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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Per Shri A.T.Varkey, JM Both these appeals preferred by the assessee is against the separate orders of the Ld. CIT(E), Kolkata dated 01.05.2017.
The main grievance of the assessee is against the action of Ld. CIT(E) in rejecting the assessee’s application for registration u/s. 12AA of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) and application for approval u/s. 80G(5)(vi).
Briefly stated facts are that the assessee trust came into existence on 29.04.2016. The assessee trust filed an application in Form 10A on 17.11.2016 for granting registration u/s. 12AA of the Act and also submitted an application of even date for granting registration u/s. 80G of the Act. At the time of hearing, the Ld. CIT(E) found that the trust is yet to start any charitable activities as defined in sec. 2(15) of the Act or fails to furnish substantial proof for any charitable activities. Hence, in absence of any proof of charitable activity, the Ld. CIT(E) rejected the assessee’s application for grant of registration u/s. 12AA of the Act. Simultaneously, the assessee’s application for granting registration u/s. 80G of the Act was also rejected by the Ld. CIT(E) since the assessee is not registered as a charitable institution u/s. 12AA of the Act. Aggrieved, assessee preferred both these appeals before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the issue before us is as to whether it is essential for a trust to commence charitable activity before it can be considered eligible for registration u/s. 12AA of the Act. We note that the objects of the assessee trust are relief of the poor, education, medical relief and advancement of objects of general public utility, to establish support, maintain and/or grant aid or other assistance financial or otherwise to schools, colleges, vidyapiths, libraries, read rooms, lecture halls and other establishments and institutions for the advancement of education and diffusion of knowledge in art, humanities, science, commerce, industry, agriculture and any other objects of similar nature pertaining to education, grant scholarship, stipends, prizes, rewards allowance or other financial assistance etc. to establish support and/or maintain hostels , boarding houses etc. From the reading of the objectives of the Trust, it is clear that these are charitable objects and are supported by other ancillary objects to which a detailed reference is not necessary.
Time and again we have been reiterating that at the time when the assessee applies for registration u/s. 12AA of the Act, the Ld. CIT(E)’s jurisdiction is only to verify the objects of the Institution/Trust and look into the genuineness of the activities, meaning thereby that he has to satisfy himself that the objects are charitable in nature and the activities being carried on or to be carried on are genuine, meaning thereby that they are in consonance for achieving the charitable object and nothing else. The Ld. CIT(E) while discharging his duty for grant of registration u/s. 12AA of the Act has to restrict himself in the field which we have stated above. We note that where a Trust is set up to achieve its objectives for establishing educational institution and is in the process of establishing such institutions, the registration u/s. 12AA of the Act cannot be refused on the ground that the Trust has not yet commenced the charitable activity. Any enquiry of this nature would amount to putting the cart before the horse. As stated above, when the application for registration under section 12AA of the Act is considered by the Ld. Commissioner only the genuineness of the objectives has to be tested and not the activities which have not commenced. The enquiry of the Commissioner of Income-tax as such is at a preliminary stage should be restricted to genuineness of the objectives and not the activities unless the activities have commenced. Since the assessee Trust came into existence vide Deed of 3 & 1367/Kol/2017 Harnarayan Rajdulari Devi Taparia Charitable Trust Trust dated 29.04.2016 and the Trust had applied for registration on 17.11.2016 it is at the initial stage only. It has to be noted that the Trust cannot claim exemption unless it is registered u/s. 12AA of the Act and thus at that initial stage the test of genuineness of the activities cannot be a ground on which the registration can be refused and for that we rely on the decision of the Hon’ble Allahabad High Court in the case of Hardayal Charitable & Educational Trust Vs. CIT-2, Agra (2013) 32 Taxman.com 341 (All). Therefore, the action of the Ld. CIT(E) cannot be countenanced for the reasons stated above and, therefore, we are inclined to set aside the order of the Ld. CIT(E) for both the appeals and remand the matter back to the file of the Ld. CIT(E) and direct him to pass a fresh order on the assessee’s application for registration u/s. 12AA and approval u/s. 80G of the Act keeping in view the law governing the subject and pass a speaking order after hearing the assessee trust.
6 In the result, both the appeals of assessee are allowed for statistical purposes.
Order is pronounced in the open court on 11/07/2018 Sd/- Sd/- (M. Balaganesh) (A. T. Varkey) Accountant Member Judicial Member
Dated: 11th July, 2018 Jd.(Sr.P.S.)
Copy of the order forwarded to:
1 Appellant – Harnarayan Rajdulari Devi Taparia Charitable Trust, C/o Smt. Shashi . Bangur, 16, Alipore Road, Kolkata 2 Respondent – CIT(Exemption), Kolkata. 3 DR, Kolkata Benches, Kolkata (sent through e-mail)