate
For Respondent: Shri Ajey Malik, CIT-DR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 874 and 875/Jodh/2024 (Assessment Year N/A) Siwach Foundation jan Seva Sansthan, CIT, Exemption, Jaipur S.R. Loonker and Co. A-56, Shastri Nagar, Opp. Lachoo College, Jodhpur- 342001 PAN No. AAWAS1927P Assessee by Shri Mohit Soni Advocate (Physically) Revenue by Shri Ajey Malik, CIT-DR Date of Hearing 07 / 05 / 2026 Date of Pronouncement 13 / 05 / 2026 ORDER DR. MITHA LAL MEENA, A.M.: These appeals are filed against the separate order of the Commissioner of Income Tax (Exemption), Jaipur [hereinafter referred to as the CIT(E)] dated 30.09.2024 challenging therein rejection of its application for registration u/s 12AB and approval u/s 80G of the Income Tax Act on account of non- genuineness of activities and benefit to interested persons.

2.

At the outset, the ld. Counsel for the assessee has submitted that the appellant trust was incorporated in the year 2020 and started its activities in the financial year 2023-24. The Ld. Counsel submitted that at the stage of

2 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) registration, the Ld. CIT(E) is not required to examine the genuineness of activities. The AR submitted that the detailed submissions were filed before the Ld. CIT(E) vide its letter dated 11.07.2024 elaborately mentioning the details of activities of the trust. The Ld. AR submitted that the appellant has filed the copy of the trust deed listing the objects of the trust such as education, medical relief, preservation of environment and any other object of general public utility. The AR has referred to its reply filed before the Ld. CIT(E) vide its letter dated 20.09.2024 explaining therein the payments made to the persons specified in Section 13(3) with supporting vouchers to justify their services rendered in the paramedical college with respect to the payments made therein. The AR argued that the appellant trust had not contravene the provisions of Income Tax Act. Its objects were carried out in pursuing the activities of the trust where the students perusing the paramedical courses in the college. The AR contended that the main object of the trust is to provide medical education, looking to the government facilities and condition that only NGO/trust can run the paramedical college. The Ld. AR stated that the building has been donated by Smt. Dr. Anju Chaudhary vide gift deed executed and registered on 30.03.2024 by Dy. Registrar, Registration Jodhpur and that the appellant has made security deposit with paramedical council of Rs. 5,80,000/.

3 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) The AR has pleaded that the Ld. CIT(A) may be directed to grant registration u/s 12AB and approval u/s 80G of the Act to the appellant trust.

3.

The Ld. CIT DR strongly relied on the impugned order. He explained that the Ld. CIT(E) has categorically mentioned that trust has been made for the benefit of interested persons Dr. Rajeev Siwach, Dr. Yasowardhan Singh and Anushka Siwach who were the trustees in the trust and that the appellant failed to rebut the objections of the Ld. CIT(E) raised vide point no. 3 of its show cause notice dated 03.09.2024, where the relevant query of the show cause notice read as under:

1.

As evident from the bank statement, on various dates various payments are made to persons covered u/s 13(3).

4.

The Ld. CIT DR argued that the appellant trust has contravened provision of Section 13(3) of the Act and that it is functioning for profit earning purpose other than charitable purpose. He pleaded that the impugned order may be upheld.

5.

Having heard both the sides and perusal of material on record, we find that the appellant trust although has furnished the details of the payment made to the person u/s 13(3) as salary payment for the services rendered by them in the paramedical college, however, it did not furnish details of what

4 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) work was done by these persons for the trust/paramedical college or did not furnish ITR of these related persons to explain their earlier income/source of income to justify the salary paid in lieu of the services.

6.

It is noted that the total amount of salary given to the specified persons constitute 36% of the total expenses claimed in P&L Account for the financial year 2023-24 for which the applicant has not furnished any details though such salary payments were relate to the specified persons where no salary payments to these persons have been shown in the earlier years. The CIT(E) has observed that the trust has been in specific violation to Section 13(3) by giving benefit to the specified person and thereby applying income of the trust for the purpose other than the purpose of the turst, which is a specified violation under clause (a) of Explanation below of Section 12AB(4) of the IT Act, 1961 and also result into non-genuineness of activities as given in clause (e)(I)(II) of explanation below Section 12AB(4) of the IT Act, 1961. He further argued that the appellant trust failed to prove genuineness of the activities carried out during the financial year by not furnishing the details called for by the Ld. CIT(E) vie para 4.1 of the impugned order. The DR argued that the activities of the trust were not verifiable whether the applicant is genuinely carried out any charitable activity. The Ld. CIT DR contended that the Ld. CIT(E) was justified in rejecting the claim of the registration u/s 12AB on the ground

5 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) of non-genuineness of activities and consequential rejection of application for approval u/s 80G of the Act.

7.

Admittedly, the trust was incorporated in the year 2020 and the activities were started in the financial year 2023-24 as explained by the Ld. AR for the appellant trust. The argument of the Ld. AR that activities are not required to be examined by the Ld. CIT(E) at the stage of granting registration is not relevant in the present case because the appellant trust has already carrying out its activities during the financial year 2023-24 and the application for registration in Form 10AB seeking registration u/s 12AB of the Income Tax Act was filed on 12.03.2024 by the appellant. It is noted that appellant trust has taken frequent adjournments during the course of examination and verification carried out by the Ld. CIT(E) with respect to the benefit to the specified interested persons u/s 13(3) of the Act and non-genuineness of activities. The Ld. AR has not furnished any document or evidences to rebut the objections of the Ld. CIT(E) regarding the benefit to the interested person u/s 13(3) of the Act and non-genuineness of the activities of the trust.

8.

In the present case, the main object of the appellant trust is to provide medical education through a NGO/trust incorporated in the year 2020 by way of running a paramedical college. The contentions of the Ld. AR are that no

6 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) activities are started by the trust or trust is yet to start the activities at the time of processing of the application for registration u/s 12AB and approval u/s 80G by the Ld. CIT(E) is factually incorrect. It is evident from the record that appellant trust has already begin its activities of running a paramedical college for providing medical education to the students and made salary payment to the interest persons in violation of Section 13(3) of the Act as rightly observed by the Ld. CIT(E). From the P&L Account for the financial year 2023-24, the applicant has shown total receipt from the college fee amounting to Rs. 19,42,500/- on which total surplus shown as Rs. 4,86,887/- including depreciation which is 25% of total receipts. The Ld. CIT(E) has observed that the applicant has received enormous markup on the 1st year of educational activities undertaken. Meaning thereby, that the appellant has been carrying on medical activities on commercial basis for earning business income and, therefore, Ld. CIT(E) has rightly observed that the trust is doing activities of profitable in nature the purpose other than the charitable purpose, and such medical education cannot be said by any stretch of imagination to be in the nature of activities for charitable purposes.

9.

The Ld. CIT(E) has placed reliance on the judgment delivered by the Apex Court in the case of Baba Banda Singh Education Trust and M/s New Noble Education Society wherein it has been observed that education with substantial

7 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) margin is not charitable and has to be considered for profit making, nor for charity. Hon’ble Apex Court in its decision has done away with the regime of huge profit being ploughed back in system as charitable in the mane of dominant objective. In our view, the high margin profit activities carried out in the medical college or any other commercial colleges are to be considered in the nature of trade and commerce only. We are, therefore, of the considered view that the application of the applicant for the registration u/s 12AB would liable to be rejected on the ground of activities in the nature of trade and commerce, benefit to the specific persons u/s 13(3) of the Act and non- genuineness of activities.

10.

In the above view, we find no reason to interfere in the order passed by Ld. CIT(E) rejecting the application of the appellant for registration u/s 12AB and consequential rejection of approval u/s 80G of the Act. Thus, the impugned order passed by the Ld. CIT(E) rejecting application u/s 12AB and approval u/s 80G of the Act are sustained.

11.

In the result, the appeals of the assessee in ITA Nos. 874 & 875/Jodh/2024 are dismissed.

8 ITA No. 874 and 875/Jodh/2024 (Assessment Year-N/A) Order pronounced on 13/05/2026 in the open court.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 13/05/2026. Nimisha, Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,

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