Income Tax Appellate Tribunal - Jaipur
Badri Narain Kanta Devi Katta ... vs Commissioner Of Income Tax ... on 30 July, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH 'B', JAIPUR
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BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM
vk;dj vihy la-@ITA No. 1212/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2014-15.
Badri Narain Kanta Devi Katta cuke Commissioner of Income Tax
Charitable Trust, Vs. (Exemptions)
101, Pearl Imperia, Jaipur.
7, Kanota Bagh, Takht-e-Shahi
Road, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AADTB 2360 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Siddharth Ranka &
Shri Saurav Harsh (Advocates)
jktLo dh vksj ls@ Revenue by: Shri B.K. Gupta (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 23.07.2019.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/07/2019.
vkns'k@ ORDER
PER VIJAY PAL RAO, JM :
This appeal by the assessee is directed against the order dated 24.08.2018 of ld. CIT (Exemptions), Jaipur passed under section 80G(5)(vi) of the IT Act. The assessee has raised the following grounds :-
"1. That in the facts and in circumstances of the case the ld.
Commissioner of Income-tax, Exemption has grossly erred in rejecting the application filed by the assessee appellant for seeking approval u/s 80G of the Act.
1.1. That in the facts and in circumstances of the case the ld.
Commissioner of Income-tax, Exemption has grossly erred in holding that no significant activity has been started by the assessee appellant as per objects of the trust and in ignoring the submissions made by the assessee appellant in this regard.2 ITA No. 1212/JP/2018
Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
2. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing."
2. The assessee trust was constituted vide Trust Deed dated 17.10.2017. The assessee applied for grant of registration under section 12AA of the IT Act as well as for grant of approval under section 80G(5)(vi) of the IT Act vide two separate applications in the Form 10A and 10G respectively both dated 15th February, 2018. The ld. CIT (Exemptions) granted registration under section 12AA(1)(b) vide order dated 24.08.2018, however, the approval under section 80G(5)(vi) was denied on the ground that no significant activity has been started by the assessee trust as per the objects.
3. Before us, the ld. Counsel for the assessee has submitted that the ld. CIT (Exemptions) has not disputed the charitable nature of objects of the Trust, even by considering the objects the registration under section 12AA(1)(b) was granted to the assessee. Since the assessee trust was yet to commence the activity, therefore, the approval under section 80G(5) was denied. The ld. Counsel has submitted that when the ld. CIT (Exemptions) has not found any violation of provision of section 80G(5) then the approval cannot be denied solely on the ground that the assessee has not carried out any activity. In support of his contention, he has relied upon the decision of Visakhapatnam Bench of the Tribunal dated 06.12.2017 in case of Mattapali Chalmayya Charitable Trust vs. CIT (E) in ITA No. 234/VIZAG/2017 and submitted that the Tribunal held that if the activities of the assessee trust are genuine at the stage of commencement of the institution, registration has to be 3 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
granted and approval under section 80G of the Act can be followed with grant of registration. He has also relied upon the decision of the Coordinate Bench of this Tribunal dated 11th January, 2017 in case of Keshar Devi Godara Samajik Kalyan Sansthan Singor vs. CIT (E) in ITA No. 877/JP/2016 and submitted that once the registration under section 12AA is granted, the approval under section 80G(5) is consequential in the absence of any contrary material or fact showing not fulfilling the conditions provided under section 80G(5) of the IT Act. The ld. Counsel has also stated at bar that now the assessee has already started its activity as per the objects and, therefore, approval under section 80G(5) should be granted.
4. On the other hand, the ld. D/R has submitted that the basic condition of section 80G(5) is not fulfilled as the assessee has not started any activity at the time of filing the application and passing the order. The ld. CIT (Exemptions) has examined the record and found that the assessee has not started any activity. He has also referred to Rule 11AA of the IT Rules and submitted that it is a requirement that the application for approval under section 80G(5) shall be accompanied with the order under section 12AA of the IT Act. In the case of the assessee since there was no registration under section 12AA at the time of submitting the application, therefore, the said condition of Rule 11AA is also not fulfilled. He has relied upon the decision of Lucknow Bench of the Tribunal in case of Chandrawati Devi Foundation Trust vs. CIT (Exemptions), 64 taxmann.com 33 and submitted that the Tribunal has confirmed the order of the ld. CIT (Exemptions) refusing the grant of approval under section 80G(5)(vi) for want of copy of registration under section 12AA along with the application for approval under section 80G(5)(vi) of the Act. The ld. D/R 4 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
has also relied upon the decision of Hon'ble Delhi High Court in case of Kirti Chand Tarawati Ch. Trust vs. DIT, 105 Taxman 686 (Delhi) and submitted that the Hon'ble High Court has upheld the order of refusing the approval under section 80G when the activities of the Trust/Institution were not carried out as per the objects though registration under section 12AA was granted to the said Institution. He has supported the impugned order of the ld. CIT (Exemptions).
5. We have considered the rival submissions as well as the relevant material on record. The ld. CIT (E) has not disputed the objects of the assessee trust being charitable in nature. These objects have been reproduced by the ld. CIT (E) in the impugned order and based on these objects, the registration under section 12AA was granted vide even date order by the ld. CIT (Exemptions). The only objection on which the approval under section 80G(5) was denied has been discussed in para 4 & 5 of the impugned order as under :-
" 4. In light of above objects, the activities commenced by the trust were examined. Therefore vide questionnaire letter No. 8527 dated 16/22.02.2018 applicant was asked to produce activity details alongwith evidences by Q.No. 14. In response to which AR of the applicant file written reply vide letter dated 14.02.2017 stated on this issue that " the bank account could open late and Trustee Smt. Kanta Devi Katta got seriously ill and got hospitalized, further the trust could not registered by your honour and not got 80-G Certificate so effective activities could not be started now we assures to do activities as per objects of the Trust."
5. As discussed above, no significant activity has been started by the applicant as per the objects. Thus, the basic condition u/s 80G is 5 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
not fulfilled. Considering this, the case is not fit for granting exemption u/s 80G at this stage."
Thus it is clear that the ld. CIT (Exemptions) has not doubted the charitable nature of the objects of the assessee trust but since no significant activity has been started by the assessee, it was held that the condition under section 80G(5) is not fulfilled. It is pertinent to note that if there is a substantial gap between the registration under section 12AA and the application for approval under section 80G, then the mere grant of registration under section 12AA will not automatically create a right of getting approval under section 80G(5) of the Act but the ld. CIT (Exemptions) has to see whether the activity of the Trust has been carried out as per objects and for achieving the objects of the assessee trust. In the case in hand, the assessee applied for registration under section 12AA as well as approval under section 80G(5) of the Act on the same date vide two separate applications both dated 15th February, 2018. Therefore, there was no new development to be verified by the ld. CIT (E) after grant of registration under section 12AA for the purpose of granting approval under section 80G(5) of the Act. Once the objects of the assessee trust are found to be charitable, then non-start of the activity by the assessee trust cannot be a reason for denial of approval when on the basis of same set of facts, the registration under section 12AA was granted by the ld. CIT (E). The situation would have been different if registration was granted on the basis of the objects of the Trust and subsequently the trust has started its activity and on verification if it was found that the activities of the assessee trust are not being carried out as per the 6 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
objects, then the registration granted under section 12AA would not ipso facto vest a right for approval under section 80G(5). In the case in hand, the ld. CIT (E) has not found that the activities carried out by the assessee trust are not as per the objects but it was noticed that no significant activity has been started by the assessee trust. Even otherwise, as per the statement made at bar by the ld. Counsel that the assessee trust has already started its activity, then the said objection of the ld. CIT (E) is also complied with by the assessee. As regards the requirement of the order granting registration under section 12AA to be annexed with the application for approval under section 80G(5) when the assessee has applied on the same date and the registration was granted by the ld. CIT (E) under section 12AA at the time of refusal of the approval under section 80G, then the said condition as provided under rule 11AA stands satisfied as the order of granting approval under section 12AA was already with the ld. CIT (E) at the time of passing the impugned order. The purpose and requirement of accompanying the order granting registration under section 12AA is to make available such order for verification and consideration of the competent authority at the time of considering the application for grant of approval under section 80G(5). Hence once the order of granting registration under section 12AA was already with the learned CIT (E), then the condition provided under rule 11AA is satisfied. As regards the decision relied upon by the learned D/R in the case of Kirti Chand Tarawati Ch. Trust vs. DIT (supra), in the said case the Commissioner conducted a spot enquiry and was found that the Trust being engaged mainly in the construction of religious temple wherein no charitable activity was being carried on. Thus it was a finding of fact that the activities of the assessee 7 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
were not carried out for any charitable work. In the case in hand, no such allegation has been made by the ld. CIT (E) that assessee has carried out any activity which is not charitable in nature but the only objection is that the assessee has not started any significant activity. The Visakhapatnam Bench of the Tribunal in case of Mattapali Chalmayya Charitable Trust vs. CIT (E) (supra) has considered an identical issue in para 5 as under :-
"5. We have carefully considered the rival submissions and perused the records. The decision of the ITAT, Lucknow bench is not applicable to the case on hand since, in the aforementioned case, the claim of the assessee was rejected by the Tribunal on the ground that for grant of approval, copy of registration granted u/s 12AA of the Act has to be annexed and for such purpose, registration on an earlier date is obligatory. However, in the instant case, the Ld. Commissioner has already granted registration u/s 12AA of the Act and approval u/s 80G was not rejected on the ground of not obtaining registration u/s 12AA of the Act but only on the limited ground that no activity has been carried out. The decision of the ITAT Kolkata Bench, as rightly been pointed out by the Ld. Counsel, supports the stand of assessee that if the activities of the trust are genuine, at the stage of commencement of institution, registration has to be granted automatically and claim u/s 80G of the Act can be followed with grant of registration. Ld. Commissioner (Exemptions) did not reject the request of the assessee for approval u/s 80G of the Act on the ground of not annexing the registration certificate u/s 12AA of the Act but on the limited ground that it has not undertaken much activity. At the inception of the institution, one cannot expect serious activities, since it needs funds and to obtain funds, the trust needs approval u/s 80G of the Act. Thus, the activities are interlinked with obtaining approval. Hence, mere fact that the assessee could not undertake much activity within the short span of 3 months, the Commissioner (Exemptions) should not have refused the claim of approval u/s 80G(5) of the Act. Under the peculiar circumstances, we direct the Ld. Commissioner to consider the issue pragmatically and grant approval u/s 80G(5) of the Act, if all other conditions are fulfilled."8 ITA No. 1212/JP/2018
Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
Thus it was held that merely because the assessee could not undertake much activity within the short span of time, the ld. CIT (E) should not have refused the claim of approval under section 80G(5) of the Act. The Coordinate Bench of this Tribunal in the case of Keshar Devi Godara Samajik Kalyan Sansthan Singor vs. CIT (Exemptions) (supra) has also considered the issue of denial of approval under section 80G(5) in para 3.2 as under :-
"3.2. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has been granted registration under section 12AA of the Act. The Coordinate Bench in the case of Hemdha Medi Resources Pvt. Ltd. vs. CIT (Exemptions) in ITA No. 679/JP/2015 under the identical facts has observed as under :-
"2.10. Further, we have gone through the decision of decision of Coordinate Bench in case of Pearls Educational Institute (Supra). The said decision was rendered in the context of renewal of approval under section 80G and the fact that the appellant in that case had not commenced construction activities even after 13 years which is distinguishable on facts as stated above. In our view, the said decision doesn't support the case of the Revenue. In fact, the Hon'ble Allahabad High Court in case of Hardayal Charitable and Educational Trust vs. CIT (supra) is directly on the issue and supports our view. In that case, assessee trust applied for grant of registration u/s 12AA and approval u/s 80G(5). The CIT refused to grant registration and approval on grounds that trust was in process of construction of college for studies and that huge amount was spent on advertisement and promotion of business of its family concern. In subsequent assessment year, registration u/s 12AA and approval 80G was granted with conditions that 9 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
exemption certificate would be effective from A.Y. 2012-13. It was held that:
"For registration u/s 12AA which was necessary for claiming exemption u/s 11 and 12, CIT was not required to look into activities, where such activities had not or were in process of its initiation. Where a trust set up to achieve its objects of establishing educational institution, was in process of establishing such institutions, and receives donations, registration u/s 12AA cannot be refused on ground that Trust had not yet commenced charitable or religious activity. Enquiry of the CIT at such preliminary stage should be restricted to genuineness of objects and not activities unless such activities had commenced."
2.11 Interestingly, the decision of the Coordinate Bench in case of Hardayal Charitable and Educational Trust which was overruled by the Allahabad High Court was quoted by the Revenue while denying the exemption initially to the appellant under section 12AA. Given that the appellant has subsequently been granted approval under section 12AA and the said decision of the Coordinate Bench is overruled by the High Court shows that the appellant is well within its right to seek approval under section 80G as well. In view of above, the CIT(Exemption) is hereby directed to grant approval u/s 80G(5) of the IT Act, 1961 to the appellant."
The facts are identical in the present case. Therefore, taking a consistent view, the ld. CIT (Exemptions) is hereby directed to grant approval u/s 80G(5)(vi) of the IT Act, 1961 to the appellant." Accordingly, in the facts and circumstances of the case, when there is no adverse fact found against the assessee and the assessee has claimed to have already started the activity, the matter is required to be considered afresh by the ld. CIT (E) after verification of the activities carried out by the assessee. Hence the matter is 10 ITA No. 1212/JP/2018 Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
set aside to the record of the ld. CIT (E) for passing a fresh order in the light of the above observation. Needless to say that the assessee be given an opportunity of hearing before passing the fresh order.
6. In the result, appeal of the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 30/07/2019.
Sd/- Sd/-
( jes'k lh- 'kekZ ) (fot; iky jkWo ½
(RAMESH C. SHARMA ) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 30/07/2019.
Das/
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- Badri Narain Kanta Devi Katta Charitable Trust, Jaipur.
2. The Respondent - The CIT (Exemptions), Jaipur.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 1212/JP/2018) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar