Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
O R D E R
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(Exemptions) Bangalore dated 27.12.2024 vide DIN & Order No. ITBA/EXM/F/EXM45/2024- 25/1071607937(1) cancelling the registration u/s 12AB of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
Brief facts of the case are that assessee trust is created by way of Deed of declaration of Trust dated 17/05/2022. The assessee Trust was provisionally registered vide Unique Registration Number (URN)- AABTE2673EE20231 under sub clause (vi) of clause (ac) of sub section (1) of section 12A of the Act as per the order for provisional Registration in Form No. 10AC dated 26/07/2023 effective from AY 2024-25 to 2026-27. Further, after commencing the activity, the assessee trust applied for the final registration in form No. 12AB on 30/06/2024. On receipt of application for registration u/s.12AB of the Act, the ld. Eeswara Seva Samithi, Davanagere Page 3 of 9 CIT(Exemption) assigned the case to the Jurisdictional Assessing Officer (JAO) for verification. The JAO issued letters/notices through official mail/post calling for the details/documents.The details submitted by the assessee were verified.
3.1 Before the ld. CIT(E), the assessee submitted that it has intention to establish Old age home in Davanagere. Subsequently, the idea was changed from smaller scale to larger scale oldage home and to attract people from neighboring states such as Tamil Nadu, Andhra Pradesh, Telangana and Karnataka. The assessee has decided to establish an old homage residence in Bengaluru. Accordingly, the land was purchased in Bengaluru and started its objectives.
3.2 The ld. CIT (Exemption) observed that during the F.Y 2022- 23, the assessee reported a surplus of Rs. 34,60,000/- and the same were utilized for purchase of land measuring 24 guntas near Jeeganahalli Village, at a cost of Rs.30,70,000/-. However, the assessee has not furnished details of donations / corpus donations received during the first year of inception.
3.3 The ld. CIT(E) further observed that during the F.Y 2023-24, the assessee received corpus donations of Rs. 4,78,63,616/-. The assessee submitted that it has received major corpus donations of Rs. 4.60 Crore and Rs. 0.50 Crore from Mr. Sama Chaitanya Kumar, Hyderabad during the FYs 2023-24 and 2024-25 respectively. The assessee had purchased agricultural land and got approval for conversion of agricultural land to non-agricultural land for the purpose of construction of old age home from concerned authorities. The assessee has furnished the copy of plan for construction of old age home but which has not been approved by the concerned authority.
Eeswara Seva Samithi, Davanagere Page 4 of 9 3.4 In view of the fact that the assessee trust had given loans and failed to furnish the list of borrowers from the assessee, the ld. CIT(E) held that the assessee has not utilized its corpus donations towards specific purposes for which donors donated funds to the assessee.
3.5 Further, the ld. CIT(E) also observed that the assessee has received donations, but the assessee has not spent major amounts towards the objects of trust as seen from the Income & Expenditure statements.
3.6 In view of the above-mentioned facts, as the assessee neither submitted the documentary evidence for which corpus donations received for building nor made charitable activities and therefore, the genuineness of charitable activities can't be proved and accordingly the ld. CIT(E) rejected the application of the assessee for grant of registration u/s 12AB of the Act.
Aggrieved by the order of ld. CIT (Exemptions), Bangalore dated 27/12/2024, the assessee has filed the present appeal before this Tribunal.
Before us, the ld. A.R. of the assessee vehemently submitted that the assessee trust after commencing the activity had only applied for the final registration. Further AR of the assessee submitted that the advances were given only for the purposes of the construction of the old age home. Further, it is submitted that the assessee trust had also filed Form 10 under clause (a) of sub- section (2) of section 11 of the Act for accumulation of Rs.4,78,63,616/- for the purposes of construction of building for 5 years.
Eeswara Seva Samithi, Davanagere Page 5 of 9 6. Ld. D.R. on the other hand, relied on the order of the ld. CIT(E) and vehemently submitted that except purchase of the land no activity has been carried out by the assessee trust.
We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that one of the main object of the assessee trust as verified from the object clause of the deed of declaration of trust dated 17/05/2022 is “ to build homes for destitute and orphans of all ages and religions.” It is also an undisputed fact that for the aforesaid purposes, the assessee trust had purchased land measuring 24 guntas near Jeeganahalli Village, at a cost of Rs.30,70,000/-. As observed by the ld. CIT(E), the assessee had also got the approval for conversion of agricultural land to non-agricultural land for the purpose of construction of old age home from concerned authorities. The assessee has also furnished the copy of plan for construction of old age home but which has not been approved by the concerned authority. Therefore, we are of the considered opinion that the assessee trust has applied for the final registration only after commencing its activity towards the objects of the Trust. Now the allegation of the ld. CIT(E) is that the assessee trust has not spent major amounts towards the objects of the trust.
7.1 We are of the considered opinion that for the purpose of granting registration, the Ld.CIT(E) should call for such documents or information or make such enquiry as she thinks necessary in order to satisfy 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.
In the present case, there is not even a whisper about any non- genuineness of the activities carried on by the assessee trust. The only allegation by the Ld.CIT(E) is that the assessee trust has not spent major amounts towards the objects of the trust. We are of the firm opinion that it is not the quantum of expenditure which is relevant for the purpose of granting registration but in fact the genuineness of the activity of the trust in accordance with the object of the trust is relevant. In the present case, it is undisputed fact that the assessee trust had purchased a land for carrying out activity of the trust and also commenced the construction activities for the old age home. Further, as the assessee trust was not able to spend the entire donation received had also filed a form No. 10 on 29/09/2024 under clause (a) of sub-section (2) of section 11 of the Act for accumulation of Rs.4,78,63,616/- for the purposes of construction of building for a period of 5 years starting from previous year 2024-25 to previous year 2028-29.
7.2 At this juncture, it is worthwhile here to mention the observations of the Hon’ble Apex Court in the case of Ananda Social & Educational Trust v. Commissioner of Income tax reported in (2020) 426 ITR 340 as below-
“We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant - Director of Income-tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Eeswara Seva Samithi, Davanagere Page 7 of 9 Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. We therefore find that the view of the Delhi High Court in the impugned judgment is correct and liable to be upheld. Ms. Bhati, learned Senior Counsel for the appellant, fairly drew our attention to a judgment of the Allahabad High Court in IT Appeal No. 36 of 2013 titled as "Commissioner of Income Tax-II vs. R.S. Bajaj Society" which has taken the same view as that of the Delhi High Court in the impugned judgment. The Allahabad High Court has also referred to a similar view taken by the High Courts of Karnataka and Punjab & Haryana. Apparently, a contrary view has been taken by the Kerala High Court in the case of Self Employers Service Society v. Commissioner of Income-tax - [2001] Vol.247 ITR 18. That view however does not commend itself. However, the facts in Self Employers Service Society (supra) suggest that the Commissioner of Income-tax had observed that the applicant for registration as a Trust had undertaken activities which were contrary to the objects of the Trust. In the result, we find that there is no reason to interfere with the impugned judgment of the High Court of Delhi. The appeal is, accordingly, dismissed”
7.3 We respectfully, following the above judgment, are of the considered opinion that the purpose of section 12AB of the Act is to enable the registration only of such trust or institution whose objects and activities are genuine. In other words, the Ld.CIT(E) is bound to satisfy herself that the object of the trust is genuine and that its activities are in furtherance of the object of the trust that is equally genuine. Since section 12AB of the Act pertains to the registration of the trust and to assess of what a trust has actually done, we are of the view that the term activities in the provision Eeswara Seva Samithi, Davanagere Page 8 of 9 include “proposed activities”. In the present case, the assessee trust had filed a form No. 10 on 29/09/2024 under clause (a) of sub-section (2) of section 11 of the Act for accumulation of Rs.4,78,63,616/- for the purposes of construction of old age home building for a period of 5 years starting from previous year 2024-25 to previous year 2028-29 which in our view is a proposed activity for attaining the object of the trust.
7.4 However, we are also conscious to the fact that as observed by the ld. CIT (E), the assessee trust had not furnished the details of donations/ corpus donations received during the first year of inception. Further, the assessee trust has also failed to furnish the details of borrowers & purposes for which the Loans & advances were given. We are also of the opinion that the Ld. CIT(E) has not properly verified the genuineness of the activities under the present facts & circumstances of the case which is crucial in granting the registration of the trust. This being so, in the interest of justice and fair play, we deem it fit and proper to remit the issue to the file of Ld.CIT(E) for verifying as follows and decide in accordance with law:
1) The assessee shall furnish the details of persons from whom the donations/ corpus donations received during the FY 2022-23 & FY 2023-2 i.e. name, address, PAN & Aadhar.
2) The ld. CIT(E) shall also verify the present status of the land purchased for the purpose of carrying on activities of the trust & also take a note of the construction activities carried on by the trust on the said land since purchased.
3) The ld. CIT(E) shall also verify the status of the pending approval of plan for construction of old age home.
4) The assessee shall also furnish the details of borrowers & purposes for which the Loans & advances were given.
5) Any other enquiry as deemed fit for the purpose of establishing the genuineness of the activity carried on by the trust.
7.5 Needless to say, a reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to produce/submit all the necessary details/documents/records/ financials/reports etc in support of its claim or as may be required by the ld. CIT (Exemptions) for granting registration u/s 12AB of the Act. It is ordered accordingly.