SAILEELA FOUNDATION TRUST,NATAL vs. COMMISSIONER OF INCOME-TAX (EXEMPTION), PUNE, PUNE

Facts of the case, in brief, are, that the assessee filed application for registration in Form No.10AB under clause (iii) of section 12A(1)(ac) of the IT Act on 31.03.2023. With a view to verify the genuineness of 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 by Ld. CIT, Exemption, Pune through ITBA portal on 15.06.2023 requesting the assessee to upload certain information/clarification. The desired information was furnished by the assessee. On verification of said information furnished by the assessee, Ld. CIT, Exemption, Pune found certain discrepancies in the information furnished by the assessee and issued another notice on 16.09.2023. The assessee sought short adjournment & complied with the said notice on 26-09-2023. However, Ld. CIT, Exemption, Pune rejected the application for registration and also cancelled the 06.04.2022 u/s 12AB r.w.s. 12A(1)(ac)(vi) of the IT Act by observing as under :- “3. The assessee has furnished its compliance through e-portal on 26/09/2023. The assessee has furnished the copy of the PT and PF challans. The assessee has also furnished copy of confirmation letter received from the parties from whom the assessee has loan taken. Further, the assessee has not furnished any explanation regarding purpose/ nature of such loans and utilisation of the same for the trust's purpose. The assessee has also failed to furnished permission of the Charity Commissioner under the provisions of section 36A of the Maharashtra Public Trusts Act, 1950.

Therefore, the compliance of the assessee is not found to be acceptable. 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. Section 12AB(1)(b) of the Income-tax Act, 1961, provides that the Commissioner shall satisfy himself about 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. The assessee, has failed to comply with this requirement.

In view of the above, the undersigned is not satisfied about the genuineness of 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. The application filed by the assessee is hereby rejected and the provisional registration granted on 06/04/2022 under section 12AB read with section 12A(1)(ac)(vi) of the Income Tax Act, 1961 is hereby cancelled.”

Ld. DR appearing from the side of the Revenue submitted before us that huge loans were obtained but for what purpose & the identity, genuineness & creditworthiness of the persons providing such loans was not proved before Ld. CIT, Exemption, Pune, secondly the permission as required from Charity Commissioner to obtain loan was also not provided before Ld. CIT, Exemption, Pune, therefore Ld. CIT, Exemption, Pune was not satisfied with the genuineness of activities of the trust & compliance to the requirements of other law in force by the trust & therefore was justified in rejecting the application of the assessee. Ld. DR placed 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. We find that admittedly the assessee made compliance to all the notices issued by Ld. CIT, Exemption, Pune. It is the sole contention of the assessee that if the final reply of the assessee was not satisfactory Ld. CIT, Exemption, Pune should have had provided at-least one more opportunity to the assessee to explain his case. It was also the contention of the assessee through an affidavit that an application for obtaining the sanction u/s 36A(3) of the Maharashtra Public Trust Act was furnished before the Charity Commissioner but for various reasons the same was not accepted by him. It was also submitted that no adverse proceedings were initiated by the Charity Commissioner for violation of obtaining unsecured loans without the prior permission. It was also the contention that the loan amount were utilised towards achieving the objects of the trust. Considering the totality of the facts of the case and in the interest of justice without going into the merits of the case, we set-aside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to him with a direction to decide the application for registration afresh as per fact