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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 01/07/2024 Date of Order – 09/07/2024
O R D E R PER V. DURGA RAO, J.M.
The instant appeal has been filed by the assessee challenging the impugned order dated 23/09/2023, passed by the learned Commissioner of Income Tax (Exemptions), Pune, [“learned CIT(E)”].
In its appeal, the assessee has raised following grounds:–
On the facts and circumstances and the Law, the learned Commissioner erred in rejecting the e application of Assessee for Erroneous findings by the Respondent registration and further erred in cancelling regarding the genuineness of the the provisional registration granted activities of the Appellant Assessee. earlier. (Section 12AB read with Clause (iii) of section 12A (1) (ac) of the Income Tax Act, 1961)
Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha ITA no.376/Nag./2023
On the facts and circumstances and the Law, the learned Commissioner erred in rejecting the application on alleged Erroneous findings by the Respondent grounds of failure of satisfaction on regarding the genuineness of the account of genuineness of activities of activities of the Appellant Assessee. Trust and also on account of compliance to the requirements of any other law for the time being in force by the Trust. (Section 12AB) On the facts and circumstances and the Law, the learned Commissioner erred in holding that Assessee failed to prove Erroneous findings by the Respondent genuineness of activities if trust in spite of regarding the genuineness of the submission of voluminous details which activities of the Appellant Assessee were examined by the Commissioner and no doubts were and communicated to the Assessee. On the facts and circumstances and the Law, the learned Commissioner erred in holding that there is violation of Erroneous findings by the Respondent provisions of section 36A of the regarding the genuineness of the Maharashtra Public Trust Act, 1960, from activities of the Appellant assessee the Charity Commissioner when said provisions are not attracted in given circumstances (Section 36 of M.P.T. Act 1960) On the facts and circumstances of the law, the learned Commissioner erred in Erroneous findings by the Respondent arriving adverse findings without giving regarding the genuineness of the any opportunity to assessee to explain the activities of the Appellant assessee matter which is in contraventions of provisions of natural justice.
Brief facts of the case are that, the assessee is a Trust registered under the Maharashtra Public Trust Act, 1950, and the Trust is also registered under section 12A(1)(ac)(vi) of the Income Tax Act, 1961 ("the Act"), with an object to provide quality education for the poor, destitute, backward people belonging to Scheduled Caste and Scheduled Tribes without any discrimination under Naxal affected Gadchiroli District within the State of Maharashtra. The assessee trust is presently running two educational institutions namely Kisan Vidyalaya at Gram Panchayat Wadadha, Tahsil Armori, District Gadchiroli and Dr. Babasaheb Ambedkar School & Junior
Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha ITA no.376/Nag./2023 College at Tahsil Armori, District Gadchiroli. The assessee trust is old institutions which impart education to mostly tribal children and working in a remote area with the help of Government of Maharashtra in the form of grant–in–aid for salary to teaching and non–teaching staff and for running the aforesaid educational institutions. The main objective of the assessee trust are as under:–
Aims and Objects i) To Open, establish, undertake, encourage, recognise aid or assist the nursery. montessary. Primary. Middle School, High School. Technical and Vocational Art of Research Schools. College and Institutions; ii) To remodel Existing Institutions and to extend their scope and functions so as to afford facilities of training in all branches for farmers, labourers and others; iii) To organise morning, evening, night and vocational classes in various subjects either exclusively or in combination with day classes in any Institution or institutions or places; iv) To run Institutions for the welfare of children and women, and to run adult education Institutions in rural area; v) To run Institutions for the socio-economic uplift of Harijans. Advasis and other Backward Classes and to provide housing facilities and educational upliftment; vi) To open and run the cosmopolitan and Backward Classes hostels for Boys and Girls wherever necessary in Vidharbha Region; vii) To set up the institution in order to protect and foster general interest of the Buddist Religious minority; viii) To donate scholarships. Books, School Uniform to helpless and needy Buddist Minority & others; ix) To impart religious education in order to promote the morality among the Buddist minority; x) To run, schools, Hostels. Colleges and vocational cources. Training Colleges to the Buddist minority; and xi) To run the Welfare schemes of State Government as well as Central Govt to Buddist minority for making their tremendous progress in order to bring them in main stream of our Society. Page | 3
Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha ITA no.376/Nag./2023
With the above objects, the assessee filed an application before the learned CIT (Exemptions), Pune (“the learned CIT(E)”), in Form no.10AB under Clause–3 of section 12A(1)(ac)(vi) of the Act on 29/03/2023, for obtaining final registration. The learned CIT(E) called for various details in response to which the assessee trust filed all the details before the learned CIT(E). From the details filed by the assessee, the learned CIT(E) came to the conclusion that the assessee trust has raised some loans for which permission under section 36(A) from Maharashtra Public Trust 1950, is required from the Charity Commissioner and since no such permission has been obtained, therefore, there is a violation of provisions of Maharashtra Public Trust Act. However, the learned CIT(E) could not produce any such objection from the competent authority. The assessee trust has also borrowed certain amounts from the private persons the amounts are extracted below:–
(i) April 12 to March 13 List 1 ` 67,500 List 2 ` 4,69,867 (ii) April 13 to March 14 List 1 ` 79,500 List 2 ` 1,76,181 (iii) April 14 to March 15 List 1 List 2 ` 72,500 ` 16,605
From the above chart, the learned CIT(E) came to the conclusion that the assessee has failed to file details of loan lenders, their address, PAN details, identity of such persons, date and mode of payment received, etc., and hence cancelled the provisional registration granted on 04/04/2022 under section 12AB r/w section 12A(1)(ac)(vi) of the Act. Aggrieved, the assessee trust filed appeal before the Tribunal.
Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha ITA no.376/Nag./2023
The learned Counsel for the assessee trust, before us, submitted that the assessee’s main objective is to provide education to poor tribal students in the backward are of District Gadchiroli. The assessee trust is running the educational institutions with the help grant–in–aid provided by the Government of Maharashtra. The learned Counsel further submitted that whenever there is a delay in receiving the grant–in–aid from the Government of Maharashtra, the assessee is approaching some private persons for borrowing money and repaying the same whenever it receives the grant–in– aid from the Government of Maharashtra. The learned Counsel submitted that the assessee trust has neither violated the provisions of Maharashtra Public Trust Act, 1950, nor the activities carried out by the assessee are contrary to law.
On the other hand, the learned Departmental Representative submitted that the assessee trust has not given details of the loan lenders, therefore, the learned CIT(E) doubted the genuineness of the transactions.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. The assessee trust is solely existed for the purpose of providing free education to the poor, tribal people belonging to Scheduled Caste and Scheduled Tribes under Naxal affected Gadchiroli District within the State of Maharashtra and does not charge any fee from the students. In fact, the assessee trust is running two educational institutions which are funded by the Government of Maharashtra. The learned CIT(E) has not doubted the activities carried on by the assessee. The only doubt of the learned CIT(E) is that, the assessee trust borrowed Page | 5
Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha ITA no.376/Nag./2023 certain loans from private parties which are contrary to the provisions of Maharashtra Public Trust Act, 1950 and the assessee trust has not provided PAN details. Thus, the learned CIT(E) came to a conclusion that the assessee trust is not genuine. We have gone through the loans obtained by the assessee trust which is extracted by the learned CIT(E) at Page–9 of his order, wherein, the assessee trust has borrowed ` 67,500, ` 79,500, ` 72,500, ` 4,98,867, ` 1,76,181 and ` 16,605 from the private parties. Except one loan amount for ` 4,98,867, rest all the loan amounts are petty, which, in our opinion, no details are required because these amounts are received for the purpose of temporary arrangement for running the educational institutions since the Government grants are the only source of finance. When the assessee is running the educational institutions with the support of Government of Maharashtra in the form of grant–in–aid and whenever there is a delay in releasing the funds from the Government of Maharashtra, for the purpose of meeting the exigency expenses like payment of salary to the teaching and non–teaching staff and other necessary payments, the assessee trust borrows money from the private individuals which is a temporary arrangement for which providing PAN details are not necessary. In only one case, the assessee trust, for the financial year 2012–13, has received ` 4,69,867, and the reason for borrowing this amount stated by the assessee trust is that, there was a huge delay in receiving the grant–in–aid and the assessee was compelled to borrow the money for temporary tiding over the financial crises. But, the learned CIT(E) was of the opinion that the assessee has not submitted the details and documentary evidences to show that the assessee has in fact received the loans. Such observations of the learned Page | 6
Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha ITA no.376/Nag./2023 CIT(E) are absurd, because of the fact that taking into consideration the locality in which the assessee trust is running the educational institution and parting education to the poor tribal people in Naxal affected, remote and backward areas of Gadchiroli District, the amount of money borrowed by the assessee trust being a temporary arrangement need to be taken into consideration. The assessee trust, inspite of those difficulties, is running the educational institutions to help the poor tribal students and to bring those students at par with the main stream of the society. In fact, the assessee trust is working for a noble cause for the upliftment of the tribal students, in our opinion, small borrowing made by the assessee that too as a temporary arrangement and since the loans were not availed from banks or financial institutions, neither violates any provision of the Maharashtra Public Trust Act, 1950, nor any provisions of the Income Tax Act, 1961. Hence, we hold that the learned CIT(E) doubted the genuineness of activities and non–compliance of transactions of borrowings made by the assessee trust is without any basis. Consequently, we reverse the order passed by the learned CIT(E) and direct him to grant registration under section 12A(1)(ac(iv) of the Act. The grounds of appeal raised by the assessee are allowed.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 09/07/2024