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Facts
The assessee, a charitable trust, applied for registration under sections 12AB and 80G. The CIT(E) rejected the application, stating that the trust had not incurred expenses on its objects, despite receiving donations, due to pending government approval for its Neurofeedback Therapy Centre. The assessee argued that they had applied for approval and incurred initial expenses from personal accounts, and later received the necessary government approval.
Held
The Tribunal held that since the government approval was subsequently received and the assessee had actively pursued its charitable objects, it was appropriate to remit the matter back to the CIT(E). The CIT(E) is to reconsider the application afresh after taking into account the factual matrix and allowing the assessee an opportunity to be heard.
Key Issues
Whether the rejection of the application for registration under sections 12AB and 80G was justified when the assessee had received subsequent government approval and incurred expenses on its charitable objects.
Sections Cited
12AB, 80G, 12AA, 12A
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Income Tax Appellate Tribunal, “B” BENCH MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL
O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: These two appeals filed by the assessee are against the orders of Ld. CIT(Exemptions), Mumbai, vide order nos. ITBA/EXM/F/EXM45/2024-25/1069238963(1) and ITBA/EXM/F/EXM45/2024-25/1069238990(1), dated 28.09.2024 passed u/s. 12AB and 80G of the Income-tax Act (hereinafter referred to as the “Act”).
Grounds taken by the assessee are reproduced as under: ITA No. 5968/MUM/2024
A. On the facts and circumstances of the case, and in Law, the CIT erred in rejecting the assessee's application u/s 12AB of the Act.
B. On the facts and circumstances of the case and in law the CIT failed to appreciate that
The CIT rejected the application under the context that the trust has not started activities ignoring the submission that the donations for the activities have already received, and the expenses are not made pending Govt approvals. ii. The CIT ignored the evidence of the applications made for approval. The Start of the activities are thus proved, though there were no financial outgo from the trust.
iii. The trustees have made the initial expenses from their personal accounts pending the start of the project. C. The Appellant therefore prays that application for registration may be approved.
A. On the facts and circumstances of the case, and in Law, the CIT erred in rejecting the assessee's application u/s 80G of the Act. B. On the facts and circumstances of the case and in law the CIT failed to appreciate that i. The AO rejected the application under the context that the assessee application u/s 12AB is rejected for not starting activities ignoring the submission that the donations for the activities have already received, and the expenses are not made pending Govt approvals. ii. The assessee has filed an appeal before the Hon. ITAT against the order passed rejecting the application for registration u/s 12AB of the Act. C. The Appellant therefore prays that application for registration may be approved.
The issues involved in the present appeals is in respect of rejection of application made by the assessee for registration u/s. 12AB and 80G of the Act, respectively.
Brief facts of the case are that assessee is a charitable trust engaged in education and healthcare for children with learning disabilities. Assessee filed its application in Form 10AB, seeking registration under section 12AB on 06.11.2023. A provisional and 5969/MUM/2024 Special Crawl Foundation. registration was granted on 06.11.2023, valid from Assessment Year 2024-25 to Assessment Year 2026-27. Thereafter, assessee applied for regular registration in March, 2024.
4.1. While processing the application of the assessee for registration u/s. 12AA, ld. CIT(E) noted that no expenses have been incurred by the assessee on the objects of the trust, based on provisional financials submitted for the year ending 30.06.2024. Assessee furnished its reply stating that it received donations, however, on account of pendency of receipt of approval from the Ministry of Health, Government of Maharashtra, it could not incur expenses on its objectives. Assessee submitted that it had applied for approval from State Family Welfare Office under the Ministry of Health, Government of Maharashtra for establishment of Neurofeedback Therapy Centre. In this respect, assessee submitted that since the project is in approval stage, assessee could not incur expenses, though the donations had already been received by it. According to the assessee, once approval is received, assessee would start incurring expenses in accordance with the objects for which it is set up. Based on this, assessee contented that though any monetary spending activity was not undertaken, yet assessee had started the project in accordance with its charitable objectives. Assessee had furnished the details of doners along with corroborative documentary evidences. Ld. CIT(E) took note of these submissions made by the assessee. According to him, commencement of activities is necessary before filing of application in Form 10AB. Since assessee did not incur expenses for the objects for which it is set up, it was concluded that assessee has not fulfilled the stipulated condition and hence rejected the application made for registration. and 5969/MUM/2024 Special Crawl Foundation.
Before us, ld. Counsel for the assessee submitted that subsequently, the approval has been received, copy of which is placed on record, forming part of the paper book. After the receipt of approval, assessee has purchased the medical equipments, out of the donations it had already received and in the present, the project is well established and assessee is working on the objects for which it has been set up. According to him, assessee had furnished evidences of applications made for approval from the Ministry of Health, Government of Maharashtra, fact of which has been taken into account by ld. CIT(E) and therefore commencement of activities were established though there were no financial out go. It was also contended that the initial expenses were incurred by the trustees from their personal accounts, which were later reimbursed. All these facts were placed on record but were not considered in proper perspective.
5.1. Ld. Counsel thus, submits that considering the fact on record of approval received by the assessee from the Government of Maharashtra and assessee having incurred expenses on its charitable objects, which formed the basis for rejection of the impugned applications by ld. CIT(E), assessee be granted the registration as applied for, since other facts are not in dispute. Ld. CIT DR placed reliance on the order of ld. CIT(E).
We have heard the rival contentions and perused the material on record. From the order of ld. CIT(E), we note that the basis of rejection is that assessee had not incurred expenses on the objects for which it is set up, awaiting approval for Neurofeedback Project, from the Ministry of Health, Government of Maharashtra. Fact of the matter is that the said approval had been received and assessee has actively pursued its charitable objects pursuant to the approval so received. and 5969/MUM/2024 Special Crawl Foundation. Considering these facts and in the interest of justice and fair play, we find it appropriate to remit the matter back to the file of ld. CIT(E), to consider this factual matrix for taking up the application made by the assessee for grant of registration u/s. 12A and 80G, afresh. Needless to say, assessee be given reasonable opportunity of being heard and to make any further submissions, if so required. Ld. CIT(E) may pass the order afresh after considering the facts on record and the submissions made by the assessee, in accordance with the provisions of law. Accordingly, grounds raised by the assessee in both the appeals are allowed for statistical purposes.
In the result, both the appeal of the assessee are allowed for statistical purposes.