Case Law Details

Case Name : Dr. NT Ghatte Charitable Trust Vs. CIT (Exemption) (ITAT Pune)
Appeal Number : ITA No. 1125/Pun/2019
Date of Judgement/Order : 13/10/2020
Related Assessment Year :

Dr. NT Ghatte Charitable Trust Vs. CIT (ITAT Pune)

Merely because the trust has not spent any amount of its income for charitable activities and the fact that the trust has not spent any amount of income for charitable purpose does not amount to carrying on the activities contrary to its objects.

The submission of the learned Commissioner–Departmental Representative the matter be remanded to the learned Commissioner (Exemption) for fresh examination cannot be acceded to for the reason that it amounts to ordering fresh enquiry which is not permissible under the law. In the light of the above discussion, we direct the learned Commissioner (Exemption) to grant registration of the appellant trust under section 12AA of the Act.

FULL TEXT OF THE ITAT JUDGEMENT

This is an appeal filed by the assessee trust against the order of ld. Commissioner of Income Tax (Exemption), Pune dated 22.06.2019 passed u/s 1 2AA( 1) (b) (ii) of the Income Tax Act, 1961 (for short “the Act”) denying the registration u/s 12AA of the Act.

2. The appellant raised the following grounds :-

“1. The ld. CIT erred in law and on facts in rejecting the registration u/s 12AA(1)(b)(ii) to the appellant Trust without giving any opportunity of being heard.

2. The ld. CIT erred in law and on facts in holding that genuineness of activities is not established.

3. The appellant craves leave to add, alter, modify or substitute any ground of appeal at the time of hearing.”

3. The brief facts of the case are as under :-

The appellant, namely, Dr. N T Ghatte Charitable Trust is a trust formed on 02.04.20 14 and is registered under the BPT Act, 1950 vide registration number E-2 173/ Sangli dated 13.07.2015 with the following objects :-

“1) Establishment, acquisition, construction and/or maintenance or support of primary schools, high schools, colleges, vidyapeeths, study centers, medical colleges, technical colleges, and other institutions for imparting education and training of students.

2) Establishment and support of Professorship, Fellowship, Lectureships, Scholarships, Loan Scholarships, Free Ships and Prizes at any schools, colleges or other educational institutions in India.

3) Establishment maintenance and/or construction of hostels and / or boarding houses and grant of free boarding and lodging to poor, deserving students and other persons upon such terms and for such period in each case as the TRUSTEES may think fit.

4) To take over the management and administration of educational and cultural institutions of the aforesaid nature and orphanages already established with all their assets and liabilities.

5) To construct, establish, equip, maintain and/or manage laboratories, workshops and to undertake, conduct, carry on or help to carry on scientific research and other scientific works and to provide fund for such works or for payment to any person or persons engaged in research work whether in such laboratories or else where in the fields of natural or applied science including Geology, Medicine, Agriculture or Animal Husbandry, Information Technology, Computer Systems, Computer Hardware developments, Sericulture, Floriculture.”

4. The appellant trust filed Form 10A for registration under the provisions of section 1 2AA of the Act on 07.12.2018. On receipt of the said application for registration of the trust u/s 12AA of the Act, ld. Commissioner of Income Tax (Exemption) had called upon the applicant through ITBA portal on 05.01.2019 to furnish certain information/clarification. In response to the same, the appellant uploaded the information on 01.02.2019. On perusal of the said information furnished by the appellant trust, the ld. Commissioner of Income Tax (Exemption) had concluded that the appellant society had not carried on any charitable activities during the last three financial years and based on this findings, the ld. Commissioner of Income Tax (Exemption) held that the genuineness of charitable nature of the activities is not established, accordingly, he denied the registration u/s 12AA of the Act vide order dated 22.06.2019.

5. Being aggrieved by the order of ld. Commissioner of Income Tax (Exemption), the appellant is in appeal before us in the present appeal.

6. The ld. AR submitted that the ld. Commissioner of Income Tax (Exemption) had drawn the adverse inference against the assessee without giving a proper opportunity of being heard to the appellant society. She further submitted that the reasoning of the ld. Commissioner of Income Tax (Exemption) is no longer tenable under the law in the light of the judgment of the Hon’ble Supreme Court in the case of Ananda Social and Educational Trust vs. CIT, 272 Taxman 7. Thus, it was submitted that the impugned order be quashed and the ld. Commissioner of Income Tax (Exemption) may be directed to grant the registration u/s 12AA of the Act.

7. On the other hand, ld. CIT-DR contended that the matter be remanded back to the ld. Commissioner of Income Tax (Exemption) for fresh adjudication in the light of the judgment of the Hon’ble Supreme Court in the case of Ananda Social and Educational Trust (supra).

8. We have heard the rival submissions and perused the material on record. The only issue in the present appeal relates to the grant of registration u/s 12AA of the Act. From the perusal of the impugned order, it is crystal clear that the ld. Commissioner of Income Tax (Exemption) had denied the registration solely on the ground that the appellant had not undertaken any charitable activities pursuant to objects on which it was set up activities of the trust in the last three financial years. It is not the case of the ld. Commissioner of Income Tax (Exemption) that the objects of the appellant society are not charitable in nature. The reasoning of the ld. Commissioner of Income Tax (Exemption) is not tenable under the law in view of the recent judgement of the Hon’ble Supreme Court in the case of Ananda Social and Educational Trust (supra) wherein the Hon’ble Apex Court held as under :-

“We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant – Director of Income Tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine.

Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term ‘activities’ in the provision includes ‘proposed activities’. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.

We therefore find that the view of the Delhi High Court in the impugned judgment is correct and liable to be upheld.

Ms. Bhati, learned Senior Counsel for the appellant, fairly drew our attention to a judgment of the Allahabad High Court in IT Appeal No.36 of 2013 titled as “Commissioner of Income Tax-II vs. R.S. Bajaj Society” which has taken the same view as that of the Delhi High Court in the impugned judgment. The Allahabad High Court has also referred to a similar view taken by the High Courts of Karnataka and Punjab & Haryana.”

9. Further, the Hon’ble Supreme Court in the case of M/s. Ananda Social and Educational Trust vs. CIT in Civil Appeal No. 1727/2020 (@SLP (C) No.25761/2015) dated 19.02.2020 held that merely because the trust has not spent any amount of its income for charitable activities and the fact that the trust has not spent any amount of income for charitable purpose does not amount to carrying on the activities contrary to its objects. In the light of legal position discussed supra, the order of the ld. Commissioner of Income Tax (Exemption) cannot be sustained in the eyes of law.

10. The submission of the ld. CIT-DR the matter be remanded to the ld. Commissioner of Income Tax (Exemption) for fresh examination cannot be acceded to for the reason that it amounts to ordering fresh enquiry which is not permissible under the law. In the light of the above discussion, we direct the ld. Commissioner of Income Tax (Exemption) to grant registration of the appellant trust u/s 12AA of the Act.

11. In the result, the appeal of the assessee stands allowed.

Order pronounced on this 13th day of October, 2020.

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