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Facts
The assessee trust filed an application for registration under Section 12A. The CIT rejected the application because the trust failed to obtain previous sanction from the Charity Commissioner for loans taken, as required by Section 36A of the Maharashtra Public Trust Act, 1950.
Held
The Tribunal noted that the assessee had applied for ex-post-facto approval from the Charity Commissioner. Following precedent, the Tribunal restored the issue to the CIT(E) to decide the application afresh after providing an opportunity of hearing.
Key Issues
Whether the rejection of registration u/s 12A by the CIT(E) was justified solely on the ground of not obtaining prior sanction from the Charity Commissioner, especially when an ex-post-facto application was made.
Sections Cited
12A, 10(23C), 12AA, 12AB, 36A
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
This appeal filed by the assessee is directed against the order dated 07.03.2025 of the Ld. CIT(Exemption), Pune rejecting the application for grant of registration u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Facts of the case, in brief, are that the assessee filed an application in Form No.10AB on 21.09.2024 for registration of the trust under sub clause (B) of clause (iv) of first proviso to section 10(23C) 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 05.11.2024 requesting the assessee to upload certain information / clarification. In response to the various notices issued, the assessee submitted certain documents. On verification of the details submitted by the assessee, the Ld. CIT(E) noted various discrepancies for which another notice was issued to the assessee asking the assessee to explain on account of those discrepancies. The assessee in response to the said notice filed the requisite details. However, the Ld. CIT(E) was not satisfied with the submissions made by the assessee and rejected the application for grant of registration u/s 12A of the Act by observing as under: “7. The assessee's contention is duly considered. It is, however not acceptable considering the following: The decision relied upon by the assessee pertains to A. Y. 2011-12. Further, there has been amendment to sec. 12AA w.e.f. 01/04/2021. The old and new provisions are reproduced for ready reference is as under: Provisions for A.Y. 2011-12 12AA (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) 28 (or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf, and (b)….” Provisions for w.e.f 01.04.2021 12AA (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about.- (i) the genuineness of activities of the trust or institution, and (ii) 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 objects. and may also make such inquiries as he may deem necessary in this behalf, and..."
8. In light of the above, it is clearly seen that the current provisions are different from the old provisions. As per the provisions of sec. 12AB(1) of the Income-tax Act, 1961, the Commissioner shall satisfy himself about, among other things, '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 objects. Thus, said provision mandates the trust to obtain previous sanction from Charity Commissioner in respect of any loan, whether by way of mortgage or otherwise. The assessee has, however, failed to comply with this statutory requirement. Therefore, the ratio of the decision relied upon by the assessee is not applicable in the present case. Further, from the reply, it is revealed that the trust has not obtained permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner. 8.1 Section 36A(3) of the BPT Act, 1050 categorically provides that' no trustee shall borrow moneys (whether by way of mortgage or otherwise) for the purpose of or on behalf of the trust of which he is a trustee, except with the previous sanction of the Charity Commissioner, and subject to such conditions and limitations as may be imposed by him in the interest or protection of the trust. Hence, the assessee was required to take previous sanction from the Charity Commissioner Further, section 36A(3A) provides that in exceptional and extraordinary situations where the absence of previous sanction contemplated under sub-section (3) results in hardship to the trust, beneficiary or bonafide third party, the Charity Commissioner may grant ex-post-facto sanction to borrow moneys from any nationalized bank or the Scheduled Bank, by the trustees. Thus, the assessee could have very well obtain ex-post facto sanction. It, however, failed in doing so.
Considering the above facts discussed in the show notice and discrepancies noticed, the undersigned is not satisfied about 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.
10. In view of the above, the application filed by the assessee under sub clause (B) of clause (iv) of first proviso to section 10(23C) of the Income Tax Act, 1961 is hereby rejected.”
Aggrieved with such order of Ld. CIT(E), the assessee is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case and in law Ld. CIT Exemption has erred in not granting registration u/s 12AB without appreciating the fact that while uploading form 10AB online, in dropdown box, incorrect section was selected "12A-Sub-clause (B) of clause (iv) of first proviso to clause (23C) of section 10 (for applicants covered under sub-clause (iv) of clause (23C) of section 10). Your appellant prays for one opportunity before Ld CIT(Exemption) to correct the said error and to consider the registration application u/s 12A.
2. On the facts and in the circumstances of the case and in law Ld. CIT Exemption has erred in not granting registration u/s 12AB without appreciating the facts of the case, for the sole reason of not taking permission from charity commissioner, your appellant states that such ex post facto permission is sought. In view of this your appellant prays for setting aside the matter to the file of Ld CIT Exemption. Your appellant prays accordingly. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.
The Ld. Counsel for the assessee at the outset filed a copy of the order of the Tribunal in the case of Rajkunwar Bahuuddeshiya Sevabhavi Sanstha vs. CIT vide order dated 30.04.2025 and submitted that under identical circumstances where the assessee trust has not obtained the permission from the Charity Commissioner regarding loans but where the assessee applied before the Charity Commissioner for post-facto approval of such loans, the Tribunal restored the issue to the file of Ld. CIT(E) to decide the issue afresh.
Referring to the decision of the Pune Bench of the Tribunal in the case of Baramati Vipassana Samiti vs. CIT vide & 2643/PUN/2024, order dated 03.04.2025 for assessment year 2025-26, he submitted that under identical circumstances the Tribunal has directed the Ld. CIT(E) to grant registration u/s 12A of the Act where the assessee has applied for post facto permission from the Charity Commissioner with reference to such loans. He accordingly submitted that since the assessee in the instant case has already applied to the Charity Commissioner for permission with respect to the loans, therefore, the Ld. CIT(E) should be directed to grant registration u/s 12A of the Act.
The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(E). He submitted that when the assessee has violated the provisions by not obtaining the permission from the Charity Commissioner for grant of loans, the Ld. CIT(E) was fully justified in rejecting the registration u/s 12AB of the Act.
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) in the instant case rejected the claim of registration u/s 12AB of the Act, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the assessee has already sought for permission from the Charity Commissioner subsequent to the assessment proceedings. However, the same is still pending.
We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of Rajkunwar Bahuuddeshiya Sevabhavi Sanstha vs. CIT (supra) where the Tribunal while restoring the issue to the file of CIT(E) has observed as under: “7. We have heard Ld. Counsels from both the sides and perused the material available on record and also copy of case laws relied on by the assessee. We find that admittedly, the assessee trust was required to obtain permission from Charity Commissioner regarding loans but the same was not obtained timely. However, we also find that the assessee has already applied before Charity Commissioner for post facto approval of such loans. Considering the totality of the facts of the case & in the interest of justice and without going into merits of the case, we deem it proper to setaside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to him with a direction to decide the application afresh as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. CIT, Exemption, Pune in this regard and produce supporting additional documents/evidences/submissions in support of application for registration, without taking any adjournment under any pretext, otherwise, Ld. CIT, Exemption, Pune shall be at liberty to pass appropriate order as per law. Thus, the grounds of appeal filed by the assessee are partly allowed.”
9. Sine it is the submission of the Ld. Counsel for the assessee that the assessee has already applied to the Charity Commissioner after granting the loans, therefore, following the decision of the Tribunal in the case of Rajkunwar Bahuuddeshiya Sevabhavi Sanstha vs. CIT cited (supra), we deem it proper to restore the issue to the file of the Ld. CIT(E) with a direction to adjudicate the issue afresh and in accordance with law after providing due opportunity of being heard to the assesse. 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.
Order pronounced in the open Court at the conclusion of hearing itself i.e. on 31st July, 2025.