VIJAY KUMAR BAJORIA FOUNDATION,KOLKATA vs. CIT(EXEMPTIONS), KOLKATA, KOLKATA

The Assessee is a Trust which came into existence pursuant to the deed of the trust dated 07.05.2014 executed by Shri Krishna Kumar Bajoria. A sum of Rs.11,000/- was set up by the author of the trust to be used for charitable and philanthropic purposes. The objects of the trust are set out in clause 4 of the Trust Deed. The objects in short are to provide financial help to the poor and needy people for pursuing education, medical needs etc. The objects also include providing funds and support to other existing institutions established for charity and philanthropy, to carry out scientific research in the field of water conservation, energy and other natural resources and provide assistance in the case of natural calamities, to give donations from the income of the trust to other charitable and philanthropic institutions which are established for charitable purposes similar to the purpose of the trust.

The Assessee filed an application for grant of registration u/s.12AA of the Act in Form No.10A on 16.03.2016. The CIT(Exemption), Kolkata on examination of the application made by the assessee for grant of registration u/s 12AA of the Act noticed from the financial statements that major part of the income received was handed over by the assessee to different trusts/society/institutions. Secondly he noticed that the donations so made were institutions which were not based in the city of Kolkata. Thirdly, he found that other than the donations made to different trusts, the assessee had not done any other charitable activities. Based on the above, the CIT(E) concluded that the assessee was merely acting as a conduit between the donors and other trusts. The further observations of the CIT(E) was that this was nothing but a way to accumulate funds by misusing the provisions of the Act. The CIT(E) was of the view that since the assessee was not carrying out any charitable activity on its own, the assessee cannot be granted registration u/s 12AA of the Act. The CIT(E) after making reference to the provision of section 12AA of the Act has further observed in the impugned order that grant of registration to an institution or trust is dependent on the fulfillment of two conditions namely that the objects of the trust should be charitable and the activities of the trust or institution should be genuine. According to the CIT(E) since the assessee has not done any activity, he was not in a position to examine the genuineness of the activities of the trust. The CIT(A) thereafter made a reference to the decision of Hon’ble Kerala High Court in the case of Self Employers Service Society vs CIT 247 ITR 18 (Kerala) observed that as laid down in the aforesaid decision, where the society has reached only the preliminary stage of making an application u/s 12AA of the Act without carrying out any charitable activity, refusal to grant of registration was justified. For all the above reasons the CIT(E) denied the benefit of registration to the assessee. Consequent to the denial of registration u/s 12AA of the Act the assessee’s application for grant of approval u/s 80G(5)(vi) of the Act was also rejected.

Aggrieved by the orders of CIT(E) the assessee has filed the present appeals before the Tribunal.

We have heard the rival submissions. Before us the ld. Counsel for the assessee submitted that with the limited funds available at the disposal of the trust in the form of corpus funds and donations, the trust gave donation to an institution by name Shri Brij Sewa Samiti T.B.Sanatorium Vrindaban at Uttar Pradesh and the said institution is very old institution which had established a TB hospital at Vrindaban, Uttar Pradesh. Our attention was drawn to the audited accounts of the assessee upto 31.03.2016 and it was brought to our notice that out of the corpus funds of Rs.20,56,000/- Rs.19,00,000/- were lying with fixed deposit with State Bank of India and out of the accumulated interest and corpus funds a sum of Rs.3,00,000/- was given as donation to T.B.Sanatorium at Uttar Pradesh. It was therefore submitted that there was an application of income of the Trust for charitable purposes. It was also submitted that the CIT(E) has not found the objects of the trust to be not charitable. In these circumstances there can be no reason for CIT(E) to reject the application for grant of registration. Reliance was placed by him on the decision of the Hon’ble Punjab and Haryana High Court in the case CIT vs Shri Shirdi Sai Darbar Charitable Trust (Dharamshala) in of 2017 dated 27.03.2017 wherein it was held that on the basis that the assessee has not filed income tax returns in the earlier years it cannot be concluded that the activities of the assessee are not genuine and that at the time of grant of registration u/s 12AA of the Act the objects contained in the trust deed and genuineness of the activities of the trust alone has to be seen. Further attention was also drawn to the decision of ITAT Kolkata ‘B’ Bench in the case of Badu Rural Welfare Society vs CIT(Exemption) in ITA Nos.94&95/Kol/2016 order dated 30.09.2016 3 wherein this Tribunal again reiterated the principle that while granting registration to the charitable institution/trust, if it is at the commencement stage, the powers of CIT with whom the application is filed are limited to the aspect of examining that whether or not the objects of the trust are charitable in nature. Further reliance was also placed on the decision of ITAT, Kolkata Bench in the case of Abacus Academia vs CIT (Exemption), Kolkata in ITA NO.64&65/Kol/2016 order dated 19.10.2016 wherein it was held that if the objects of the trust have objects which are charitable in nature and if there is no material to suggest that the activities of the trust are not genuine, then that would be sufficient to allow registration subject to fulfillment of other conditions for grant of registration. The ld.DR relied on the order of CIT(Exemptions).

We have given a very careful consideration to the rival submissions. The Provisions of Sec.12AA of the Act, in so far as it is relevant for the present case, is as follows: “12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall— (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he— (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :….”.

As can be seen from the aforesaid provisions, the requirements for grant of registration u/s 12AA of the Act, are that the objects of institution/trust should be charitable in nature within the meaning of section 2(15) of the Act and that its activities should be genuine. In the present case the CIT(E) has not doubted the objects of the trust and was satisfied that the objects of the trust are charitable in nature within the meaning of section 2(15) of the Act. The only apparent reason given by CIT(E) for rejecting registration is that the assessee was receiving donations and giving the donation and doing so was for some ulterior motive. The CIT(E) has not spelt out what is the ulterior motive of the assessee. In any event at the stage of grant of registration this question does not assume any importance as we have already observed that the requirements of section 12AA for grant of registration are only the objects of the trust and genuineness of its activities. The assessee had done some charitable activity in the form of giving donations to a T.B.Hospital at Uttar Pradesh. We fail to see how the CIT(E) concluded that the assessee did not carry out any charitable activities. There is no instance of genuineness of the activities of the assessee brought on record by CIT(E). In the circumstances we are of the view that there is no valid ground for rejecting registration u/s 12AA of the act to the assessee. The decision of the Hon’ble Kerala High Court in the case of Self Employers Service Society vs CIT (supra) is not applicable in the present case because in that case there is no material produced by the assessee to show that it carried out charitable activities. In the present case, as we have already seen, the assessee trust had carried out charitable activity and these activities were genuine. For the reasons given above we are of the view that the assessee is entitled to grant registration u/s 12AA of the Act. We hold and direct accordingly. Consequently the assessee would also be entitled to grant of approval u/s 80G(5)(vi) of the Act. We hold and direct accordingly.

In the result both the appeals of the assessee are allowed. Order pronounced in the Court on 19.04.2017.