KALYANI MEDICAL FOUNDATION,PUNE, MAHARASHTRA vs. THE CIT (EXEMPTION), PUNE, PUNE, MAHARASHTRA

Facts of the case, in brief, are that the assessee filed an application in Form No.10AB on 29.06.2024 for registration of the trust under clause (iii) of section 12A(1)(ac) of the Act. With a view to verify the genuineness of the activities of the assessee and compliance to requirements of any other law for the time being in force by the trust / institution as are material for the purpose of achieving its objects, a notice was issued through ITBA portal on 09.08.2024 requesting the assessee to upload certain information / clarification. The assessee in response to the same filed the requisite details. The Ld. CIT(E) noticed various discrepancies for which another notice was issued on 29.11.2024 asking the assessee to explain the discrepancies and to explain as to why the application should not be rejected and as to why the provisional registration granted earlier u/s 12AB should not be cancelled. The assessee submitted its reply on 06.12.2024. The reply of the assessee regarding investment with private limited companies was reproduced by the Ld. CIT(E) which reads as under: “6. The assessee furnished its reply on 06/12/2024. The part of the submission regarding investments have been made with Pvt. Ltd. companies is reproduced as under: "We wish to inform your honour that the investment in preference share is made in the year 1998 i.e. well before the application for registration of 12A is made and we also have requested for redemption of preference shares to the company in which investment is made. Now we have received the redemption of preference shares amount of Rs.5089400/- out of the total investment of Rs.7604800/- in preference shares. Balance amount of investment is also expected to be received in the coming week. We have enclosed herewith bank statement in Annexure 3."

He, therefore, concluded that since the assessee has invested certain amount in the private limited companies since 1998 and has withdrawn a part of the investment only after a specific query was raised by him and still there are certain investments in the private companies, therefore, the assessee has violated provisions of section 11(5) of the Act. In absence of furnishing any credible supporting documents, he held that the assessee has not made compliance of requirements of any other law for the time being in force as are material for the purpose of achieving its objects. He, therefore, rejected the application filed by the assessee for grant of registration u/s 12A and also cancelled the provisional registration granted earlier u/s 12AB of the Act.

Aggrieved with such order of Ld. CIT(E), the assessee is in appeal before the Tribunal.

The Ld. Counsel for the assessee at the outset drew the attention of the Bench to para 7 of the order of the Ld. CIT(E) which reads as under: “7. In view of the above it is seen that the assessee has itself confirmed that the assessee has invested the certain amount in the private companies since 1998. The assessee has also contended that the part of these investment were received by the company. The assessee has withdrawn this investment only after a specific query by this office in this regards and only a partial investment is withdrawn by the assessee. Thus, it is clearly seen that the assessee has made violation of section 11(5) of the Act. Further, the assessee has not furnished any credible supporting documents in this regard. Therefore the assessee has not made compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects.”

He submitted that now the assessee has withdrawn the entire investment. He submitted that given an opportunity, the assessee is in a position to furnish credible supporting documents to the satisfaction of the Ld. CIT(E) regarding the compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects. He accordingly submitted that the matter should be restored to the file of the Ld. CIT(E) for fresh adjudication.

The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(E).

We have heard the rival arguments made by both the sides, perused the order of the Ld. CIT(E) and the paper book filed on behalf of the assessee. We find the Ld. CIT(E) rejected the application for grant of registration u/s 12A basically on the ground that the assessee has invested certain amounts in the private limited companies since 1998 and has partly withdrawn these investments only after a specific query was raised by him. It is also his allegation that the assessee has not furnished any credible supporting document to substantiate the compliance of requirements of any other law for the time being in force as are material for the purpose of achieving its objects. It is the submission of the Ld. Counsel for the assessee that the assessee has withdrawn the entire amount of investment made in private limited companies which were made in the year 1998. Further it is also his submission that given an opportunity the assessee is in a position to furnish all the necessary evidences / documents to the satisfaction of the Ld. CIT(E) to substantiate that the assessee has made compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Ld. CIT(E) with a direction to give an opportunity to the assessee to substantiate its case by filing the requisite details and decide the issue afresh and in accordance with law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes.