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Facts
The assessee, a trust, applied for registration under Section 12AB and approval under Section 80G. The CIT(Exemptions) rejected both applications, holding that the donations received were utilized solely for the purchase of land and construction of a building, and not for charitable activities. The CIT(E) considered these activities as not being of a charitable nature.
Held
The Tribunal held that the purchase of land and construction of a building are necessary for establishing and undertaking charitable activities. The CIT(E) did not bring sufficient material on record to prove the activities were non-genuine or non-charitable. Therefore, the matter was remitted back to the CIT(E) for fresh consideration.
Key Issues
Whether the purchase of land and construction of a building by a charitable trust constitutes application of income for charitable purposes. Whether the CIT(E) erred in rejecting registration and approval without adequate inquiry and material.
Sections Cited
12AB, 80G, 11, 12, 13, 80G(5)
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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
These appeals at the instance of the assessee are directed against the order of the ld. CIT(Exemptions) Bangalore both dated 27.12.2024 vide DIN & Notice No. ITBA/EXM/F/EXM45/2024- 25/1071624450(1) cancelling the registration u/s 12AB of the Act and DIN & Notice No. ITBA/EXM/F/EXM45/2024- 25/1071624556(1) cancelling the approval u/s 80G of the Act of the Income Tax Act, 1961 (in short “The Act”). for adjudication. In this appeal, the assessee has raised the following grounds of appeal:-
Brief facts of the case are that on receipt of application in form 10AB dated 05.06.2024 for the registration u/s 12AB of the Act, the ld. CIT(E) assigned the case to the JAO for verification. The & 353/Bang/2025 Okkaliga Gowda Seva Sangha Kadaba, Dakshina Kannada Page 3 of 7 JAO issued letters/notices through official mail/post calling for the details/documents.
3.1 The ld. CIT(E) observed that the assessee entity is a trust registered on 5.4.2023. During the F.Y 2023-24, the assessee received donations of Rs.1,27,30,995/-. The assessee has claimed that it has made payments to the extent of Rs.1,03,92,899/- 3.2 The ld. CIT(E) further observed that the major expenses are towards purchase of land and building construction. The assessee spent Rs.23,34,680/- on purchase of land and spent Rs.80,25,219/- towards building construction. The ld. CIT(E) is of the opinion that the assessee has not spent any amount towards charitable activities of trust. The assessee has utilized donations only for the purchase of land and construction of building.
3.3 In view of the above fact, the ld. CIT(E) came to the conclusion that the donations received during the year were not put into use towards the charitable activities of the trust and accordingly held that the activities made by the assessee trust are not in a charitable nature. Hence the application in Form 10AB dated 5.6.2024 filed for registration u/s 12AB of the Act was rejected and registration was cancelled by the ld. CIT(E).
Aggrieved by the order of ld. CIT(E) dated 27/12/2024, the assessee filed the present appeal before this Tribunal.
Before us, the ld. A.R. of the assessee submitted that the ld. CIT(E) cancelled the registration only by holding that assessee has not spent any amount towards the charitable activities of the trust and the assessee has utilized donations only for the purchase of land and construction of building. Further the ld AR submitted that & 353/Bang/2025 Okkaliga Gowda Seva Sangha Kadaba, Dakshina Kannada Page 4 of 7 for a charitable activity to be undertaken, the trust needs an establishment and for which investment is made in the capital asset. Lastly the ld AR submitted that nothing is brought on record to show that the activity is non-charitable in nature.
Ld. D.R. on the other hand relied on the order of ld. CIT(E) and requested to dismiss the appeal as the assessee has utilized donations only for the purchase of land and construction of the building.
We have heard the rival submissions and perused the materials available on record. We are of the firm opinion that for the purpose of granting registration, the ld. CIT(E) shall call for such documents or information or make such inquiry as he/she thinks necessary in order to satisfy himself/herself about the twin object:- (a) the genuineness of the activity of the trust and (b) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its object. We are also of the opinion that at the time of granting registration the ld. CIT(E) should not steps into shoes of the AO & in the guise of Registration proceeding starts the assessing the Income of the assessee Trust. On going through the order of the ld. CIT(E), we observe that the only contention for rejecting the application of registration is that the assessee has utilized donations only for the purchase of land and construction of the building which according to ld. CIT(E) is not in a charitable nature. It is not in dispute that the activities of the assessee trust have not commenced. We do agree with the contention of the ld. AR of the assessee that for a charitable activity to be undertaken, the trust needs an establishment and for which the applications were made in purchase of land & construction of the building. Therefore, & 353/Bang/2025 Okkaliga Gowda Seva Sangha Kadaba, Dakshina Kannada Page 5 of 7 the purchase of the land & the construction of the building are also for the purposes of the charitable object of the Trust. We are of the considered opinion that the ld. CIT(E) without giving any cogent reasons had merely affirmed that the purchase of land & construction of the building is not in a charitable nature. We also agree with the contention of the ld. AR of the assessee that merely because the assessee trust has purchased land & started construction of the building for the purpose of achieving the aims & objectives of the trust, it cannot be said that it is not in a charitable nature. Further the ld. CIT(E) also not brought any material on record to suggest that these activities are non-genuine or non charitable in nature. This being so, in the interest of justice and fair play and as requested by the ld. A.R. of the assessee, we deem it fit and proper to remit the entire issue of registration to the file of ld. CIT(E) to decide in accordance with law. The ld. CIT(E) shall verify the object clause of the Trust Deed & satisfy himself about the purposes of the purchase of land & construction of the building & see whether they are in accordance with the object of the Trust or not? Further the ld. CIT(E) shall also call for & verify further activities carried on the said building & its present status along with the other activities of the Trust. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. We also direct the assessee to produce/submit all the necessary details/documents/record/ financials/reports in support of its claim. It is ordered accordingly.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Since we have remitted the entire issue of registration u/s 12AB of the Act to the file of ld. CIT(E), we deem it fit and proper to remit this issue of approval u/s 80G of the Act to the file of ld. CIT(E) to decide afresh in accordance with law as the ld. CIT(E) had rejected the approval u/s 80G(5) of the Act by mentioning the same reason while rejecting the registration u/s 12AB of the Act . It is ordered accordingly.
In the combined result, both the appeals filed by the assessee are partly allowed for statistical purposes.