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Facts
The assessee trust applied for registration under section 12AB of the IT Act. The CIT rejected the application, citing discrepancies and failure to obtain prior permission for loans from the Charity Commissioner as required by state law, and also noting the provisional registration was not furnished. The assessee appealed this rejection.
Held
The Tribunal acknowledged that the assessee trust was required to obtain permission from the Charity Commissioner for loans but failed to do so timely. However, since the assessee had applied for post-facto approval, the Tribunal set aside the CIT's order and remanded the matter back for fresh adjudication.
Key Issues
Whether the rejection of registration application under section 12AB by the CIT was justified without granting a final opportunity to the assessee, especially when post-facto approval for loans was sought from the Charity Commissioner.
Sections Cited
12AB, 12A(1)(ac)(iii), 12A(1)(ac), 36A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 20.01.2024 passed by Ld. CIT, Exemption, Pune rejecting the application for registration u/s 12AB of the IT Act.
There is a delay of 110 days in filing of the present appeal. In this regard, the assessee has filed an application for condonation of delay along with an affidavit. We are satisfied with the explanation of the assessee that he was prevented by reasonable cause for not filing the present appeal within prescribed time limit. Ld. DR raised no serious objection to the condonation request made by the assessee. Accordingly, the delay of 110 days is condoned and the appeal is admitted for adjudication.
Facts of the case, in brief, are that the assessee is a trust applied for registration in Form 10AB u/s 12A(1)(ac)(iii) of the IT Act on 27.09.2023. 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 dated 05.12.2023 was issued through ITBA portal requesting the assessee to upload various information detailed in notice. In compliance to the above notice, desired information was furnished by the assessee trust. Since various discrepancies were noticed including that the application is not under appropriate clause, another notice was issued by Ld. CIT, Exemption, Pune on 09.01.2024. Not being satisfied with the compliance made by the assessee, Ld. CIT, Exemption, Pune rejected the application for registration by observing as under :- “6. The assessee submitted the compliance on 16/01/2024 but failed to furnish the copy of order or registration under section 12A or 12AA of the Income Tax Act, 1961 prior to 01/04/2021. Therefore, it seems that the assessee has obtained the said registration by mis- representation of facts and the said registration is not a valid registration. The assessee has not furnished the copy of provisional registration under section 12AB of the Act hence the prerequisite for the present application under clause (i) of section 12A(1)(as) of the Act is not fulfilled in this case. Further, the regular registration obtained by the assessee is also found to be invalid.
7. Without prejudice to the above, it was noticed that the assessee has raised loans. It was, therefore, requested to furnish nature and purpose of said loans and its utilisation for each of the institution/project along with copy of permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner. 7.1 In reply, the assessee contended that it has taken loans from trustees and not from financial institutions or banks. As such, no permission was required to be taken from Charity Commissioner u/s 36A of the Maharashtra Public Trust Act. 1950. The contention of the assessee is duly considered. However, the same is not acceptable. Section 36A(3) of the MPT Act, 1950 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." Thus, said provision mandates the trust to obtain previous sanction from Charity Commissioner in respect of any loan. The assessee has, thus, failed in compliance of such requirement of any other law for the time being in formce as are material for the purpose of achieving its objects.
In view of the above, the application filed by the assessee is hereby rejected and the regular registration granted on 06/10/2021 under section 12AB read with clause (i) of section 12A(1)(ac) of the Income Tax Act, 1961 is hereby cancelled.”
It is this order against which the assessee is in appeal before this Tribunal.
Ld. AR appearing from the side of the assessee submitted that the rejection order passed by Ld. CIT, Exemption, Pune is unjustified. It was submitted by Ld. Counsel of the assessee that if Ld. CIT, Exemption, Pune was not satisfied with the explanation furnished by the assessee, he ought to have provided at least one last opportunity to furnish further clarification with regard to queries. It was the only request made by the assessee that at least one last opportunity may kindly be given to the assessee to substantiate the application for registration before Ld. CIT, Exemption, Pune. It was also submitted by Ld. Counsel of the assessee that they have already applied before Charity Commissioner, Aurangabad regarding post facto approval of loan taken by the society. However, it was also clarified that most of the loans were obtained prior to year 2019. Accordingly, it was prayed before the Bench to set-aside the order passed by Ld. CIT, Exemption, Pune with a direction to decide the application afresh after providing reasonable opportunity of hearing to the assessee.
Ld. DR appearing for the Revenue relied on the order passed by Ld. CIT, Exemption, Pune and requested to confirm the same.
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 set- aside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to him with a direction to decide the application