Mahaveer (I) Foundation Trust Vs CIT (Exemption) (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune Bench has remanded the case of Mahaveer (I) Foundation Trust versus the Commissioner of Income Tax (Exemption), Pune, pertaining to the denial of the trust’s application for registration under Section 12A of the Income Tax Act, 1961. The Tribunal’s decision provides the assessee a fresh opportunity to submit additional evidence and explanations regarding its financial operations and charitable activities.
The case originated from the assessee’s application in Form No. 10AB on January 29, 2024, seeking registration under Section 12A(1)(ac)(iii) of the Act. The Ld. CIT (Exemption) subsequently issued notices requesting information and clarification to verify the genuineness of the trust’s activities and compliance with other relevant laws.
Discrepancies Noted by CIT (Exemption): During the verification process, the Ld. CIT (Exemption) identified several discrepancies, leading to a show-cause notice issued on July 11, 2024. The primary concerns raised were:
1. Unsecured Loans Without Charity Commissioner Approval: The trust admitted to borrowing unsecured loans in FY 2019-2020 for routine operational expenses, citing the COVID-19 pandemic as the reason for not obtaining prior approval from the Charity Commissioner. The Ld. CIT (Exemption) highlighted Section 36A(3) of the Maharashtra Public Trust Act, 1950, which mandates prior sanction from the Charity Commissioner for any borrowing by a trustee. The Commissioner concluded that the trust failed to comply with this statutory requirement and, consequently, with Section 12AB(1) of the Income-tax Act, 1961, which requires compliance with other relevant laws.
2. Lack of Charitable Activity Evidence: The Ld. CIT (Exemption) noted the absence of bills and vouchers for activities conducted towards charity. The financial statements reportedly indicated that the entire expenditure was on establishments rather than charitable objects. Specific requests for details of free services, beneficiaries, or concessional rates provided to financially weaker patients, along with supporting evidence, were unmet. While some photographs were submitted, they were deemed insufficient to prove charitable activities.
Based on these observations, the Ld. CIT (Exemption) concluded that the trust’s activities appeared to be commercial in nature rather than charitable. As a result, the application for Section 12A registration was rejected, and the provisional registration granted earlier under Section 12AB was cancelled.
