IMAME RABBANI FOUNDATION,SANGRUR vs. INCOME TAX OFFICER WARD-1, MALERKOTLA

The learned Authorised Representative (“AR”) for the assessee assailed the order of the CIT(E) as being hyper-technical and contrary to law. He submitted that the mere purchase of land, or the acquisition of infrastructure, cannot by itself be equated with the commencement of charitable activities. The AR emphasised that charitable activities, in the real sense, begin only when benefits are actually delivered to the beneficiaries in line with the objects of the trust.

He placed strong reliance on the decision of the Surat Bench of the Tribunal in Shrimati Shantaben Haribhai Gajera Foundation vs. CIT(E), order dated 16.01.2024, wherein it was categorically held that preparatory steps such as receiving seed donations or purchasing land are not tantamount to commencement of charitable activities. The Tribunal in that case observed that commencement must be understood purposively to mean actual implementation of charitable objects, and not preliminary acts of setting up.

The learned Departmental Representative (“DR”), supporting the order of the CIT(E), submitted that as per section 12A(1)(ac)(iii), provisional registration is meant only for trusts which have not commenced activities. He pointed out that the assessee itself admitted to having purchased land on 26.12.2022, which clearly demonstrates the commencement of activity. Once this fact was established, the DR contended, the assessee’s application under the provisional registration category was misconceived.

The DR further argued that the statutory language must be given due effect, and once it is found that the assessee had commenced activities, the provisional registration and subsequent application were not maintainable. He thus pleaded that the order of the CIT(E) be upheld.

We have considered the rival submissions, perused the record, and carefully gone through the statutory provisions as well as the judicial precedents cited. The short controversy is whether the purchase of land by the assessee on 26.12.2022 amounted to the commencement of activities, thereby rendering its subsequent application for registration under section 12AB non-maintainable.

At the outset, we note that the genuineness of the assessee’s objects or activities has not been doubted by the learned CIT(E). The rejection is based solely on the fact that preparatory acts—such as land purchase—amount to commencement and the assessee had obtained the provisional registration by selecting the wrong column

In this regard, we find merit in the submissions of the assessee. The Surat Bench in Shrimati Shantaben Haribhai Gajera Foundation (supra) has clearly held that “mere receipt of donation or purchase of land cannot be considered as commencement of charitable activities; such steps are only preparatory and facilitate future operations” (emphasis supplied). The Tribunal observed that charitable activity in the real sense commences only when the beneficiaries actually receive the intended benefits.

Applying the above principles to the present case, we are of the considered opinion that the CIT(E) erred in treating the assessee’s application as non-maintainable. Land purchase is a preparatory step, not the commencement of charitable activity. The assessee was therefore well within its right to apply for registration under section 12AB.

In the absence of any adverse finding on the genuineness of the trust or its objects, denial of registration on a purely technical ground is not justified. Moreover the scheme of section 12AB is benevolent in nature and intended to facilitate the registration of genuine charitable institutions; it should not be frustrated by adopting hyper-technical interpretations. We must also acknowledge that the law in this area has been recently amended and is still evolving. The level of digital literacy in our country has yet to reach a stage where every assessee or professional is fully conversant with the intricacies of the new portal-driven compliance system. More so, this transition occurred in the backdrop of the Covid-19 pandemic, when procedural and technical hurdles were a common reality. In such circumstances, substantive justice must prevail over form, and procedural lapses or mistaken selection of the wrong category cannot deprive a bona fide charitable trust of its legitimate right to registration.

We accordingly set aside the impugned order of the learned CIT(E). The appeal of the assessee is allowed and the CIT(E) is directed to grant registration to the assessee-trust under section 12AB of the Act forthwith.

In the result, appeal of the assessee-trust stands allowed.