GADRE FOUNDATION,,RATNAGIRI vs. COMMISSIONER OF INCOME-TAX, (EXEMPTION),, PUNE

PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (Exemptions) – Pune dated 28.05.2018 passed u/s 12AA(1)(b)(ii) of the Income Tax Act.

Assessee is stated to be a Private Company incorporated under the Companies Act, 2013 on 14.02.2017 and stated to being formed to contribute for the welfare of society through engagement in

Corporate Social Responsibilities and such other activities for rural

development, promoting education, protection of national heritage etc.

Assessee made an application for registration u/s 12A of the Act

before ITO, Exemptions, Kolhapur on 02.11.2017 along with

supporting documents. Subsequently, assessee in reply to the letter

from CIT, Exemptions, Pune dated 10.01.2018 submitted the bills of

the expenses incurred / donations made etc. for verifying the

genuineness of activities of the assessee. The application of the

assessee was rejected by the Ld.CIT(E), Pune on the ground that the

genuineness of activities of the trust is not verifiable and the activities

of the trust are not charitable. Aggrieved by the order of Ld.CIT(E),

Pune assessee is now before us and has raised the following grounds :

“1. Ld CIT erred in not granting an appropriate opportunity of hearing and has thus violated the laws of nature justice. 2. The learned CIT erred in rejecting the application for registration of the appellant on the ground that activities of the trust are not genuine and object of the trust are not charitable. 3. The learned CIT while rejecting the application has erred in holding that the application cannot be processed as no verifiable details/ proof have been furnished by the appellant in respect of the activities claimed to be carried out by the appellant. 4. The learned CIT while rejecting the application for registration has erred in not appreciating the following important points that:

a. The foundation is registered as NGO u/s 8 of the companies Act,2013. b. The objects of the trust mentioned in the memorandum of association are purely of charitable nature. c. The audited books of accounts for the year ended 31.03.2017 were' furnished and details about the expenditure incurred were submitted along with the activities carried out were furnished before the ITO(Exemptions), Kolhapur from 30.10.2017. d. The submissions made before the ITO and inspector of CIT Exemptions at Kolhapur as well as Pune have not been considered before rejecting the application.”

assessee Trust has raised various grounds but the only grievance of

the assessee is about the refusal of granting registration u/s 12AA of

the Act.

submitted that all the objects are charitable and that CIT(E) has

rejected the application without considering the submissions made

before ITO, Kolhapur and CIT(E), Pune. He further submitted that it

is a settled law that at the time of registration, the CIT(E) is only

required to look as to whether the objects of the Trust are charitable

or not and the activities are genuine and he is not required to examine

the application of income. He further submitted that various

requirements raised by Ld.CIT(E) were provided by the assessee. He

further submitted that without issuing any show cause notice and

only on the basis of assumptions, Ld.CIT(E), rejected the application

filed by the assessee. He further submitted that the CIT(E) be directed

to grant registration to the assessee. Ld. D.R. on the other hand,

supported the order of lower authorities.

on record. The issue in the present case is with respect to denial of

claim of registration u/s 12A of the Act. The registration u/s 12A of

the Act can be sought either by a Trust or by an Institution. In order

to avail of the benefit of exemption u/s 11 or 12 of the Act, the

activities of the Trust or the Institution must be charitable or for

religious purposes. The conditions for applicability of Sec.11 and 12

are provided u/s 12 A and one of the conditions is that the person in

receipt of the income which he claims to be for charitable purposes

has to make an application for registration of the Trust or the

Institution in the prescribed form and in the prescribed manner to the

Commissioner within the period stipulated therein. The procedure for

registration of the Trust or the Institution by the Commissioner is

provided u/s 12AA of the Act. Sec.12AA(1) requires the Commissioner

to whom an application is made for the registration of a Trust or

Institution to satisfy himself about the genuineness of the activities of

the Trust or the Institution as well as the objects of the Trust or

Institution and for that purpose Commissioner is vested with power to

call for documents or information and is also empowered to make

such inquiries as he may deem necessary in that behalf. The

Commissioner is thereupon empowered to pass an order in writing

either registering an Institution or if he is not satisfied about the

objects of the Trust or Institution and of the genuineness of its

activities, to pass an order in writing refusing to register the Trust or

Institution. Thus it can be seen that at the time of grant of

registration, the Commissioner is not empowered to examine the

application of income. The stage for consideration of the relevance of

the object of the Trust and the application of its funds arises at the

time of assessment. We further find that Hon’ble Kerala High Court in

the case of Shri Anjaneya Medical Trust Vs. CIT (2016) 382 ITR 399

(Ker) on the issue of the scope of inquiry by CIT(A) for the registration

u/s 12A and 12AA has observed as under :

“It is clear from a plain reading of sections 12A and 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for the

claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the trust and the application of its funds arises at the time of assessment. Where benefits are claimed by the assessee in terms of sections 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the trust, going by the binding judgments of the apex court, what is to be looked into is whether the trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act. There is no such finding in the impugned order.”

the objects of Trust as mandated by the provisions of the Act as noted

above. Further it is also not in dispute that assessee had made an

application for registration in 02.11.2017. Considering the totality of

the aforesaid facts, we restore the issue back to CIT(E), Pune to decide

the issue of registration u/s 12AA of the Act in accordance with law

and after granting reasonable opportunity of hearing to the assessee.

Thus, the grounds of the assessee are allowed for statistical purposes.

statistical purposes.

Order pronounced on 12th day of September, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 12th September, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(Exemptions), Pune. 4. Addl.CIT(Exemp), Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.