ITAT Grants Section 12AA Registration for Trust’s COVID-19 Relief Activities

Kanojiya Pardeshi Dhobi Vs ITO (ITAT Pune)

In a recent decision, the Income Tax Appellate Tribunal (ITAT) Pune rendered judgment in favor of the Kanojiya Pardeshi Dhobi Trust, granting them registration under section 12AA of the Income Tax Act.

1. Grounds of Appeal: The Kanojiya Pardeshi Dhobi Trust filed an appeal against the rejection of its registration application under section 12A(1)(ac) of the Income Tax Act. The grounds of appeal included challenges to the rejection decision, citing errors in fairness and justice.

2. Assessee’s Argument: The trust, established in 2017, argued that it had actively engaged in charitable activities during the COVID-19 pandemic. It provided food to the underprivileged and also bore expenses for the cremation of those who succumbed to the virus. The trust contended that its objectives were charitable, and evidence supporting these claims was submitted.

3. CIT(E)’s Rejection Decision: The Commissioner of Income Tax (Exemption), Pune, rejected the application on the basis of inadequacy of evidence. Despite acknowledging that the trust had submitted evidence, the CIT(E) found it to be insufficient and incomplete. Furthermore, the commencement of the trust’s activities was deemed unestablished.

4. ITAT Pune’s Verdict: The ITAT Pune disagreed with the CIT(E)’s rejection decision. The tribunal noted that the trust had spent substantial amounts on its charitable objectives, including food distribution and cremation assistance during the pandemic. These activities aligned with the trust’s stated charitable purposes, as defined in section 2(15) of the Income Tax Act. The ITAT Pune also verified the trust’s objectives and found them to be charitable in nature, as defined by the same section. As a result, the grounds of appeal raised by the trust were allowed.

5. Conclusion: In a significant ruling, the ITAT Pune has granted registration under section 12AA of the Income Tax Act to the Kanojiya Pardeshi Dhobi Trust. The tribunal recognized the trust’s genuine charitable activities, which included distributing food to the impoverished and covering expenses for the cremation of individuals who passed away due to COVID-19. This decision underscores the importance of genuine charitable efforts and ensures that deserving organizations receive the appropriate tax benefits for their noble endeavors.

This case serves as a reminder of the critical role played by charitable organizations during times of crisis and the need for a fair and just assessment of their activities to facilitate their continued support to the community.

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax (Exemption), Pune dated 30.03.2023 rejecting the application of the assessee filed in Form No.10AB under section 12A(1)(ac) of the Income Tax Act, 1961 on 29.09.2022. The assessee has raised following grounds of appeal :

“1. CIT Exemption Pune has erred in rejecting Registration to the Trust u/s 12AB of the Act. Appellant Prays for grant of Registration.

2. CIT Exemption has erred in not being just and Fair and Rejecting Registration u/s 12AB to the Trust.

3. Commissioner of Income Tax(Exemptions) has erred not being Just, Judicious, and fair. Appellant prays for Just and Equitable relief.

4. Appellant prays to add, alter, amend, take additional grounds, submit additional evidence, and/or withdraw the ground/s, during appellate Proceedings.”

2. The ld.Authorised Representative(ld.AR) of the assessee submitted that the assessee is a very small trust and was established in 2017. Assessee has done services of providing food to poor person during the Covid-19 period. Assessee has also helped the poor and incurred expenses for the funerals of people died during Covid-19. Therefore, the ld.AR pleaded that the activities of the assessee are eligible and hence, assessee is eligible for Registration under section 12AA of the Act. The ld.AR has also submitted that assessee’s objects are charitable which are enclosed at page no.35, 36, 37 & 38 of the paper book. The ld.AR submitted that ld.CIT(E) has rejected the application only on the ground that evidence submitted by the assessee is inadequate. This cannot be the ground for rejection during the proceedings, the ld.CIT(E) is supposed to verify the objects of the Trust and genuineness of the activities. In this case, the objects are charitable, the ld.CIT(E) has not mentioned anything about the objects of the Trust. All the details were filed before the ld.CIT(E).

Findings & Analysis :

3. The ld.CIT(E) has rejected the application filed by the assessee. The relevant paragraph of the ld.CIT(E)’s order is reproduced here as under:

“2.3 The assessee was requested to show cause as to why the application should not be rejected and why the registration granted under section 12AB of the Income Tax Act, 1961 should not be cancelled. The assessee was also given opportunity of being heard vide the said notice. The assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration shall also be liable to be cancelled. The compliance to the said notice was due on 27/03/2023. The notice was duly served on the assessee through e-portal and email. However, the evidence submitted by the assessee is found to be inadequate and incomplete. Even the commencement of the activities does not get established.”

4. Thus, the ld.CIT(E) has accepted the fact that assessee had filed evidences regarding activities. The ld.CIT(E) merely mentioned that the evidence is inadequate. It is an admitted fact by the assessee that assessee has spent Rs.8,000/-, Rs.35,000/- on the objects of the Trust in the last two years. The copy on the Income & Expenditure Account was submitted to the ld.CIT(E). The assessee has claimed that assessee has distributed food to the poor people during the Covid-19 and also the expenditure on the funeral of poor people. We all know that the Pandemic period was a very disturbing period for entire country. In this scenario, the assessee had distributed food to the poor people and assessee also spent on cremation of the diseased. These activities are definitely as per the object of the Trust. Therefore, we are convinced that assessee’s activities were charitable in nature as defined in section 2(15) of the Act. WE have also read out the objects of the assessee and we find that objects are charitable in nature as defined under section 2(15) of the Income Tax Act. Accordingly, grounds of appeal raised by the assessee are allowed.

5. In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 28^th July, 2023.