Summary: The Commissioner (Exemptions) had rejected the trust’s application, for registration under section 12AB and 80G, citing the reasons that the assessee trust has availed a loan from the trustees and no prior sanction of loan was taken from the Charity Commissioner. The ITAT found that the trust had not been provided an adequate opportunity to clarify the nature of this loan. However, the Tribunal remanded the matter, directing the Commissioner to reconsider the case afresh after giving the assessee a proper hearing observing that denial of registration 12AB should not be solely based on absence of Charity Commissioner sanction for a temporary loan
Facts of the Case
Snehbandh Foundation, a public trust, is engaged in family welfare and medical relief initiatives, including the operation of clinics and care centres. It submitted applications for regular registration under section 12AB and for approval under section 80G of the Income-tax Act, 1961 on 25.03.2024. The Commissioner (Exemptions) rejected both applications. The grounds for rejection included doubts about the genuineness of the trust’s activities and the failure to obtain sanction from the Charity Commissioner regarding a loan received by the trust from one of its trustees during the assessment year.
Arguments Made
The assessee’s counsel submitted that the loan was unsecured, taken solely for temporary needs from a trustee, not from commercial lending institutions or banks. Assessee relied on the coordinate bench’s decision in Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha v. CIT(E) [IT Appeal No.376 (Nag) of 2023, dated 9-7-2024], and argued that such temporary borrowings for noble purposes do not infringe provisions of either the Maharashtra Public Trust Act, 1960 or the Income-tax Act, 1961. The counsel further requested to set aside the matter to clarify the need for Charity Commissioner sanction regarding the loan from trustee. The counsel also requested for another opportunity to submit relevant documents supporting the trust’s genuine activity.
The counsel The Revenue countered by supporting the Commissioner’s order.
Decision of ITAT
The ITAT, after reviewing the submissions, found that the assessee had not been afforded a fair opportunity to clarify the nature of the loan from the trustee. The Tribunal acknowledged the reliance placed on the decision of Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha (supra), which held that rejection under section 12AB should not be solely based on absence of Charity Commissioner sanction for a temporary loan.
Consequently, the ITAT decided to remit the matter to the Commissioner (Exemptions) for fresh adjudication.
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