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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini: The captioned appeal filed by the assessee, is directed against the order passed by the commissioner of Income Tax (Exemption), Kolkata u/s 12AA(1)(b)(ii) of the Income Tax Act, 1961 [in short the ‘Act’] dated 17.08.2017.
The grounds of appeal raised by the assessee are as follows:
For that on the facts and circumstances of the case, the impugned order passed by the ld. CIT(E) was unjustified and bad in law. 2. For that on the facts and circumstances of the case, ld. CIT(E), Kolkata erred in law as well as in facts in rejecting the application for registration of trust u/s 12AA of the Income Tax Act, 1961 on the ground that no activity has been carried out in spite of the fact that the appellant is a new trust.
M/s B.G. Lohia Foundation ITA No.2186/Kol/2017 Assessment Year: 3. For that on the facts and circumstances of the case, ld. CIT(E), Kolkata had rejected the application for registration of trust u/s 12AA without valid reason. This kind of rejection of application of registration of trust u/s 12AA(1)(b)(ii) of the Income Tax Act, 1961 is biased, arbitrary and without complying the laws of natural justice and therefore liable to be deleted.
The appellant craves leave to amend, alter, modify, substitute, add to, abide and/or rescind any or all of the above grounds.
The brief facts qua the issue are that M/s B. G. Lohia Foundation (Trust) came into existence, as a trust on 20.06.2015. This trust filed an application in form no. 10A on 20.02.2017 for granting registration as charitable institution u/s 12AA of the Act. The CIT(E) asked the assessee to prove about commencement of charitable activities. The CIT(E) has noted that the trust has donated Rs. 17,500/- for providing relief to the poor but failed to prove whether the charitable activities have been started or not. The CIT(E) noted that since the assessee did not file any substantial evidence to prove about commencement of charitable activities, and since the charitable activities have not been commenced therefore, the assessee should not be granted exemption u/s 12AA(1)(b) of the Act. Therefore, the CIT(E) after going through the provision of section 12AA of the Act, came to the conclusion that since the instant trust has not started the charitable activities therefore, registration u/s 12AA(1) of the Act should not be granted, hence, the CIT(E) denied to register the trust u/s 12AA of the Act.
Aggrieved by the stand taken by CIT(E), the assessee is in appeal before us.
The ld. Counsel for the assessee begins by pointing out that it is not necessary for a trust to commence charitable activity for the purpose of getting registered u/s 12AA of the Act. In order to get the trust registered u/s 12AA of the Act, the trust should only demonstrate the charitable activity and object clause of the charitable activity. The ld. Counsel pointed out that this trust has been created to carry on the charitable activities and the trust deed (vide page no. 3 of trust deed) where the following objective of the trust are mentioned:
M/s B.G. Lohia Foundation ITA No.2186/Kol/2017 Assessment Year: a) Help deserving students by providing financial assistance for higher studies as also give them allowances, scholarship, stipends and help them in all other possible ways. b) To establish and/or maintain schools, college, hostels or other institutions for imparting education and grant aid to such institutions. c) To render help in ailments of needy persons by providing medicines, facilities for treatment and medical assistance and/or by opening dispensaries, hospital nursing homes etc and give aid to such institutions for the public in general. d) To assist promote and/or subscribe to the establishment and maintenance of any institution, association fund, trust or charity for the benefit of general public. e) To takeover or amalgamate with itself any other trust institution of society and utilize the same in accordance with the objects of the trust. f) To study, spread and propagate Indian Culture especially in its intellectual, spiritual and artistic aspects and for the purpose :
i) To maintain a Research Library and a place where scholars can study ii) To hold educational conferences, seminars etc. iii) To publish articles , papers and books iv) To give stipends to promising students, artists etc.
g) To do all such other lawful things or acts as are conducive to the attainment of the above objects or any of them.
The ld. Counsel therefore, pointed out that in the light of the above charitable activities, one can understand thatthe trust has engaged in valid charitable activities which are to be carried on in future. The criteria to grant the registration u/s 12AA is to examine the charitable activities only. Therefore, the ld. Counsel prayed the Bench that the CIT(E) should be directed to grant the exemption based on the charitable activities mentioned in the object clause of the trust deed.
M/s B.G. Lohia Foundation ITA No.2186/Kol/2017 Assessment Year: 7. However, the ld. DR for the revenue primary reiterated the stand taken by the ld. CIT(E), which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We have given a careful consideration to the rival submissions and perused the material available on record, we note that in order to grant registration U/s 12AA of the Act, it is not necessary for the CIT(E) to examine whether the trust has started charitable activities or not. In the assessee`s case under consideration, the CIT (E ) denied the registration U/s 12AA, solely on the ground that trust has not started charitable activities.We do not subscribe to the above-said action of the Ld. CIT(E). We are of the opinion that so far as grant of registration u/s 12AA of the Act is concerned, the Ld. CIT (E )’s jurisdiction is only to verify the objects of the institution and genuineness of the activities, meaning thereby that he has to satisfy himself that objects are charitable in nature and activities being carried on or to be carried on are genuine, meaning thereby that they are in consonance for achieving of charitable objects and nothing else. From a reading of section 12A and 12AA of the Act what is intended thereby is only a registration simplicitor of the entity/trust. The registration u/s 12AA of the trust has been made a condition precedent for claiming the benefits of the exemption u/s 11 and 12 of the Act. While processing the application for registration u/s 12AA of the Act, no examination of the modus of the application of the funds of the assessee is called for. The stage for consideration of the application of the funds vis-a-vis objectives of the trust arises at the time of assessment by the A.O. where benefits are claimed by the assessee in terms of section 11 and 12 of the Act and AO can examine the question as to the nature of the contributions etc. at the time of assessment. At the time of registration of the assessee u/s 12AA is concerned what is to be looked into is whether the assessee trust is a genuine one or whether it is a sham institution floated only to avail the benefits of exemption under the Act (Refer SreeAnjanaya Medical Trust vs. CIT 382 ITR 399 Ker). In the light of the aforesaid discussion the impugned order of rejection for registration under 12AA by the Ld. CIT(E) cannot be sustained. The Ld. CIT(E) could have examined only the genuineness of the trust and its activities postulated are to achieve the objects
M/s B.G. Lohia Foundation ITA No.2186/Kol/2017 Assessment Year: for which it is created. There was no material to show that the trust was not genuine or that its activities were not as professed in the deed of trust. There was no finding that the trust was a sham entity and therefore, we are inclined to set aside the order of the Ld. CIT(E) with the direction to him to consider the application for registration u/s 12AA of the Act, de novo by passing a speaking order in accordance to law and after giving adequate opportunity to the assessee in accordance to law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 23.01.2019.
Sd/- Sd/- (A.T.VARKEY) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक/ Date: 23/01/2019 (SB, Sr.PS) आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to :
अपीलाथ�/The Assessee –M/s B.G. Lohia Foundation 2. ��यथ�/ The Revenue –CIT(Exemption), Kolkata 3. आयकरआयु�त(अपील) / The CIT(A), 4. आयकरआयु�त/ CIT 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, कोलकाता/ DR, ITAT, Kolkata 6. गाड�फाईल / Guard file. स�या�पत��त