ANAND INCUBATION CENTRE,JAIPUR vs. CIT(EXEMPTIONS), JAIPUR

Briefly the facts of the case are that the assessee filed an application before the ld. CIT(E) seeking approval u/s 80G(5)(vi) of the Act on 18.11.2016. The details of the activities of the assessee were called for by the ld. CIT(E) and after receiving the assessee’s submissions, it was held that the assessee trust came to existence on 13.10.2016 and in period of more than 7 months, no significant charitable activity has been started by the assessee trust as per its

During the course of hearing, the ld. AR submitted that the assessee submitted its application for grant of registration u/s 12AA as well as u/s 80G before the ld. CIT(E) on 18.11.2016. The ld. CIT(E) granted registration u/s 12AA on 18.05.2017 however, approval u/s 80G was not granted by order of even date.

It was further submitted by the ld AR that as per provisions of Rule 11AA(5), ld CIT is empowered to refuse registration only in those cases where conditions laid down in clause (i) to (v) of section 80G(5) are not fulfilled. In the case of the assessee, it is submitted that all the conditions mentioned in clause (i) to (v) of 80G were fulfilled by the assessee. Therefore there was no reason for rejecting the application of the assessee. The learned CIT has also not pointed out as to which condition the assessee failed to fulfil. Therefore the order passed by the learned CIT is arbitrary and unlawful.

It was further submitted that the learned CIT has rejected application for registration for the reason that no significant activity was started by the assessee trust. In this regard it is submitted that the assessee had filed letter dated 03.01.2017 in which the assessee had given details of scholarship given by the assessee trust.

It was further submitted that the assessee filed one more letter dated 15.05.2017 and in this letter it was explained that the assessee needed registration under section 80G(5) to start activities of the trust in a big way. With this letter also the assessee filed details of scholarship given by the

It was further submitted that the Hon’ble Jaipur bench has also taken this view that CIT cannot refuse registration for the reason that the assessee had not carried out any charitable activities. Reliance is place on the following decision of the Jaipur Bench of ITAT in the case of Jasoda Devi Charitable Trust V/s CIT 43 Tax World 175 wherein it was held held that registration under section 12AA and as well as under section 80G should be allowed to the newly created trust if conditions are fulfilled. The head notes of the case are as under:- “Before Tribunal it has been submitted by the assessee that CIT has passed order without giving any opportunity of hearing and is thus violative of the principles of natural justice. Assessee further submitted that charitable activities cannot begin immediately after formation of Trust and that there is no requirement of filing of income and expenditure account unless the trust is in existence for a year or more- Assessee also explained that unless registration is granted and exemption is allowed u/s 80G, how it will obtain donations from the people- Considering these submissions as well as fact of this case, Tribunal have held that CIT was not justified in rejecting the applications for registration since it had not carried out any charitable activity without appreciating that it was created during this year itself on 06.05.2009 besides not allowing the assessee an opportunity of being heard- Accordingly Tribunal have directed the CIT to grant registration to the assessee trust u/s 12AA of the Act and also to grant approval for exemption u/s 80G of the Act in case the conditions for the same are fulfilled.”

The ld DR is heard who has supported the order of the ld CIT(E).

We have heard the rival contentions and perused the material available on record. The limited objection raised by the ld CIT(E) is that the assessee has not started significant activity and accordingly, the application is not fit for grant of approval under section 80G of the Act. In other words, the ld CIT(E) has accepted the fact that the assessee has started certain activities as per its objects. The objects which have been duly verified and approved as charitable objectives while granting approval under section 12AA of the Act. Even during the course of hearing, the ld AR submitted that certain scholarship amount has been disbursed during the year as per its objects and the said fact is on record and submitted before the ld CIT(E) which he has failed to consider. In our view, what is a significant activity is a very subjective term and cannot be a sole basis for rejection of application. Where the assessee has various objectives, it is not necessary that the activities in furtherance of each of the objectives should be started simultaneously and at the same pace and level. It is up to the assessee to determine which all activities can be started initially and how the same can be expanded subsequently. And for that purposes, grant of approval under section 80G act as an enabler and a catalyst to encourage the prospective donors to look at the intended activities of the assessee and where they find the same to be acceptable, to provide financial support through donations/contributions. In our view, what is of relevance for the purposes of grant of approval under section 80G is whether the objectives are charitable or not and the activities, so started, howsoever insignificant it may be, are genuine activities or not and

Further, on perusal of Section 80G(5) as well as Rule 11AA, what is required to be seen is whether the institution/fund has been established in India for a charitable purpose or not. Secondly, it lays down certain additional conditions under clause (i) to clause (v) which are required to be fulfilled. Rule 11AA provides that where the CIT is satisfied that the conditions laid down in clauses (i) to (v) of sub-section 5 are fulfilled, the CIT is required to record his satisfaction before grant of approval under section 80G(vi). Where however, the CIT is satisfied that one or more of the conditions are not fulfilled, he is empowered to reject the application for approval after recording the reasons for such rejection. In the instant case, the appellant has been duly registered under section 12AA which shows that ld CIT has already verified its objectives and its establishment for charitable purposes. Regarding fulfilment of additional conditions specified in clause (i) to clause (v) of section 80G(5), we find that there is no recording of satisfaction regarding non-fulfilment of any of the conditions so specified and the ld CIT(E) has summarily rejected the assessee’s application.

We are accordingly setting aside the matter to the file of the ld CIT(E) to examine the matter afresh in light of above directions.