Case Law Details
N J Charitable Foundation Vs CIT (Exemption) (ITAT Surat)
The appeal was filed by the assessee trust against the order of the Commissioner of Income Tax (Exemptions), Ahmedabad, rejecting its application for approval under Section 80G(5) of the Income-tax Act, 1961. The trust challenged the rejection of its application dated 27.03.2023 for regular approval under Section 80G(5).
The assessee trust was established on 04.10.2021 and had already obtained registration under Section 12AB of the Act. It was granted provisional approval under Section 80G(5) on 12.02.2023. The trust filed its application for regular approval on 27.03.2023. During the proceedings, the CIT(E) issued a show-cause notice stating that the application in Form 10AB was required to be filed either six months before the expiry of provisional approval or within six months from the commencement of charitable activities, whichever was earlier.
In response, the trust submitted that its actual charitable activities commenced only on 27.09.2022, when it admitted students for computer training courses. It furnished admission forms of the students as evidence of the commencement of its educational activities. However, the CIT(E) examined the trust’s financial statements for the financial years 2021-22 and 2022-23 and noted that the trust had received corpus donations on 26.03.2022 and donated ₹2 lakh to Shri Ram Mandir Charitable Trust on 31.03.2022. On this basis, the CIT(E) concluded that the trust had commenced its charitable activities on 31.03.2022 and should have filed Form 10AB on or before 30.09.2022. Since the application was filed on 27.03.2023, it was treated as time-barred and rejected.
Before the Tribunal, the assessee contended that receiving donations and making donations to another charitable trust did not constitute the commencement of its own charitable activities. It argued that its actual activities began only on 27.09.2022, when it started imparting computer education by admitting students. Therefore, according to the assessee, its application had been filed within six months from the commencement of its activities.
Alternatively, the assessee requested condonation of the delay of 178 days, if any, submitting that it had acted under a bona fide belief that the application had been filed within the prescribed period from the commencement of its activities. It further submitted that all other statutory conditions for approval under Section 80G(5) had been fulfilled. In support of its request, the assessee relied upon decisions of the Tribunal in GHB Green Foundation vs. CIT(E) and SDA Aarogya Trust vs. CIT(E), which had followed the Delhi High Court decision in DCIT(E) vs. Vishwa Jagriti Mission.
The Revenue supported the order of the CIT(E), contending that the trust had already acted in furtherance of its charitable objects by donating ₹2 lakh to Shri Ram Mandir Charitable Trust for setting up a dialysis centre on 31.03.2022. It argued that this constituted commencement of charitable activities, requiring the application to be filed within six months thereafter. The Revenue also pointed out that the assessee had neither sought condonation of delay before the CIT(E) nor raised such a plea during the original proceedings.
After considering the submissions and examining the record, the Tribunal noted that there was no dispute regarding the donation made by the assessee on 31.03.2022, which had formed the basis of the CIT(E)’s conclusion regarding the commencement of activities. The Tribunal also took note of the assessee’s alternative request for condonation of delay and, following its earlier decisions in GHB Green Foundation and SDA Aarogya Trust, as well as the Delhi High Court decision in Vishwa Jagriti Mission, condoned the delay of 178 days in filing the application under Section 80G(5). The Tribunal restored the matter to the file of the CIT(E) with directions to reconsider the application, examine whether the remaining statutory requirements for approval were satisfied, and pass a fresh order in accordance with law. The appeal was accordingly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This appeal by assessee is directed against the order of Ld. Commissioner of Income-Tax (Exemption, Ahmedabad [for short to as “Ld. CIT(E)”] passed under section 80G(5) of Income Tax Act, 1961 (‘the Act’) in rejecting application for approval funds dated 27.09.2023. The assessee has raised the following grounds of appeal:
“1) The ld. Commissioner of Income Tax (Exemptions), Ahmedabad has erred in law and on facts in rejecting the application for grant of approval under clause (iii) of first proviso to section 80G(5) of the Act.
2) The Appellant craves leave to add, amend, alter modify, substitute, delete, change or vary one or more or all the grounds of Grounds of Appeal.”
2. Rival submission of both the parties heard and record perused. The Ld. Authorized Representative (Ld.AR) for the assessee submits that assessee-trust was set-up on 04.10.2021. The assessee-trust is also having registration under section 12AB of the Act. The assessee-trust was allowed for provisional approval under section 80G(5) of the Act on 12.02.2023. The assessee-trust applied for approval under section 80G(5) on 27.03.2023. The Ld.CIT(E) while issued show cause notice on 03.08.2023 assessee asked the assessee that they were required to file application in Form-10AB for registration under section 80G(5) of the Act either six months prior to expiry of provisional approval or commencement of activities, whichever is earlier. The assessee filed its reply on 05.09.2023. In assessee’s reply, it was submitted that the activities of the assesse-trust were commenced only on 27.09.2022, when the assessee admitted the students for training of computer courses. The assessee furnished certain admission forms of the students / beneficiaries. However, the Ld.CIT(E) rejected the application of assessee by taking view that from annual accounts of assessee-trust for financial years 2021-22 and 2022-23, it was noted that assessee-trust received corpus donations on 26.03.2022 and given donation to Shri Ram Mandir Charitable Trust on 31.03.2022. Thus, the activities of the assessee-trust commenced way back i.e., from 31,.03.2022 and assessee-trust to file application in Form 10AB on or before 23.09.2022, which the assessee failed. Thus, the application for registration under section 80G(5) is not filed in time and ultimately rejected the application in question. The Ld. AR for the assessee further N J Charitable Foundation submits that activities of the assessee-trust actually started on 27.09.2022 when the assessee-trust admitted students for its imparting activities of computer education in furtherance of object of assessee mere taking donation in students in financial year 2021-22 and giving donation in next financial year 2022-23 is in real sense is not the activities. Ultimate activities are to be considered in the hand of recipients for donation from assessee would be when they utilized such donation for their charitable activities. The Ld. AR for the assessee submits that assessee has filed application for approval under section 80G(5) within six months from the commencement of activities, which in case of assessee if on 27.09.2022 is eligible for registration of approval under section 80G(5).
3. In alternative submission, the Ld. AR for the assessee submits that if it is considered that there was a delay, the delay was of 178 days from 30.09.2023 till filing application before Ld.CIT(E) on 27.03.2023. Such delay may be condoned as the assessee-trust was under bona fide belief that they have applied for approval for registration under section 80G(5) well within time from the starting of their activities. Otherwise, the assessee fulfilled all requisites conditions. The Ld. AR for the assesse submits that Co-ordinate of this Tribunal in the case of GHB Green Foundation vs. CIT(E) in ITA No.556/SRT/2023 and in the case of SDA Aarogya Trust vs. CIT(E) in ITA No.852/SRT/2023 dated 16.01.2024, by following the decision of Hon’ble Delhi High Court in the case of DCIT(E) vs. Vishwa Jagriti Mission [2013] 30 taxmann.com 41 (Delhi) condoned the delay in approval under section 80G(5) of the Act. The Ld. N J Charitable Foundation AR for the assessee submits that by following the aforesaid decisions, the delay of 178 days may be condoned and Ld.CIT(E) be directed to grant approval for registration under section 80G(5) as the assessee fulfills all requisites conditions.
4. On the other hand, Ld.CIT-DR for the Revenue supported the order of Ld.CIT(E). The Ld.CIT-DR submits that first object of assessee-trust is to grant-in-aid in cash or kind to hospital, dispensaries or maternity home etc. etc., the assessee in furtherance of their objects has given the donation to Ram Mandir Charitable Trust of Rs.2.00 lakh for set-up dialysis center and assessee acted in furtherance of their objects which is part of activities of assessee-trust. From such aid of activities i.e., on giving donation to Ram Mandir Charitable Trust on 31.03.2022, the assesse has not filed application within six months for approval fund. The assessee-trust has not filed any condonation of delay, nor took such plea before Ld.CIT(E) despite issuance of show cause notice. Thus, the application of assessee was rightly rejected by Ld.CIT(E).
5. We have considered the rival submission of both the parties and perused the record. We also deliberate on various case law relied by Ld. AR for the assessee. We find that order of Ld.CIT(E) that there is no dispute that assessee has given donation to Ram Mandir Charitable Trust on 31.03.2022. The Ld.CIT(E) made basis of this donation as a charitable activities and considered the application of assessee-trust beyond the statutory period of six months from commencement of charitable activities. Before us, Ld. AR for the assessee vehemently argued that assessee-trust was allowed provisional registration, which N J Charitable Foundation is followed up to assessment year 2024-25 and that the assessee-trust was under bona fide belief that they have applied for regular approval well within time limit from the commencement of their activities, which is started from 27.09.2022. We also find that in alternative plea, the Ld. AR for the assessee prayed for condoning the delay on the basis of decision of Hon’ble Delhi High Court decision in the case of Vishwa Jagriti Mission (supra). Considering the alternative plea of the ld AR for the assessee and following the decisions of this combination in the case of GHB Green Foundation vs. CIT(E) (supra) and in SDA Aarogya Trust vs. CIT(E) (supra) and decision of Hon’ble Delhi High Court in the case of DCIT(E) Vs. Vishwa Jagriti Mission (supra) the delay in filing of application under section 80G(5) of 178 days is condoned and appeal of the assessee is restored beck the file of Ld.CIT(E) to reconsider the application of assessee and examine the remaining requirements of approval and to pass order afresh in accordance with law and allow relief to assessee, if assessee fulfilled all requisites conditions for availing approval under section 80G(5) of the Act. In the result, the grounds of appeal raised by the assessee is allowed for statistical purpose.
6. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 08/03/2024.
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