SHREE SURATI MODH GANCHI GNATI JILLA NANPURA PANCH,SURAT vs. CIT (EXEMPTION), AHMEDABAD

Rival submission of both the parties heard and record perused. The Ld. Authorized Representative (Ld.AR) of the assessee submits that assessee is a “trust” created in the year 1937 i.e., prior to enactment of Bombay Public Trust Act, 1050. The assessee-trust is registered with Charitable Commissioner, Vadodara vide registration No.A-4, Surat. The assessee is having valid registration under section 12A/12AB of the Act allowed vide order dated.03.03.2020. In view of new provisions inserted by Finance Act, 2020, the assessee-trust filed application for registration of trust under section 12(a) of the Act on 02.08.2021 and after due consideration assessee was allowed registration under section 12AB on 23.09.2021, which is valid upto assessment years 2022-23 to 2026-27. The assessee applied for approval of trust in a prescribed form 10AD vide application dated 06.03.2024, along with application the assessee furnished required details. The Ld.CIT(E) issued show cause notice dated 04.07.2024, copy of show cause notice is placed on record at page No.79 of Paper Book. In the show cause notice, Ld. CIT(E) required Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, expenditure related with the religious purpose incurred for last three financial years i.e. for AY 2021-22, 2022-23 & 2023-24. In reply, assessee furnished all required details assessee also stated that activities of assessee-trust are in consonance with object of the trust. The assessee also furnished photograph showing the genuineness of such activities. The assessee stated that assessee-trust registered under section 12A from 1974 copy of registration was furnished. The Ld.CIT(E) after considering the submission of assessee held that earlier application of approval was rejected on 11.03.2020 wherein it was noted that assessee incurred religious expenditure over and above the prescribed limit of 5% as define in Section 80G(5B) in financial years 2017-18 and 2018-19. The Ld.CIT(E) on the basis of aforesaid observation held that assessee is not established for charitable purpose nor its activities are genuine and rejected application under section 80G(5).

The Ld. AR of the assessee submits that object and activities were duly verified and accepted while allowing registration under section 12A/12AB of the Act. While considering the application for approval, the Ld.CIT(E) is to require if the condition prescribed under Rule 11AA(2)(g) are fulfilled or not. AS per clauses (g) of sub-rule (2) of 11AA, the Ld.CIT(E) cannot go beyond the accounts of three preceding years. The assessee furnished account of all three preceding years wherein there is no such violation. The assessee has not spent any amount for religious purpose in last three financial years. Thus, the order passed by Ld.CIT(E) is not in consonance with prescribed under Rule-11AA. The Ld. AR of the assessee submits that assessee is an old trust and having Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, provisional registration upto assessment year 2023-24, therefore appeal may be accepted and to allow approval under section 80G(5) of the Act.

On the other hand, Ld. Commissioner of Income-tax Departmental Representative (Ld.CIT-DR) for the Revenue submits that Ld.CIT(E) has passed a very categorical and detailed order and held that the earlier application under section 80G(5) was dismissed on the ground that the assessee has spent more than 5% of its income for religious purpose. The ld. CIT-DR of the revenue submits that he supports the order of ld. CIT(E).

We have considered the rival submissions of both the parties and have gone through order of lower authorities carefully. We find that there is no dispute that the assessee is having registration under section 12A/AB of the Act. For allowing approval of the fund, registration of assessee-trust under section 12A/AB is the primary condition. We find that while considering the application for approval, the Ld.CIT(E) has to satisfy himself if the condition prescribed under Rule 11AA(2)(g) are fulfilled or not. As per clause (g) of sub-rule (2) of 11AA,the Ld.CIT(E) has to examines if there is any violation or the assessee has spent any amount for religious purpose in last three financial years. There is no such finding of ld. CIT(E) about such violation of Rule 11AA(2)(g). On perusal of expenditure account, which is part of audit report filed before Charity Commissioner, we find that the assessee-trust has not incurred any expenses for religious purpose in last three financial year. There is no dispute that assessee-trust is an old trust and having provisional approval upto assessment year 2023-24. The assessee is already allowed registration under section 12A/AB. Thus, in our view the scope of inquiry of trust by the ld CIT(E) for Shree Surati Modh Ganchi Gnati Jilla Nanpura Panch, approval of the institution is to be confined only to the finding out whether prescribed conditions are fulfilled. In our view such conditions are primarily fulfilled by the assessee. If the ld CIT(E) intends to travel beyond three years expenditure as prescribed in Rule 11AA(g) he should have issued specific show cause notice to the assessee, which admittedly, is not issued. So far as other observation of ld CIT(E) that on occasion, similar application of assessee was rejected, we find that even for such grounds no specific show cause notice was issued to the assessee. Moreover, the assessee has applied afresh for approval and there is no legal bar in making fresh application for approval of funds, if the assessee subsequently fulfilled requisite condition of approval of funds. Considering the aforesaid discussions, restore the matter back to the file of the ld CIT(E) to allow approval under section 80G(5) to the assessee, if the assessee fulfilled all other conditions.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 03/02/2025.