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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI RAMA KANTA PANDA & MS. ASTHA CHANDRA
Assessee by : Shri Bhuvnesh Kankani Department by : Shri Pankaj Kumar Date of hearing : 18-06-2024 Date of 09-07-2024 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 25.10.2023 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the assessee’s application filed on 09.06.2023 in Form No. 10AB under clause (iii) of section 12A(1)(ac) of the Income Tax Act, 1961 (the “Act”) and cancelled the provisional registration granted on 27.05.2021 u/s 12AB r.w.s. 12A(1)(ac)(vi) of the Act.
2. The assessee has raised the following grounds:-
“1. On facts and circumstances prevailing in the case and as per provisions & scheme of the Income-tax Act, 1961 (‘The Act’) the order passed by the Commissioner of Income Tax-Exemptions [‘CIT(E)’], Pune, rejecting the Appellants application for seeking registration u/s 12AB of the Act is against the provisions of the Act. Accordingly, the order passed by the CIT(E) be held as not tenable in law and be set aside directing the CIT(E) to grant registration. The appellant be granted just and proper relief in this respect.
On facts and circumstances prevailing in the case and as per provisions & scheme of the Income-tax Act, 1961 (‘The Act’) the order passed by the Commissioner of Income Tax-Exemptions [‘CIT(E)’], Pune, rejecting the Appellants application for seeking registration u/s 2 12AB of the Act without considering the facts of the case and submission made by the appellant, is incorrect. Accordingly, the order passed by the CIT(E) be held as not tenable in law and be set aside directing the CIT(E) to grant registration. The appellant be granted just and proper relief in this respect. 3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.”
The appeal is late by 58 days. The assessee sought condonation of delay explaining the reasons for delayed filing of appeal supported by sworn affidavit of Mr. Sharad Kumar Bajaj, trustee which was opposed by the Ld. DR. 3.1 We have gone through the contents of the application and deposition made by the trustee in his affidavit. We are of the view that there is sufficient cause for the impugned delay which we have condoned and proceeded to decide the appeal on merits.
Brief facts are that on receipt of assessee’s application in Form No. 10AB under clause (iii) of section 12(1)(ac) of the Act the Ld. CIT(E) issued notice through ITBA portal on 18.08.2023 requiring the assessee to upload certain information/clarification as enumerated in para 2(i) to (xv); to explain the queries raised in para (xvi) (a) to (h); to furnish details etc as per para 2.1 (i) to (xiii) if engaged in running educational institution; to furnish certain copies/details as per para 2.2 (a) to (e) and to ensure that self certified copy of attachments as per the provisions of Rules 17A(2) of the Income Tax Rules, 1962 (“the Rules”) as applicable are submitted. Compliance was sought by 01.09.2023. In para 3 it was stated that the information/details have been called for under the provisions of section 12AB(1)(b)(i) of the Act. The assessee did not respond to the said notice as also to notice sent by the Ld. CIT(E) on 16.09.2023. The Ld. CIT(E) proceeded to verify the documents submitted along with the application. He noticed certain discrepancies and issued a show cause notice on 01.10.2023 stating therein – (i) that the object No. A of the trust deed/MoA are found to be for the benefit of a particular religious community viz. Jain and not for public at large; (ii) the application is not accompanied by note on activities actually carried out as required under Rule 17A(2)(k) of the Rules; (iii) the supporting credible evidence in respect of activities undertaken has not been furnished. Since it violated the provisions of section 12AB(1)(b)(i) of the Act, the assessee was required to furnish copies 4.1 The assessee submitted reply on 16.10.2023, the gist of which is in para 6 of the CIT(E)’s order.
4.2 The contention of the assessee and the documents furnished in support did not satisfy the Ld. CIT(E) about the charitable nature and the genuineness of the activities of the assessee. He, therefore, rejected the assessee’s impugned application and cancelled the provisional registration granted to the assessee on 27.05.2021 u/s 12AB r.w.s. 12A(1)(ac)(vi) of the Act by observing and recording his findings as under : “7. The contention of the assessee and the documents furnished to support its say has been duly considered. The assessee has not commented on the specific query that the trust's objects were found to be for the benefit of a particular religious community. It has only contended that it also carries out other activities such as education awareness, medical help etc. 7.1 The assessee has further contended that it also carries out activities of education awareness, medical relief, helping to poor students and establishing a meditation hall, school, hostel etc. As regards the activities of education awareness, medical relief, the assessee has not furnished any details such as date and place of such activity, names of participants, experts who offered their services etc. Details of persons to whom medical aid was provided, how the beneficiaries were identified, amount of aid so provided etc. Also, no supporting documentary evidences are furnished to prove the genuineness of activities. Hence, the assessee's statement can not be accepted in absence of any such supporting evidences. Regarding establishing a meditation hall, school, hostel etc., the assessee has stated that these activities are aimed to be carried out and not actually carried out as yet. 7.2 The assessee has furnished details and supporting documents in respect of education aid given to various students. On examination of these documents, it is observed that all the beneficiary students belong to Jain community. Application of each student is accompanied by a standard 'Affidavit' wherein the applicant solemnly states that he/she would religiously follow Jain Kool sanskars by way of observing Dev darshan, poojan, swadhya, tyag, ahimsa vrat. Further, almost all applications are supported by a' recommendation letter from Jain community organisations wherein it has been certified that the applicant belongs to Jain community. 7.3 Thus, even the activity of providing educational help to students carried out by the assessee trust is restricted to the students of Jain community only. There isn't any student of any other community, religion who is beneficiary of the assessee's aid. This further strengthens this office finding that the objects of the trust are for the benefit of a particular religious community viz Jain community. 7.5 Without prejudice to the above, in the standard 'Affidavit' obtained from each student, the student further undertakes to repay the amount received by him/her back to the trust immediately after he/she starts earning income. This further raises question about the nature of aid given by the assessee to these students. As per the provisions of the Income-
4 tax Act, 1961, the donation shall be voluntary and unconditional. Educational aid given by the assessee is with a condition to repay the same and casts obligation on the recipient. Therefore, at the most it can be considered as an interest-free advance and not a donation. It, therefore, does not remain a charitable activity also.”
The assessee being aggrieved thereby is before the Tribunal and both the grounds relate thereto.
The Ld. AR drew our attention to assessee’s application dated 16.10.2023, copy of which is at page 14 of the paper book wherein it was stated that objectives of the trust are not aimed for a particular religion or caste. Various objectives of the trust viz. education awareness, medical relief to the people and animals were highlighted duly supported by evidence which formed part of enclosure to reply filed on 16.10.2023 (pages 16 to 19 of the paper book) and also proof of incurring of expenses on education. Jeev Daya expenses (Item 4 at page18 of the paper book) related to aid/support which included medical relief to poor people and animal were submitted. The Ld. AR therefore submitted that the observations of the Ld. CIT(E) in para 7 are contrary to the facts brought by the assessee on records.
6.1 The Ld. AR further submitted that the Ld. CIT(E)’s observations that the students receiving financial help for education are only from Jain community and thus, the object is to benefit particular religious community is factually incorrect. Non-Jain students are also financially helped, evidence thereof was produced before the Ld. CIT(E), copies of which are placed at pages 59 to 80 of the paper book.
6.2 Referring to the recommendation letters mentioned by the Ld. CIT(E) in para 7.2, the Ld. AR pointed out that on perusal thereof it would show that there is no whisper at all about the students being Jain. Recommendation letter was required only to ensure that the beneficiary is a deserving student and nothing more.
6.3 The Ld. AR emphasized that it has escaped the attention of the Ld. CIT(E) that it is a case of “religious-cum-charitable” trust and the provisions of section 13(1)(b) of the Act apply to a trust which is only a charitable trust.
5 6.4 Referring to the objects clause A, B and E of the trust deed, the Ld. AR submitted that only these three objects have referred to Jain religion/philosophy but even these objects do not exclude the people of other religion, caste, creed and sex etc. (pages 23 to 26 of the paper book refer).
6.5 The Ld. AR relied upon a number of judicial precedents including the decision of Hon’ble Supreme Court in the case of CIT Vs. Dawoodi Bohara Jamat (2014) 43 taxmann.com 243 (SC).
6.6 The Ld. AR pointed out that there are numerous objects which are for the benefit of public at large and without making any distinguishment between Jain and Non-Jain people. Looked from this angle provisions of section 13(1)((b) cannot be invoked.
6.7 Adverting to the observation of the Ld. CIT(E) that financial help given to the student is nothing but interest free advance, the Ld. AR submitted that the trust is financially assisting the needy students by paying their education fees, for which nothing is charged. Drawing our attention to pages 69 and 71 of the paper book, the Ld. AR stated that the pledge of student is that whenever he/she would start earning, they would try to repay the financial assistance so that the said money can be used for benefiting another needy student. This has been done only to ensure that the person getting benefited owes to the society. This is “Tyag and Vrat” in Jain Kool Sanskars.
6.8 The Ld. AR refuted the observations of the Ld. CIT(E) with regard to the nature of donation and pointed out that even assuming that the said assistance is nothing but interest fee advance, then also interest foregone is charity as banks too charge interest for education loans.
The Ld. DR emphasized that the assessee has not carried out charitable activities except giving education aid to students belonging to Jain community and drew our attention to the observations of the Ld. CIT(E) in paras 7.2, 7.3 and 7.5 of the order. Referring to the affidavit sworn by the trustee appearing at Sr. No. 7 at pages 39 to 45 of the assessee’s paper book, the Ld. DR submitted that it has been admitted that it is mere a co-incidence that all the students are from Jain community.
6 He also contended that the law mandates the trust to be either religious or charitable but the application of the assessee describes the assessee as carrying out activities as religious-cum-charitable which is contrary to the mandate of law. Apart from the decision relied upon the Ld. CIT(E), the Ld. DR laid emphasis on the decision of Rajkot Tribunal in the case of Amreli Modh Vanik Community Property Vs. CIT (Exemption) (2023) 150 taxmann.com 179 (Rajkot-Trib.).
We have carefully considered the rival submissions and perused the records. The trust deed is placed at pages 20 - 30 of the paper book filed by the assessee. Clause (2) thereof relates to objects. It says “any charitable activity, provision, promotion, recognition, establishment, service, delivery and attempt to do so with the objective to deliver the benefit to the individuals, animal, environment without any regard to race, caste, creed, sex, nationality and geography, shall be the supreme objects of the trust ……….” . Clause (3) thereof declares “if anyone or more of the objects specified in clause (2) of these presents are held not to be objects of a public charitable nature, the trustee shall not carry out such object or objects as if the same are not incorporated in these presents but the validity of the trust created by these presents as a trust for public charitable purposes shall not be affected in any manner”. We are of the view that the above clauses (2) and (3) of the trust deed escaped the attention of the Ld. CIT(E).
We are not inclined to agree with the contention of the Ld. DR that carrying out religious cum charitable activities by the assessee in any way vitiates the mandate of law. It is well established that the trust may be formed with both the religious and charitable objects. It is also a well known fact that many trusts/institutions which are carrying out charitable work are often inspired by the tenets of religion. What is important is to examine whether religious-cum-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the community and for society at large. Before us, the assessee submitted affidavit sworn by Mr. Sharad Kumar Bajaj, trustee deposing therein inter alia that objects of the trust are not restricted only to Jain community. Copy of the affidavit is at pages 36 to 45 of the assessee’s paper book. In para 5 thereof, it is deposed that the objects of the trust nowhere provides that the beneficiaries should only be from Jain
7 community. Instead, the objects are for the benefit of society at large which can be inferred from perusal of all the objects of the trust deed. The Ld. DR had the opportunity to examine the same. Though he has commented adversely, we are of the view that the contents of the affidavit need verification. Moreover the decisions relied upon by the Revenue are distinguishable on facts.
Having regard to the facts and in the circumstances of the assessee’s case, in our considered view, the matter deserves to be set aside and restored back to the file of the Ld. CIT(E) to decide the issues afresh in the light of the contentions raised by the assessee before us which have not been considered by the Ld. CIT(E) and results of verification of the contents of the sworn affidavit of the trustee with a view to test the veracity or otherwise thereof. This will meet the ends of justice. Of course, the Ld. CIT(E) shall afford reasonable opportunity of being heard to the assessee. We order accordingly.
In the result, the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 09th July, 2024.
Sd/- Sd/- (Rama Kanta Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 09th July, 2024. रदि आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “ए” बेंच, 4. पुणे / DR, ITAT, “A” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER,
िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune