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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SHRI G.D. AGRAWAL, & SHRI CHANDRA MOHAN GARG
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
The above captioned two appeals have been filed against the separate orders dated 05.04.2013 of ld. CIT(A), Rohtak vide which he has dismissed the appeals and has refused to register the appellant- trust u/s 12AA and to grant approval u/s 80G(5) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act', for short]. Both the above appeals by the assessee were heard together and involve identical issues. Hence these are being disposed of by this common order for the sake of brevity and convenience.
ITA No. 3766/Del/2013 2. At the very outset, it is relevant and necessary to record relevant facts of the case that the applicant-trust was registered under the Indian Trusts Act vide Trust deed executed on 27.11.2010. As per the applicant-trust, it is a charitable trust established with the object of spreading education and providing medical and social relief to the poor. Earlier, the applicant-trust applied for registration u/s 12A of the Act in the prescribed format, Form No. 10-A alongwith the requisite documents on 09.03.2011. The registration was refused by the ld. CIT and the ITAT ‘G’ Bench, New Delhi vide its order dated 11.6.2012 in ITA Nos. 4641 & 4642/Del/2011 restored both the issues to the file of the ld. CIT for fresh adjudication on merits. During the second round of proceedings, the ld. CIT, Rohtak called for the remand report from the concerned AO as to whether the applicant fulfilled all the conditions required for grant of registration applied for and the report was received through the JCIT, Sonepat vide his office letter dated 18.2.2013. During the remand proceedings, the applicant-trust submitted that further information and explanation to the
JCIT as well as the AO did not clearly recommend the case for grant of registration u/s 12A of the Act and left the matter to be decided by the ld. CIT, Rohtak on merits. The ld. CIT, in the impugned order, considered the information as insufficient and passed the impugned order rejecting registration u/s 12A and approval u/s 80G of the Act. Now the empty handed applicant is before the Tribunal in the second round of proceedings with this appeal. However, the applicant-assessee has raised as many as 10 grounds in this appeal but except Ground No. 3, the other grounds are argumentative and supportive to the main Ground No. 3 which reads as under: “3. That the CIT has wrongly dismissed the application for registration under section 12AA of the income tax act, 1961 without giving appropriate opportunity and ignoring all merits of the case. In fact the Ld. CIT did not give any hearing on the matter and left it on the Ld. ITO Hq. (vig), Rohtak.”
We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. The ld. AR submitted that the ld. CIT(A) has wrongly dismissed the application for registration u/s 12A of the Act without giving opportunity of being heard to the 3
assessee as per the direction of the ITAT vide order dated 11.6.2012 [supra]. The ld. AR vehemently contended that the ld. CIT again rejected the application for registration u/s 12A of the Act by ignoring all the merits and relevant facts of the case. The ld. AR also pointed out that in fact, the ld. CIT, Rohtak did not give opportunity of hearing on the matter and rejected the application only the basis of remand report of the ITO. The ld. AR further contended that the ld. CIT failed to appreciate that the applicant-trust has applied for registration u/s 12A in the prescribed form No. 10A alongwith requisite documents including the trust deed, but the ld. CIT has wrongly concluded that the activities of the trust cannot be put to the test of genuineness without going into the merits. The ld. AR contended that the ld. CIT has ignored the fact that the applicant-trust exists only for charitable purposes and not for profit motive, as is clearly evident from its aims and objects mentioned in the trust deed [pages 32 to 41] wherein clause (3) aims and objects of the trust have been mentioned which clearly mandates that the trust has been created solely for charitable objects of dispensing education and not for the purpose of profit. The ld. AR also
pointed out that the ld. CIT had not followed the prescribed procedure u/s 12A of the Act as the order must be passed within six months from the date of receipt of Tribunal order which is 11.6.2012, which was actually passed on 5.4.2013. The ld. AR lastly contended that the ld. CIT, Rohtak rejected the application for registration by considering the irrelevant facts and on incorrect basis. Therefore, the applicant-trust should be granted deemed registration.
Replying to the above, the ld. DR contended that as per the directions of the Tribunal, the ld. CIT, Rohtak properly asked for remand report from the AO and after considering the same, held that the JCIT as well as the co did not clearly recommend the case for registration u/s 12A of the Act and left the matter to be decided on merits. The ld. DR further submitted that during the first round of proceedings, the applicant-trust did not cooperate with the revenue authorities and did not submit required details and documents and in the absence of material for recording satisfaction by the ld. CIT, as required u/s 12A of the Act, the ld. CIT rejected the application for registration. The ld.
DR further drew our attention towards para 5 of the Tribunal order and submitted that in pursuance of direction of the Tribunal, the ld. CIT(A) properly conducted second round of proceedings and dismissed the application for registration u/s 12A of the Act.
On careful consideration of the above noted discussion, we note that the Tribunal directed the ld. CIT to decide afresh the issue of grant of registration u/s 12A of the Act and grant of approval u/s 80G of the Act by observing as under: “5. We have heard rival contentions and gone through the relevant material available on record. The CIT has not indicated the nature of information not furnished and without considering the documents filed by the applicant along with applications for registration u/s 12AA/80G has rejected assessee’s claim solely on the ground that applicant could not file most of the information call for. We find force in the argument of Id. counsel that CIT failed to consider the claim of the applicant on merit, without considering the record and affording opportunity of being heard to the applicant on alleged non compliance. In the interest of natural justice we deem it fit and proper to restore the issues in question i.e. registration u/s 12AA/80G, back to the file of CIT for decision afresh on merit in accordance with law, after affording reasonable opportunity of being heard 6
to the appellant. We order accordingly.”
From the vigilant perusal of the relevant material on record, we note that the ld. CIT has rejected the application for registration u/s 12A of the Act with the following allegations: That the appellant trust has carried out one time activity of the i) distribution of sums & also the appellant society has not carried out any activity in the field of formal education. The Ld. CIT contented that the distribution of sums of money cannot be described as charitable activity in view of section 2(15) of the Income Tax Act, 1961. That the appellant society is just like a private discretionary ii) society controlled by the President, Secretary, First Vice- president, Second Vice-President and Treasurer of the Society who are brother having close family relations with other members. That the appellant society has amended the constitution without iii) following the due procedure of the law. The Joint CIT as well as Assessing Officer did not recommend the iv) case under registration 12A and left the matter to be decided on merits. The properties of the society and the financial control are in the v) hand of members and also the crucial power to transfer the assets to any or many member of the office bearer.” 7. In view of the above, it is amply clear that the ld.
CIT(A) took the sole basis for rejection of application for registration u/s 12A of the Act, the trust deed and stipulations. The ld. CIT(A) also noted that the JCIT as well as the AO did not recommend the case for registration u/s 12A and left the matter to be decided on merits by him. As per the proposition laid down by the co-ordinate bench of ITAT, Ahmadabad in the case of Jupiter Medical Research Centre Trust Vs. CIT 128 TTJ [Ahd] UO 118, as relied by the ld. AR wherein it was held that merely because the trustees are of the same family, it does not put a rider or any adverse inference that the assessee applicant-trust is not for charitable purposes.
From the impugned order of the ld. CIT we note that in the ground taken for rejection he observed that the appellant trust has carried out one time activity of the distribution of sums and the applicant society has not carried out any activity in the field of formal education. He further alleged that the distribution of ht sums of money cannot be described as charitable activity in view of section 2(15) of the Act. On these observations and basis we are of the view
that at the time of grant of registration u/s 12A of the Act, the ld. CIT has to record his satisfaction about the charitable objects and genuineness of the proposed activities of the applicant. The clause 10 and 12 clearly mandates the charitable activities of the trust. It is not pre-requirement for seeking registration u/s 12A of the Act that the applicant must show and establish having undertaken charitable activities before filing such application for registration u/s 12A of the Act. The ld. CIT(A) has not brought out any allegation or fact on record to establish and allege that the receipts of application trust were not used for charitable purposes and nor it has been shown that receipts were misappropriated or misused by the trustees or office bearers of the trust. Hence this allegation has no legs to stand.
Next allegation made by the ld. CIT(A) is that the applicant trust has amended constitution without following the procedure and properties of the trust and financial control are in the hands of the members and crucial power to transfer the assets to any or many members of the office bearer but we are unable to see any such clause or provision
in the trust deed which shows that the control of properties and finance is safely given to members to enjoy the fruits of the properties and financial resources and receipts of the trust.
Per contra, from clause 16 of the trust deed it is clear that in the event of winding up of the trust or on any account whatsoever, the assets of the trust as at the time of wining up shall devolve upon any other charitable trust decided by the board of trustees.
Last allegation for rejection as noted by the ld. CIT(A) is also not correct that the JCIT and the AO did not recommend the case for registration u/s 12A of the Act. But we do not agree with this basis as the satisfaction has to be recorded by the ld. CIT himself who is considering the grant of registration and it is not the case of the Revenue that the JCIT or the AO did not recommend the grant of registration but at the same time from the copies of the remand report dated 18/2/2013 and 11.2.2013 [available at pages 26 to 28 of the assessee’s paper book] it is clear that it was reported
that the amount of Rs. 93,000/- has been utilised for the benefit of brilliant and needy students. In those reports the JCIT & ACIT/AO has also stated that the trust is running on deed which was made on 27.12.2010 and the trust is an educational and charitable trust with the object to help in spreading of education in its widest connotation with special focus on education of poor and needy without any preference on the basis of religion, race, caste, sex or place of birth and operation of the trust shall be carried in accordance with the intention of earning profits will perform with service motive only. In such situation the basis and allegations labelled by the ACIT are not found to be sustainable.
We note that section 12A of the Act provides conditions for applicability of section 11 and 12 of the Act and section 12AA of the Act provides procedure for registration u/s 12AA of the Act. The provisions of section 12AA of the Act provide that the Commissioner shall call for documents, information and conduct inquiries to satisfy about the genuineness of the activities of the trust or institution and after recording satisfaction about the charitable or religious nature of the objects and genuineness of the trust or
institution, CIT will pass an order granting registration u/s 12AA of the Act.
It is further provided that if the CIT is not so satisfied, the provisions of section 12AA of the Act require him to pass an order rejecting such application of registration and section 12AA of the Act prescribes and provides the scope and ambit of the inquiry that the commissioner is authorised to carry out at the time of grant of registration u/s 12AA of the Act to a Trust or institution. From these provisions, it is amply clear that the scope and ambit of the inquiry revolves around the nature of objects being charitable or religious and the genuineness of the activities of the trust or institution. At this juncture, it is relevant to take respectful cognizance of the judgment of Hon’ble Karnataka High Court in the case of Sanjeevamma Hanumath Gowda Charitable Trust vs DIT(E) reported as 285 ITR 327 (Karnataka) wherein their lordships have set out the guidelines for the purpose of grant of registration u/s 12AA of the Act and has held that the registration granting authorities have to be satisfied about the genuineness of the activities of the Trust or institution and they are required to see that how the income derived from the trust property is applied to charitable purposes.
On this issue, it is relevant and necessary to take respectful cognizance of the order of Hon'ble Punjab & Haryana High Court in the case of CIT-I vs Baba Kartar Singh Dukki Educational Trust reported as 221 Taxman 493 (P&H) wherein speaking for the Jurisdictional High Court, their lordships held as follows:-
“4. We have heard counsel for the parties, perused the impugned order as well as the order passed by the Commissioner of Income -tax and the substantial questions of law but find no reason to hold that the impugned order suffers from any error or raises a substantial questions of law much less questions of law framed by the revenue. The object of Section 12AA of the Act is to examine the genuineness of the objects of the Trust and though while examining genuineness, the income as well as resources of the Trust may be taken into consideration but any suspicion as to these facts cannot be the sole criteria for rejecting an application under Section 12A of the Act. This apart, there appears to be a misconception amongst officers exercising power under Section 12AA of the Act that if a trustee is a life long member of a Trust, it automatically raises an inference that the Trust is not charitable.
The fact that a trustee is a life member, may be relevant but cannot by itself lead to a finding that the Trust is not charitable. ”
Our conclusion also finds support from above noted dicta of Hon'ble Jurisdictional High Court. Furthermore, as per dicta laid down by Hon'ble Karnataka High Court case of PIT vs Garden City Educational Trust 191 Taxman 238 (Kar), as relied by the appellant, the manner of application of funds and as to whether the assessee can claim benefit of exemption in terms of section 1 land 12 are the questions which have to be examined by the Assessing Officer at the stage when it is urged and not by the CIT while considering the application for grant of registration u/s 12A of the Act.
On the basis of foregoing discussion, we are of the view that the CIT rejected an application for registration u/s 12AA of the I.T. Act, 1961 without any justified reason and basis despite the fact that the objects of the applicant trust are charitable and no allegation has been brought out on record by the CIT that the assessee is conducting activities beyond its object as per trust deed or fees and donations are being used for the activities which are not charitable and beyond the ambit of the objects of the assessee applicant trust, hence, we direct the CIT that the applicant trust should be granted registration u/s 12 A of the Act and accordingly we direct the Id. CIT to grant registration to the applicant trust as per relevant provisions of the Act. 14
ITA No. 3767/Del/2013
Since vide the earlier part of this order we have allowed the issue of grant of registration u/s 12A of the Act and thus grant of approval u/s 80G of the Act is also allowed, as this was rejected consequent to the rejection of registration u/s 12A of the Act. Consequently, the ld. CIT, Rohtak is also directed to grant registration u/s 80G of the Act to the assessee trust. Accordingly, this appeal of the assessee is also allowed.
In the result, both the appeals of the assessee are allowed. The order is pronounced in the open court on 31.03.2016.
Sd/- Sd/- (G.D. AGRAWAL) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31st March, 2016 VL/