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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
Per Vijay Pal Rao, JM:
These two appeals by the assessee are directed against two separate orders both dated 29.09.2022 of Commissioner of Income Tax(Exemption) whereby the application for registration u/s 12A and approval u/s 80G(5) were rejected. In the appeal filed against rejection of application for registration u/s 12AB the assesse has raised following grounds of appeal:
“1. The order appealed against is bad-in-law, void-ab-initio, barred by limitation, against the principles of natural justice and fair play, illegal and therefore liable to be quashed. 2. Without prejudice, the Ld. CIT Exemption, Bhopal erred in rejecting the application filed for registration u/s 12AB without considering the documents on records and facts and circumstances of the case.
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ITA No.406 & 407/Ind/2022 Raj Kumar Wadhwani Page 2 of 5 3. Without prejudice, the registration u/s 12AB ought to be granted in the facts and circumstances of the case.” 2. The Ld. AR of the assessee has submitted that the assesse society was incorporated on 27.11.2021 and during the financial year 2021-22 the Covid-19 was at its peak. Looking at the situation of prevailing Covid-19 pandemic the assesse made arrangements of blankets from the respected persons of the society and distributed those blankets directly to the needy persons. Thus, the assesse was not required to purchase these materials for making arrangements of distribute the same to the needy people during the time of Covid-19 crisis. The assessee did not receive any money nor was expended. The assessee filed application for registration u/s 12AA which was provisionally granted and thereafter the regular registration was denied by the CIT(E) on the ground that no expenditure is shown in the receipt and payments as well as the alleged issuance of form 10BE prior to the provisional registration. The Ld. AR has submitted that since the assesse has rendered its services of charitable nature by distributing the blankets and other articles by procuring the same from the donors and therefore, there is no involvement of any money for purchase of these articles. Hence, Ld. AR submitted that there is no question of showing any expenditure on this account. He has referred to receipt and payment account and placed at page no. 59 of paper book and submitted that the assesse has not shown any expenditure on this account but the expenses actually incurred by the assesse are duly recorded and shown in the receipt and payments account. The assesse has also shown the donations including donations from the members of the assesse society for construction of the building and therefore, the same is part of the corpus funds of the assesse society.
As regard the second objection of issuing form 10BE the Ld. AR has submitted that the form 10BE were issued on 31st May 2022 after provisional registration granted to the assesse. Though the donation was received by the assessee earlier then provisional registration but the form 10BE was issued only after the provisional approval. Therefore, there is no
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ITA No.406 & 407/Ind/2022 Raj Kumar Wadhwani Page 3 of 5 violation of provisions of section 80G. He has also referred to Rule 17A(7) and submitted that the provisional registration is considered w.e.f. 1st April of the year in which it is granted. He has also relied upon the judgment of Hon’ble Supreme Court in case of DIT vs. Meenakshi Amma Endowment Trust 143 taxmann.com 143 taxmann.com 240 (SC) and submitted that the Hon’ble Supreme Court has held that while considering registration u/s 12AA, non-commencement of charitable activities would not be a ground for rejection of application. Thus, the Ld. AR has submitted that the impugned order of the CIT(A) be set aside and assesse be granted registration u/s 12AA as well as approval u/s 80G(5) of the Act.
On the other hand, Ld. DR has submitted that there is no expenditure incurred by the assesse for any charitable activities. Therefore, the CIT(E) has rightly doubted the genuineness of the activity and existence of the assesse trust. The assesse has not produced any record to the satisfaction of the CIT(E) to show the existence of the assessee society for the achievements of the charitable objects. Thus it was not possible to ascertain from the record produced by the assesse as to whether any activity carried by the assesse trust for charitable purpose. He has further submitted that the donation claimed to have been received in kind such as blankets which are distributed by the assesse must be reflected from the books of account. In absence of any such record the claim of the assessee cannot be accepted. He has relied upon the order of the CIT(E).
We have considered the rival submission as well as relevant material on record. The CIT(E) has noted that as per the audit report for F.Y.2021-22 there is no expenditure shown related to the activity conducted by the trust. Further it was noted that the assesse has claimed to have distributed the blankets but no such expenditure for purchase of blanket has been shown in the Income and expenditure account. The CIT(A) further noted that the assesse has issued form 10BE for the donation received prior to the date of provisional registration u/s 80G(5) Page 3 of 5
ITA No.406 & 407/Ind/2022 Raj Kumar Wadhwani Page 4 of 5 of the Act. It was specifically noted that the provisional registration u/s 80G(5) was given vide order dated 10.03.2022 but the assesse has given benefit of section 80G to various individuals for the donation received prior to the registration. Thus, the registration u/s 12AB as well as approval u/s 80G(5) was denied by the CIT(E) mainly on these two grounds that the assessee had not incurred for any expenditure for carrying out any charitable work and the assessee has issued form 10BE for the donation received prior to the provisional registration u/s 80G(5) granted vide order dated 10.03.2022. Undisputedly the assessee has not claimed to have incurred any expenditure on the charitable activity carried out by the assessee during F.Y.2021-22 which was also Covid-19 pandemic crises period. Therefore, having considered the facts and circumstances and prevailing Covid-19 pandemic we are of the view that non-incurrence of expenditure on those activities of distribution of blankets which were received from other respected people of the society cannot be a ground for denial of registration particularly when the assesse society was formed in the year 2021. The Hon’ble Supreme Court in case of DIT vs. Meenakshi Amma Endowment Trust (supra) has held that for the purpose of registration u/s 12A the non-commencement of the charitable activity could not be a ground for rejection of application.
As regards the form 10BE issued by the assesse we find that all these forms were issued by the assesse after the provisional registration as well as approval u/s 80G was granted on 10.03.2022 though against the donations received prior to the date of provisional approval registration and approval. It is pertinent to note that as per the Rule 17A(7) of IT Rules 1962 the provisional registration u/s 12A shall be effective from the 1st day of assessment year relevant to the previous year in which an application is made. For ready reference sub-Rule (7) to Rule 17A is quoted as under:
“(7) in case of an application made under sub-clause (vi) of clause (Ac) of sub-section (1) of section 12A during previous year beginning on 1st day of April, 2021, the provisional registration shall be effective from the assessment year beginning on 1st day of April, 2022.” Page 4 of 5
ITA No.406 & 407/Ind/2022 Raj Kumar Wadhwani Page 5 of 5 7. Even as per sub Rule (6) & (8) of the Rule 18AB the certificate in form 10BE is required to be furnished to the donors on or before 31st May immediately following the financial year in which the donation is received. Therefore, issuing the certificate in form 10BE subsequent to the receipt of donation and after the provisional registration/approval granted to the assesse is in accordance with the Rules and there is no violation of any rule on the part of the assessee by issuing certificate in form 10BE. Hence in the facts and circumstances of the case the objections raised by the CIT(E) for denial of registration u/s 12AB as well as approval u/s 80G(5) are highly arbitrary and not in accordance with the provisions of the Act. Accordingly the impugned orders of the CIT(E) are set aside with the directions to the CIT(E) granted registration u/s 12AB as well as approval u/s 80G(5) to the assessee.
In the result, appeals of the assesse are allowed.
Order pronounced in the open court on 09.11.2023
Sd/- Sd/-
(B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member
Indore, 09.11.2023 Patel/Sr. PS
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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