JUST BE FOUNDATION TRUST ,NEW DELHI vs. CIT(E) , NEW DELHI

Per Anadee Nath Misshra, AM

This is an appeal filed by M/s Just be Foundation (referred (A) as “applicant” in this order) against the order dated 27th April,

2018 of the learned Commissioner of Income Tax (Exemptions),

Delhi [“ld. CIT (E)”, for short] wherein the ld. CIT (E) rejected the

applicant’s application for grant of approval under section 80G of

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the Income Tax Act, 1961 (“I.T. Act” for short). Ground of appeal

is as under:-

i. On the facts and in the circumstances of the case and in law the ld. CIT(E) erred in rejecting the application seeking approval for exemption u/s 80G of the Income Tax Act, 1961. The order being arbitrary, misconceived, erroneous and unjust must be quashed with directions to grant approval as sought.”

(B). The applicant came into existence through trust deed which is reproduced below:

“This declaration of Trust is made in the city of Delhi on this 27th day of June 2017 by Ms. Lavanya Anirudh Verma D/O Mr. H. Rajamani R/O F-001 Yamuna Apartments, Alaknanda, New Delhi 110019, hereinafter called the EXECUTANT TRUSTEE/ SETTLOR. The expression of the Executant Trustee/ settlor hereinused unless repugnant to the contest hereof shall mean and include her heirs, successors, legal representative, administrators, nominees and assignees. And WHEREAS the Executant trustee/ settlor is desirous to settle a Trust for Charitable purposes and hereby settle a sum of Rs. 1,100 (Rupees One Thousand One Hundred Only) wholly for charitable purposes and advancement of objects of general public utility for the exclusive benefit of the public without reference to caste or creed or religion and not involving the carrying on of any activities for profit. It is considered expedient to execute a formal deed of Trust Page 2 of 21

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specifying the terms and conditions for such administration and also the powers of the Trustees. NOW THIS DEED THEREFORE WITNESSETH AND IT IS HEREBY DECLARED BY THE EXECUTANT TRUSTEE/ SETTLOR IS AS FOLLOWS: 1) The name of the Trust shall be “JUSTBE FOUNDATION” 2) The Head office of the Trust shall be at Delhi but the trustees are at liberty to transfer it and open branches at such other place or places as they may decide. 3) Trustees: There shall be not less than two and not more than five trustees at any time, who altogether, shat, constitute the Board of Trustees provided that the following shall constitute the first Board of Trustees who have given their consent to become trustees: 1. Ms. Lavanya Anirudh Verma, D/O Mr. H. Rajamani, R/O F-001 Yamuna Apartments, Alaknanda, New Delhi 110019 2. Ms. Mayoori Sangameshwar Hanagodimath, D/O Late Mr. Sangameshwar Hanagodimath, R/O 520 Sarita Vihar, Pocket A, new Delhi 110 076 Ms. Lavanya Anirudh Verma, Chairperson of the Board of Trustees, shall hold office for life and shall preside over all the meetings of the Board and shall have a casting vote in the event of a tie of votes amongst the trustees. 4) Objects: PRIMARY OBJECTS

a) To work for the upliftment and welfare of underprivileged children, Page 3 of 21

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orphans and abandoned children, irrespective of caste, creed and religion, and to establish institutions and/ or to provide financial, medical and other aid and support to such institutions that are working with this object b) To provide relief to the needy and advancement of any other object of general public utility and aid. CHILD WELFARE

c) To work with a special concentration on Child welfare for children in need of care and protection who are orphaned and or abandoned including those abused and abandoned d) To establish, build or manage directly or in partnership - Child Care Institutions like Children Homes including After-care homes. Also Hostels. Short Stay Homes, Rehabilitation Centers', Shelters. Creches. and Counselling Centers for children. e) To liaison with relevant government bodies, welfare department and authorities to aid and further the interests of the beneficiaries. f) To organize and take-up Health, Educational and Welfare programs for children in need of care and protection. Also facilitating rehabilitation and integration back to society for these children. EDUCATION

g) To establish, run, maintain, support or help in the establishment of educational institutions, colleges, libraries, other academic, vocational institutions for public at large and for spread of education in Arts, Science, Commerce, Agriculture and allied fields, Literature, Philosophy, Physical Education, training, or in any other subjects of faculty or for furthering the cause of education and furthering the cause of the beneficiaries. Page 4 of 21

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h) To give awards, rewards and recognition and other incentives to deserving candidates i) To provide, give help to poor and meritorious students of either sex either by payment of fees or by providing them books or defraying other incidental expenses by suitable means j) To promote physical culture and education and to assist and promote sports and games. k) Tosupport, maintain, manage and/ or grant aid to schools (formal and non-formal including bridge schools, remedial schools and tuition centres), colleges, technical and/ or other institutions, libraries, reading rooms, lecture halls, studygroups, public museums, galleries or paintings, and/ or other works of art or collection of natural history and to grant aid for the promotion of science or literature or fine arts or diffusion of useful knowledge or economic and scientific inventions and designs and to grant aid, support and maintain persons and institutions engaged therein. OTHER OBJECTS

I) To establish an award and/or reward, financial or otherwise for the deserving people in the field of Social service, Communal harmony, brotherhood and peace, within the trust and larger community in society m) To construct, repair or maintain such places and buildings to provide shelter to the needy public such as orphanages, shelter homes and/ or to give aid in cash or kind for marriage of poor children or to orphans or abandoned or poor or needy persons, n) To arrange / establish / rent and maintain centers and to support and/ or partner any institution technical or otherwise to help support beneficiaries (financially or otherwise) as detailed out. o) To acquire, purchase or otherwise own or under take on loan or lease or hire temporarily or permanently and Page 5 of 21

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movable or immovable property necessary or convenient for the furtherance of the objects of the trust, p) To exchange views with other association, Societies and organizations also, and to co-act and cooperate with them, as may be decided for achieving the objects of the Foundation and/ or grant aid to other institutions or persons doing welfare service for the beneficiaries q) To issue appeals raise funds and accept gifts, donation subscriptions in cash or in kind and any property either movable or immovable for the achievement of the objective of the trust. To construct, maintain, alter, improve or develop any building belonging to the trust or works necessary or convenient for purpose of the trust, r) To do all such other things as may be beneficial and it is declared that the benefits arising out of the exercise of all or any of the objects for which the Foundation is established shall be extended to the general public. 5) The Trustees will have the following powers:- a. To accept subscriptions and donations by way of cash, gifts and other moveable or immovable assets and devices and bequests from individuals, other bodies, corporate or institutions, Government, semi government undertaking etc... b. To pay all charges, impositions and other outgoings, payable in respect of the Foundation Properties or pay all costs incidental to the administration and management of the Foundation Properties for the time being. c. The trustees shall be entitled from time to time to open and maintain bank accounts including time deposits in any scheduled bank. Such account may be operated jointly/ severally by the trustees or may be authorized by the trustees. d. To purchase or acquire on lease or in exchange or by way of gift or otherwise any movable or immoveable property and any right or privileges necessary, incidental or convenient for the purposes of Page 6 of 21

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the Foundation and to sell, improve, manage, lease, mortgage, rent out or otherwise deal like collaboration with any property of Foundation for furthering the objects of the Foundation and to sign, execute any papers in this connection. e. To borrow, if need be, against the security of the assets or otherwise of the Foundation by way of bank overdraft, loan or otherwise, as may be necessary for the benefit of the Foundation and for more effectively carrying out the objects of the Foundation and to authorize one or more of the Trustees to execute such documents, deed, papers, etc. as may be necessary in connection therewith. f. The trustees shall cause to be maintained true and correct account of all assets and liabilities and money received or expenses incurred and get the accounts audited by a Chartered Accountant. The first accounts of the Foundation shall be closed on 31st March 2018 and thereafter annually on 31st March each year. g. The trustees shall meet atleast two times in every calendar year. h. To appoint Constituted Attorneys or Agents with all or any of the powers vested in them under those present and from time to time remove such Attorneys or agents and to appoint other or others in his or their place. i. To appoint Trustee, Secretary, Manager, Treasurer, Clerks or other Officers or employees to look after and manage the Foundation Properties and to allot to such Secretary, Manager, Treasurer, Clerks or other Officers or employees such duties as the Trustees may think fit and proper. j. To frame Rules and Regulations and/ or to appoint committee or sub-committees to carry out and to give effect to the objects and purposes of the Foundation and/ or managing the affairs of the Foundation and to repeal and/ or very the same from Page 7 of 21

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time to time. k. The trustees may within the basic structure of this deed amend, alter, and substitute any clause in the interest of the Foundation. 6) The Foundation is hereby expressly declared to be a public charitable trust and all the provisions of this deed are to be constituted accordingly. The investment of the funds of the trust and its application of funds and income will be made in accordance within the provisions of the Income-Tax Act as amended from time to time. All activities of the Foundation shall be carried out with a view to benefit the public at large, without any profit motive and in accordance with the provisions of the Income Tax Act 1961, or any statutory modifications thereof. 7) The Board of Trustees by a majority of two-thirds may request a trustee except the Chairperson of the Foundation to vacate the office of the trustee if found acting against the interests of the trust and s/he will be deemed to have vacated the said office from that date. 8) In all meetings of the trustees, two will form a quorum provided, however, if number of Trustees falls below two then for the purpose of appointment of new trustees, the Chairperson shall be deemed to form the quorum. All matters at the meeting of the Trustees will be decided by a majority. In case there is an equal division of votes, the Chairperson shall have a second and casting vote. 9) Any resolution may be passed by circulation amongst the Trustees then present in India and the decision or the majority of the Trustees so voting shall be effective and binding as resolution or decision passed at a meeting of the Trustees. 10) On dissolution of the Foundation, its Properties will be transferred to any other public charitable trust having one or Page 8 of 21

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more similar objects. IN WITNESS WHEREOF THE EXECUTANT TRUSTEE/ SETTLOR HERETO SETS AND SUBSCRIBES HER HANDS ON THE DAY, MONTH AND YEAR FIRST ABOVE WRITTEN. 3. The applicant filed separate applications in Form Nos. 10A

& 10G, each dated 11.10.2017; the former application seeking

registration under section 12AA of I.T. Act; and the latter seeking

approval under section 80G of the Income Tax Act respectively; in

the office of the ld. CIT(Exemption). The applicant also filed copy

of financial statement (including receipt and payment account &

statement of affairs). Further, the applicant filed copies of

banker’s cheques amounting to Rs. 3,500/- and Rs. 2,500/- in

favour of Shakun Stationary Mart (totalling Rs. 6000/-) as

evidences in support of the contention that the applicant was

engaged in charitable activities [by way of distribution of

stationary for the new terms for orphaned girls in a Child Care

institution for girls (NGO), and by way of giving of Bottles and

Tiffin Boxes for orphaned boys in a Child Care institution for Boys

(NGO)]. The ld. CIT(E), while granting registration to the

assessee under section 12AA of the Income Tax Act; vide order

dated 27.04.2018 however, denied the approval under section

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80G of the I.T. Act vide a separate order also dated 27.04.2018.

Relevant portions of the aforesaid orders of the ld. CIT(E) each

dated 27.04.2018 are reproduced as under:-

“Sub- Order of Registration U/s 12AA read with section 12A

of the Income Tax Act.

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iv. The trust/institution shall furnish a return of income every year within the time limit prescribed under the act. v. The trust/institution should quote the PAN in all its communications with the Department. vi. The registration u/s 12AA of the I.T. Act, 1961 does not automatically confer any right on the doners to claim deduction under section 80G. vii. The certificate cannot be used as a basis for claiming non deduction of tax at source in respect of investments etc., relating to the Trust/Institution. viii. All the Public Money so received including for Corpus or any contribution shall be routed through a Bank Account and such Bank Account Number shall be communicated to this office. ix. No change in the terms of Deed of the Trust shall be effected without due procedure of law i.e. by order of the jurisdictional High Court and its intimation shall be given immediately to this office. The registering authority reserves the right to consider whether any such alteration in objects would be consistent with the definition of “charitable purpose” under the Act and in conformity with the requirement of continuity of registration. x. No asset shall transferred without the knowledge of the undersigned to anyone, including to any Trust/Society/Non profit Company etc. xi. The registered office or the principal place of activity of the applicant should not be transferred outside the national capital territory Delhi except with the prior approval of the CIT(E), Delhi. xii. If later on it is found that the registration has been obtained fraudulently by misrepresentation or suppression of any fact, the Registration so granted is liable to be cancelled as per provisions u/s 12AA(3) of the Act. xiii. The registration so granted in liable to be cancelled at any point of time, if the registering authority is satisfied that activities of the Trust/Institution are not genius or are not being carried out in accordance with the objects of the Trust/Institution.”

“ORDER U/S 80G(5)(vi) OF THE INCOME TAX ACT, 1961 read with rule 11AA of the Income Tax Rules, 1962.

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(B-2) Aggrieved against the aforesaid order dated 27.4.2018 of

the ld. CIT(E) denying approval under section 80G of the Income

Tax Act to the applicant, this present appeal has been filed by the

applicant in Income Tax Appellate Tribunal (“ITAT” for short).

(C) At the time of hearing before us, the learned counsel for the

applicant submitted that the only reason given by the ld. CIT(E)

for denying approval under section 80G of the I.T. Act to the

applicant was that the assessee had incurred only Rs. 6,000/- for

charitable activities such as distribution of stationary items Bottles

and Tiffin boxes for orphan boys. The learned counsel submitted

that the applicant had limited financial resources at its disposal

because of which it was not possible for the assessee to spend

more amount for charitable work. Drawing the attention to the

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financial statement, the learned counsel submitted that at the

relevant time when the ld. CIT(E) rejected the applicant’s

application for approval under section 80G of the I.T. Act, the total

funds available with the applicant (including donations amounting

to Rs. 18,000/-) was only Rs. 19,000/- out of which Rs. 6,000/-

(excluding bank charges of Rs. 68/-) had already been spent, and

that the applicant was left with only Rs. 12,832/-. The learned

counsel further submitted that the applicant is facing enormous

difficulty in obtaining donations because of denial of approval

under section 80G of the Income Tax Act. The ld. Counsel made

further reliance on paper book filed in the course of appellate

proceedings in ITAT, which contained the following documents:

S. Particulars No. 1. Written submissions filed before CIT(A) dated 07.04.2018 2. Written submissions filed before CIT(A) dated 13.04.2018 3. Copy of Certificate of Registration u/s 12A dated 27.04.2018 4. Copy of Financial Statement for the period from 01.04.2018 to 12.04.2018 5. Copy of Bank Statement and details of Cheques 6. Copy of Trust Deed

(C-1) In particular learned counsel for the applicant drew our

attention to two separate written submissions made before the ld. Page 13 of 21

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CIT(E), dated 7the April 2018 and 7th April, 2018 and 13th April,

2018 relevant portions of which are reproduced below for ease of

reference:

“Please refer to your letter dated 11.10.2017. With regard to exemption application for exemption u/s 80G of the Income Tax, 1961, following submissions made: 1. The Trust was formed on 27.06.2017. It is awaiting Registration Certificate u/s 12A of the Income Tax Act, 1961 and also exemption u/s 80G Certificate to start its activities for achieving objects for which it was established; 2. This is the first year of the Trust; 3. This is the first year of the Trust. There is no change in the objects of the Trust since its inception; 4. An affidavit from the Managing Trustee that there is no infringement of section 13 of the Income Tax Act, 1961 since inception is being filed; 5. Trust has not incurred any expenditure; 6. This is the first year of the Trust and there is no activity; 7. The Trust has not received any donation since inception in the absence of 80G Certificate; 8. This is the first year of the Trust and no Income Tax Return has been filed; 9. This the first application for Registration so no question of any rejection; 10. Contact numbers, e-mail address of the Trustees are enclosed. 11. The Trust requires registration u/s 12A and 80G exemption for receiving donations to fulfil its objects. The 80G Certificate shall be enable the Trust to carry out its charitable activities; 12. The Trust has not incurred any expenditure; 13. Certificate as required regarding infringement of proviso to s.2(15) of the Income Tax Act, 1961 is enclosed; 14. The Trust is existing for relief to the poor, education, medical relief and also advancement of other general public welfare. 15. Copy of PAN card of the Trust is enclosed. 16. ID proof of the main Trustee of the Trust is enclosed.”

“Please refer to the discussions held on the last date of hearing on the above subject. Following further submissions are made:

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(C-2) The Departmental Representative did not dispute the facts

claimed from the applicant’s side. He also did not dispute the

facts contended at the time of hearing before us by the learned

counsel for the applicant. However, he relied on the order of the

ld. CIT(E).

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(D) We have heard both the sides. We have perused the

materials on record carefully. The requirements for approval

under section 80G of the I.T. Act are contained in Rule 11AA of

Income Tax Rules, 1962 (I.T. Rules, 1962 for short) which is

reproduced below for ease of reference:

11AA. (1) The application for approval of any institution or fund under clause (vi) of sub-section (5) of section 80G shall be in Form No. 10G and shall be made in triplicate. (2) The application shall be accompanied by the following documents, namely:— i. Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C); ii. Notes on activities of institution or fund since its inception or during the last three years, whichever is less ; iii. Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less. (3) The Commissioner may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund. (4) Where the Commissioner is satisfied that all the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid. (5) Where the Commissioner is satisfied that one or more of the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing : Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard. (6) The time limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not

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exceed six months from the [end of the month in] which such application was made : Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded.]”

(D-1) For further convenience of reference, the provisions of section 80G(5) of I.T. Act are also reproduced as under:- (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills the following conditions, namely :— (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10: Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if— (a) the institution or fund maintains separate books of account in respect of such business; (b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a Page 17 of 21

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University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; (vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf; and (vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been,— (a) established for charitable purposes for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009; and (b) approved under the said clause (vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009.”

(D-2) On perusal of the aforesaid statutory provisions it is found

that the grounds on which approval under section 80G of the

Income Tax Act can be denied to an applicant are specified in

Rule 11AA (5) of I.T. Rules which refers to the conditions laid

down in clauses (i) to (v) of sub section 5 of section 80G of I.T.

Act. We find that nowhere it is the case of the ld. CIT(E) that any

of the conditions laid down in clauses (i) to (v) of section 80G(5)

of the I.T. Act are not fulfilled. It is also nowhere the case of the ld.

CIT(E) that objects of the applicant trust are not charitable. On

perusal of the trust deed, already reproduced in foregoing

paragraph (B) of this order, we find that the trust is expressly

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declared to be a public charitable trust in paragraph (6) of the

trust deed.

We further also find that it is nowhere the case of the ld. CIT(E)

that the applicant did not comply with procedural requirements

prescribed under sub-Rules (1), (2) and (3) of Rule 11AA of I.T.

Rules. Moreover, in view of the foregoing paragraph (C.1) of this

order, we find that further documents or information called for by

the ld. CIT(E) were provided by the applicant trust. When the

applicant has limited financial resources (Rs. 19,000/- in this

case), the mere fact that the applicant has not spent substantial

amount for charitable work cannot be held against the assessee

so far as the approval under section 80G of the Income Tax Act is

concerned. Unless the learned CIT(E) expresses his satisfaction

that one or more conditions laid down in Clauses (i) to (v) of

Section 80G(5) of Income Tax Act are not fulfilled; the learned

CIT(E) is required to grant approval under section 80G of I.T. Act,

when the applicant has complied with procedural requirements

prescribed under sub-Rules (1), (2) and (3) of Rule 11AA of I.T.

Rules.

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(D.2.1) In view of the foregoing, we are of the view that the

learned CIT(E) erred in denying approval under section 80G of

Income Tax Act. Therefore, we set aside the impugned order dated 27th April, 2018 of the learned CIT(E) denying approval to

the applicant under section 80G of the Income Tax Act, and direct

the learned CIT(E) to grant approval to the assessee under

section 80G(5) of the Income Tax Act.

(D.3) In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 17th September,

2019.

Sd/- Sd/- (AMIT SHUKLA) (ANADEE NATH MISSHRA) Judicial Member Accountant Member

Date: 17/09/2019 SH