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Income Tax Appellate Tribunal, : ‘B’ BENCH, KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
Appellant by : Shri S.D. Verma, Advocate, ld. AR Respondent by : Md. Usman, CIT, ld.DR Date of Hearing : 19-09-2017 Date of Pronouncement : 08-12-2017 ORDER Shri S.S.Viswanethra Ravi, JM: This appeal by the assessee is directed against order dated 13-12-2016 passed by the CIT (Exemptions), Kolkata, whereby he rejected the application of the assessee for approval under section 80G of the Act.
The assessee in the present case is a charitable trust which came into existence on 01.04.2016. It filed an application in the prescribed form 10G on 12-09-2016 for grant of approval u/s 80G of the Act. The CIT (Exemptions) while considering the claim of the assessee for registration u/s 80G of the Act, however, found that it is not a fit case for u/s 80G of the Act and rejected the application of the assessee for grant of approval u/s 80G of the Act. Aggrieved by the orders of the CIT (Exemptions) rejecting the applications for approval u/s 80G of the Act, the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee submitted that the assessee was granted registration u/s 12A of the Act on 08-08-2016 w.e.f 01-04-2016 and it is in force. The Ld.AR submitted that the CIT(E) passed a non speaking order without giving any specific reason for rejection of application in Form 10G and placed reliance on the decision of Jaipur Bench in the case of Hemdha Medi Resources (P) Ltd in ITA 679/JP/2015 for the proposition that the Revenue can not deny the approval u/s 80G of the Act having registration u/s 12A of the Act is in force. We find that the facts in the case of Hemdha Medi Resources (P) Ltd supra are similar to the facts of the case in hand. We may refer to the following observation in the case of Hemdha Medi Resources P.Ltd supra:
“2.9 We have heard the rival contentions and pursued the material available on record. Firstly, it is interesting to note that it is for the third time that the appellant has filed the subjection application under section 80G(5) and on the previous occasions, the reasons cited by the ld. CIT varies from assessee not registered u/s 12AA to registration certificate u/s 12AA not enclosed with the application and hence, it is not eligible for approval u/s 80G(5)(vi). The reasons cited in the impugned order states that seeing the insignificant nature of activity, the case does not seems to be fit for granting exemption u/s 80G at this stage. The question that arises for consideration is whether the reason cited by the ld CIT justifies denial of approval under section 80G(5) of the Act. On perusal of section 80G(5) as well as Rule 11AA, what is required to be seen is whether the institution/fund has been established in India for a charitable purpose or not. Secondly, it lays down certain additional conditions under clause (i) to clause (v) which are required to be fulfilled. Rule 11AA provides that where the CIT is satisfied that one or more of the conditions specified in clause (i) to clause (v) of section 80G(5) are not fulfilled, he shall reject the application for approval after recording his reasons for such rejection. In the instant case, the appellant has been duly registered under section 12AA which shows beyond any doubt that Id CIT has already verified the genuineness of the objects and its activities are not doubted by the CIT. Hence, having granted registration u/s 12AA, the first condition regarding establishment of institution for charitable purposes is fulfilled. Regarding satisfaction of additional conditions specified in clause (i) to clause (v) of section 80G(5), there is no dispute as apparent from the order of the Id CIT. As can be seen from Revenue's stand of rejection of earlier applications filed by the appellant, the approval under section 80G is closely linked to approval under section 12AA. Now ,once, the registration under section 12AA has been granted, the approval under section 80G should not be denied unless the case of the appellant falls under non- fulfilment of one or more of the conditions specified in section 80G(5) which is not the case before us. Regarding the activities carried out by the appellant towards achievement of its object for establishment of the hospital and medical college, it cannot be said that assessee has not yet commenced any activity. The CIT has accepted that assessee has taken steps for implementation of its objects in as much as it has acquired the land, converted the land for institutional use for setting up the hospital project, appointed the architect., carried out soil testing etc. All these activities are towards the achieving the objects of the trust. The registration under section 25 of the companies Act has been granted on 13.10.2012, subsequently the land was acquired on 29.3 .20 13 and thereafter other activities like conversion of land use, appointment of architects and soil testing has been done. The project of setting up hospital and medical college is a complex project requiring various approvals, clearances etc which the appellant has been complying with. It is critical that as part of fund raising programme for this project, the appellant has sought the approval under section 80G whereby the donations can be accepted for approved purposes and the project can be expedited. The approval under section 80G will thus aid and provide the necessary support in successful completion of the project. In our view, ld CIT (Exemption) was not correct in denying the approval under section 80G(5) to the appellant. 2.10 Further, we have gone through the decision of decision of Coordinate Bench in case of Pearls Educational Institute (supra). The said decision was rendered in the context of renewal of approval under section 80G and the fact that the appellant in that case had not commenced construction activities even after 13 years which is distinguishable on facts as stated above. In our view, the said decision doesn't support the case of the Revenue. In fact, the Hon'ble Allahabad High Court in case of Hardayal Charitable and Educational Trust (supra) is directly on the issue and supports our view. In that case, assessee trust applied for grant of registration u/s 12AA and approval u/s 80G( 5). The CIT refused to grant registration and approval on grounds that trust was in process of construction of college for studies and that huge amount was spent on advertisement and promotion of business of its family concern. In subsequent assessment year, registration u/s 12AA and approval 80G was granted with conditions that exemption certificate would be effective from A.Y. 2012-13. It was held that:- "For registration u/s 12AA which was necessary for claiming exemption u/s. 11 and 12, CIT was not required to look into activities, where such activities had not or were in process of its initiation. Where a trust set up to achieve its objects of establishing educational institution, was in process of establishing such institutions, and receives donations, registration u/s 12AA cannot be refused on ground that Trust had not yet commenced charitable or religious activity. Enquiry of the CIT at such preliminary stage should be restricted to genuineness of objects and not activities unless such activities had commenced." 2.11 Interestingly, the decision of the Coordinate Bench in case of Hardayal Charitable and Educational Trust(supra) which was overruled by the Allahabad High Court was quoted by the Revenue while denying the exemption initially to the appellant under section 12AA. Given that the appellant has subsequently been granted approval under section 12AA and the said decision of the Coordinate Bench is overruled by the High Court shows that the appellant is well within its right to seek approval under section 80G as well. In view of above, the CIT(Exemption) is hereby directed to grant approval uls SOG(5) of the IT Act, 1961 to the appellant.”
The Tribunal in the case of supra directed the CIT-Exemptions to grant approvals u/s. 80G of the Act. In turn, placing reliance on the decision of Hon’ble High Court of Allahabad in the case of Hardayal Charitable Educational Trust reported in 355 ITR 544. Therefore, in the present case, we find that as discussed above the Respondent- revenue has granted registration u/s. 12AA w.e.f. 1-4- 2016 and denied the approval u/s. 80G of the Act, in our opinion is bad under law. We, therefore, set aside the impugned order of the CIT (Exemptions) and direct the Ld. CIT (Exemptions) to give approval to the assessee u/s 80G of the Act. Therefore, the grounds raised by the assessee in this regard are allowed.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 08-12-2017 Sd/- Sd/- Waseem Ahmed S.S. Viswanethra Ravi Accountant Member Judicial Member
Dated : -12-2017 PP(Sr.P.S.) Copy of the order forwarded to: Appellant/Assessee: Choradia Charity Trust, Ladshrinagar, 1. 7C, Lakshmi Narayan Gunj Gully, Watgunj, Kolkata-700023. Respondent/Revenue: The Commissioner of Income-tax 2 (Exemptions), 10B Middleton Row, 6th Floor, Kolkata-700 071. The CIT(A), Kolkata 3.