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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI D.S. SUNDER SINGH
Per N.V. Vasudevan, Vice President
This appeal by the assessee is against the order dated 0407.2018 of the Commissioner of Income-Tax (Exemptions) [CIT(E)], Bangalore rejecting the application for grant of approval u/s. 80G(V)(vi) of the Income- tax Act, 1961 [the Act] to the assessee.
The assessee is a company incorporated under the Companies Act, 2013. The main objectives of the assessee was establishing and running educational institutions, hospitals and sanatoriums, etc. The assessee was incorporated on 21.11.2017. It made an application for grant of approval u/s. 80G of the Act on 3.1.2018. Even prior to this, the assessee has made an application for grant of registration u/s. 12A of the Act on 8.2.2017. The CIT(E) by his order dated 17.5.2018 granted registration to the assessee as an organization which has, as its objects, activities which are charitable in nature within the meaning of section 2(15) of the Act.
Insofar as the application of assessee for grant of approval u/s. 80G of the Act is concerned, the CIT(E) by his letter dated 4.4.2018 called for details of assessee and assessee sent a detailed reply to the aforesaid letter, which is placed at page 3 of the assessee’s PB and gives each of the details asked for by the CIT(E). The same is as follows:-
The CIT(E) by the impugned order rejected the request of assessee for grant of approval u/s. 80G of the Act on the ground that evidence filed by the assessee showed that no charitable activity was carried on by the trust and in this regard relied on the financial statements and bank account of the trust. He was of the view that in the absence of charitable activities, it was difficult to grant recognition u/s. 80G of the Act. Accordingly the request of assessee for grant of approval u/s. 80G of the Act was rejected by the CIT(E). Aggrieved by the aforesaid order, the assessee is in appeal before the Tribunal.
At the time of hearing, the ld. counsel for the assessee brought to our notice that on identical reasoning given by the CIT(E) for not granting approval u/s. 80G of the Act, this Tribunal in the case of Bhima Foundation v. CIT, by order dated 20.9.2019, granted approval. In the aforesaid order, the Tribunal came to the conclusion that the assessee trust is newly set up and when the approval u/s. 80G is sought for and when the period between the formation of trust and examination of application of the assessee for grant of approval u/s. 80G of the Act was only a period of 5 months, it is not possible for such organization to demonstrate the actual carrying of its activities. The Tribunal placed reliance on the decision of the Hon'ble Karnataka High Court in the case of DIT(E) v. Meenakshi Amma Endowment Trust, 354 ITR 219 (Kar) and came to the conclusion that for want of proof of activities of a trust, when the trust was yet to commence its activities, an application for grant of registration u/s.12A cannot be rejected. The Tribunal also placed reliance on the decision of ITAT Jaipur Bench in the case of Anand Incubation Centre v. CIT(E), 86 taxmann.com 250 (Jaipur Trib) wherein on identical facts, approval u/s. 80G was directed to be granted. The following were the relevant observations of the Tribunal:-
“6. We have heard the rival contentions and perused the material available on record. It is noted that the appellant is a public charitable trust which has been newly constituted vide Trust Deed dated 16.03.2017 and it is therefore not a case of existing charitable trust which has been in existence for past many years. Further, as far as the objects of the appellant trust are concerned, given the fact that the appellant has been granted registration under section 12AA, the objects being “advancement of any other object of general public utility” in nature have been verified by the learned CIT(E) while granting the registration under section 12AA of the Act and are thus not in dispute. As far as the genuineness of the activities of the assessee trust is concerned, in our view, the said requirement has to be seen in the context of the establishment of the trust. Where the trust has been set up in the past and has been carrying out its activities at the time of moving the application, then it is no doubt true that while granting the registration under section 80G, the learned CIT(E) is within his powers and jurisdiction to examine the genuineness of the activities and how such activities are connected with the achievements of the objects for which the assessee trust has been set up. However, in a scenario where the assessee trust has been newly set up, as in the instant case, and within a period of five months of its setting up, it has applied for approval under section 80G, practically, it would take some time to mobilize the resources and there may not be an occasion for the assessee trust to demonstrate the actual carrying on of its activities at the time of moving the application. Therefore, the question of genuineness of such activities and examination thereof by the learned CIT(E) is premature to our mind at the time of grant of approval. In our view, the object of grant of recognition under section 80G of the Act is to promote charitable activities and to mobilize resources which can be generated by the assessee trust from the potential donors as well as public at large. Therefore, denial of recognition under section 80G merely for the fact that the activities have not been carried out by the assessee trust and thus cannot be verified is not appropriate. Further, the ld CIT(E) has not spelt out non- fulfillment of any of the conditions specified under section 80G(5) of the Act, therefore, it is not a case where any of the conditions specified for grant of approval have not been fulfilled by the assessee trust. A similar view has been taken by the Co- ordinate Bench in the case of OLA Foundation vs CIT(E) (ITA
No.215/Bang/2018 dated 26.10.2018) wherein it was held as under: “10. We have carefully considered the rival submissions. It is not in dispute that the CIT(E) himself has granted registration to the assessee u/s 12A of the Act and therefore, the CIT(E) was satisfied that the objects of the trust were charitable and that its activities were genuine as this is a condition for grant of registration u/s.12A of the Act. As per the requirements of Rule 11AA(5) of the Rules, it is incumbent on the part of the CIT(E) to spell out the conditions mentioned in sec. 80G(5) which has not been fulfilled by the assessee. Therefore it can be safely concluded that the only reason assigned by the CIT(E) for not granting approval u/s.80G of the Act is the absence of activities of the trust from the date of coming into existence of the Trust. The Hon'ble Karnataka High Court in the case of DIT(E) Vs. Meenakshi Amma Endowment Trust, 354 ITR 219 (Kar), wherein the Hon'ble Karnataka High Court in the context of grant of approval u/s 12A of the Act made an observation that where trust has approached the authority for registration u/s 12A within span of 8 month after its formation, objects of the trust have to be examined and the authorities cannot insist on proof of activities of the trust as trust was yet to commence its activities. ITAT, Bangalore Bench in the case of All People Charitable Trust Vs. CIT(E) in and 1217/Bang/2015 order dated 30/12/2015 has applied the principles laid down in the case of Meenakshi Amma Endowment Trust Trust (Supra) in the context of grant of registration u/s 80G of the Act. In the present case the trust was formed on 14/12/2016 and application for grant of registration and approval u/s 12A and 80G respectively was made on 16/5/2017. Therefore the CIT(E) was not justified in basing his conclusion for rejecting approval u/s.80G of the Act on the ground of absence of activities of the trust. ITAT, Jaipur in the case of Anand Incubation Centre Vs. CIT(E), Jaipur 86 taxmann.com 250 (Jaipur - Trib), on identical facts as the case of the assessee, the Tribunal held that rejection of grant of approval u/s 80G was not justified. Keeping in mind the aforesaid decisions and the facts of the present case, we are of the view that the CIT(E) ought to have granted the approval u/s.80G(5) of the Act. We accordingly direct that the approval u/s.80G of the Act be granted to the Assessee.”
7. In light of above discussion and respectfully following the aforesaid decision of the Coordinate Bench which has followed the legal proposition laid down by the Hon’ble Karnataka High Court, we hereby direct the learned CIT(E) to grant the registration to the assessee trust under section 80G of the Act.”
The facts and circumstances of the present case decided by the Tribunal referred to above. Following the aforesaid decision of the Tribunal, we direct the CIT(E) to grant registration to the assessee u/s. 80G of the Act.
In the result, the appeal is allowed.
Pronounced in the open court on this 5th day of December, 2019.