Income Tax Appellate Tribunal - Delhi
Rotary Naqshband Institute For ... vs Assessee on 23 July, 2009
1 ITA No. 3653/D/09
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F' NEW DELHI
BEFORE SHRI VIMAL GANDHI HON'BLE PRESIDENT AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
ITA NO. 3653/DEL/2009
ASSTT. YEAR: --------
Rotary Naqshband Institute for Vs DIT(E),
Physically Challenged, Aaykar Bhawan, 3rd Floor,
143, Udai Park, Distt. Centre, Laxmi Nagar,
New Delhi- 1100049 New Delhi.
(Appellant) (Respondent)
Appellant by: Smt. Sweety Kothari, CA
Respondent by: Shri H.K. Lal, Sr. DR
O R D E R
PER VIMAI GANDHI, PRESIDENT This appeal by the assessee Trust is directed against order of Director of Income Tax (Exemption) dated 23.7.2009 refusing to grant registration to the Trust u/s 12A and consequentially denying exemption claimed u/s 80G of the Income Tax Act.
2. The assessee "Rotary Naqshband Institute for Physically Challenged"
was created through a deed dated First day of August 2008 by settlor Shri Ghulam Naqshband. It was got registered with the Sub-Registrar, New 2 ITA No. 3653/D/09 Delhi on 1.8.2008. The main objective of the Trust is to function as an Institute for disability related issues of all categories and provide a comprehensive information and data base for service and products etc. that may be useful for rehabilitation and empowerment of the disabled so as to make them self-reliant and also improve their quality of life.
3. Other objects of the Trust have been enumerated in the deed and how the Trust is going to be managed is also provided. 3.1 Vide two applications dated 17.2.2009 on Form 10A and application dated 9.3.09 in Form 10G, the assessee sought registration u/s 12A and exemption for donation made to it u/s 80G of the I.T. Act. The ld. DIT(E) vide letter dated 1.5.2009 sought information detailed at page 1 of the impugned order. Ld. Representative of the assessee sought several adjournments. It is recorded that on 22.7.2009, Ms Nidhi Luthra, CA attended and stated that no income and expenditure A/c for the financial year 2008-09 has been prepared as no transaction has been made by the Trust and no expenditure has been debited for charitable activities. 3.2 In the above background, the ld. DIT (Exemption) held that in the absence of original MOA and registration certificate of society, the application seeking registration u/s 12A cannot be entertained in the light of 3 ITA No. 3653/D/09 Rule 17A. This objection of the ld. DIT (Exemption), in our view, is without much substance as there is material on record to show that MOA was registered with the Sub-Registrar. The ld. DIT (Exemption) was to consider whether in place of original MOA, its copy could be entertained. Further, we find nothing in Rule 17A of I.T. Rules requiring certificate of registration from the Registrar of Societies to be produced. No such requirement is provided in Rule 17A. On facts and material on record, we do not find any merit in the objections raised by DIT (Exemption) in Para 3 of the impugned order. For these reasons, registration could not be refused to the assessee Trust.
4. The other reasons for refusing registration to the assessee Trust and denying consequential relief are contained in Para 4 and Para 4.1 of the order which are as under:-
"4. The provisions of section 12AA stipulate the following conditions for registration u/s 12A of the I.T.Act, 1961:-
(i) The objects of the trust should be of charitable in nature;
(ii) The activities of the trust should be genuine.
4.1 Since the applicant has not undertaken the charitable activities and no expense has been claimed on charitable activities till date, it cannot be said that actual charitable 4 ITA No. 3653/D/09 activities have been carried out by the applicant and the genuineness of the activities could not be established. Therefore, one of the conditions for granting registration u/s 12A is also not satisfied. Accordingly, the application filed by the applicant for grant of registration u/s 12A is hereby rejected. Reliance in this regard is placed on the decision of the Hon'ble High Court in the case of Self Employees Service Trust vs CIT, 247 ITR 18 (Kerala). In this case, although the nature of the objects was charitable and voluntary the trust had not commenced any of its activities. The trust could not produce any evidence before the CIT regarding the genuineness of its activities and, therefore, the Hon'ble High Court dismissed the trust's appeal against CIT's order rejecting registration u/s 12A. Since, in this case, the applicant has not commenced its charitable activities, the application for grant of registration is rejected."
5. The assessee has come up in appeal. It was argued by the ld. Counsel for the assessee Smt. Sweety Kothari that the fact that assessee was a genuine Trust created for charitable purposes was not in dispute. It did not have sufficient income to prepare accounts or to carry on charitable activities as per its objects, though charitable activities could only be carried after assessee was granted registration u/s 12A and donation made to it was exempt u/s 80G. It was submitted that ld. DIT(E) pre-judged the issue. Ld. Counsel also drew our attention to page 27 of the paper book which is a note on charitable activities and which, according to assessee was submitted before the ld. DIT(E). She also drew our attention to the following para of letter dated 19th June 2009 filed before the DIT(E):- 5 ITA No. 3653/D/09
"The assessee has also received names of handicapped children from Akshay Pratishthan requiring help and assistance. A total of 8 beneficiaries out of the above proposed names with polio afflicted disabilities were provided monetary assistance. In support of the above, we hereby enclose the letter received from Amar Jyoti and Akshay Pratishthan for your ready reference."
5.1 She placed reliance on the following decisions of the Tribunal:-
i) Sardari Lal Oberai Memorial Charitable Trust vs Income Tax Officer 106 TTJ(Del) 468
ii) The Guru Harkishan Medical Trust (TGHMT) vs Director of Income Tax (Exemptions) 122 TTJ(Del) 41
iii) Dharma Sansthapak Sangh (NIYAS) vs CIT 118 TTJ (Del) 823 5.2 In all the above cases, registration to the Trust as charitable trust was granted under similar circumstances. In the last mentioned case, the Hon'ble Members of the Bench after review of the case law held as under-
"After narrating the facts, it was pleaded by the learned Authorised Representative that while considering the application of the assessee for grant of registration, it is not necessary that the assessee should have performed charitable activity. He contended that what is important is whether the objects of trust are charitable or religious or not. In other words, while considering the application of the assessee for grant of registration, the CIT is not 6 ITA No. 3653/D/09 authorized to go into the fact that whether any charitable activity has been performed by the applicant trust but what is necessary is that the objects of the trust are charitable or religious. For raising such contention, he referred to the decision of Delhi Bench of Tribunal in the case of Sardari Lal Zoberai Memoraial Charitable Trust vs ITO (2007) 106 TTJ (Del) 468: 2005 3 SOT 229 (Del).
Copy of which is filed at pp. 13 to 19 of the paper book, wherein it has been held that s. 12AA takes care of situation where activities have been carried out by a trust, whereas it does not lay down anything negative in cases where no activities have been carried out. In such case, the sole criteria of grant/non/grant of registration to the trust would be for the CIT to see the objects of the trust. If the objects of the trust are charitable, just because no activity has been carried out by the trust, this does not entitle the CIT to hold that the trust was not entitled to registration, even though its objects were charitable. Further, reference was made to the decision of Hon'ble Allahabad High Court in the case of Firth Generation Education Society vs CIT (1990) 87 CTR (All) 169 : (1990) 185 ITR 634 (All) to contend that precondition for availing benefit of exemption under ss. 11 and 12 at the time of registration is that whether objects of the trust are charitable or not and the CIT is not entitled to examine the application of income of trust and also for substantiating the contention that for registration whether the assessee trust has carried out any charitable activity is not the criteria. For raising similar contention, reliance was placed on the decisions of the Delhi Benches in the case of Ashutosh Dawar Trust vs Director of IT (Exemption) (2002) 77 TTJ (Del) 976: (2202) 82 ITD 593 (Del) and Acharya Sewa Niyas Uttaranchal vs CIT (2006) 105 TTJ (Del) 761 and the decision of the Jodhpur Bench of the Tribunal in the case of Modern 7 ITA No. 3653/D/09 Defence Shikshan Sansthan vs CIT (2007) 108 TTJ (Jd) 732."
It was accordingly contended that ld. CIT(A) was not right in refusing to grant registration to the assessee Trust and also in denying exemption u/s 80G of the I.T.Act. Ld. DR, on the other hand, relied upon decision of Kerala High Court referred to and relied upon by the DIT(E). Their Lordships of Kerala High Court in the above case have laid down as under:-
"A reference to the bye-laws of the society, a copy of which is produced as exhibit P1, would show that several charitable activities are included in the objects of the society, but even according to the petitioner society it has not been able to do any of such charitable activities during the first year of its functioning. The proposal to start a technical educational institution itself was taken only on June 14, 1999, that is much after exhibit P5 order. When the Commissioner exercises his jurisdiction under section 12AA while considering an application for registration under section 12A he has to be satisfied of the charitable and religious nature of the objects and genuineness of the activities of the trust or institution. In the present case, admittedly, the society has not done any charitable work during the relevant period, on the other hand, the activities which they have carried on during the period were only for the purpose of generating income for its members. There were no materials before the Commissioner to be satisfied of the genuineness of the activities of the trust or institution. Under these circumstances, rejection of the application under exhibit P5 cannot be termed as illegal or arbitrary. But the learned single judge has given an opportunity to the society to file a fresh application when they actually start doing charitable work and the Commissioner has been directed to consider such application on the merits untrammelled by the view taken in exhibit P5. According to us, no better relief could be granted to the society in this case."8 ITA No. 3653/D/09
6. We have given careful thought to the rival submission of the parties. It was not disputed before us that the assessee did not lead any evidence relating to activities of the institution before the DIT(E) and position remained unaltered before us. The claim as noted above is that while granting registration u/s 12A, DIT(E) need not consider activities of the charitable trust or institution. However, as noted above, their lordships of Kerala High Court specifically noted the provisions of Section 12AA inserted by Finance (No.2) Act, 1996 w.e.f. April 1, 1997 which also requires that satisfaction about the genuineness of activities is also to be enquired into. Above decision of High Court has not been noted in any of the benches while dealing with the question of registration of Trust u/s 12A. At the same time, it is to be seen that main consideration before granting registration to the Trust to be charitable is to see whether its objects are charitable or not. A Trust can apply for exemption immediately after it is established and by such time it might not have carried charitable activities for which the trust was constituted. It would, therefore, be harsh if registration is denied to the Trust for not leading evidence relating to activities carried on by it. Such order would close door of the institution for all times to come. Besides, the question can arise how satisfaction or finding against the institution can be recorded where the Trust or institution has 9 ITA No. 3653/D/09 carried no activities. Therefore, an adverse finding to the above fact for all times to come would cause incalculable harm to many genuine trusts. In such circumstances, the decision of their lordships of Kerala High Court is good guidance suggesting a via media to the competent authority to provide another opportunity to the assessee trust to make a fresh application for registration and to lead evidence before the competent authority of the charitable activity carried on by it. In our considered opinion, such a course may now be followed by the DIT(E) in this case. The assessee has also become aware of the statutory provision and it is in his own interest to lead evidence relating to charitable activities carried by it.
7. In the light of above discussion, we set aside impugned order and restore the matter to the file of the DIT(E) to allow another opportunity to the assessee to place evidence on the activities of the institution so that satisfaction in terms of Section 12AA might be recorded. After affording reasonable opportunity of being heard, a fresh satisfaction in terms of the above section shall be recorded by the ld. DIT(E). He would also consider claim of the assessee for registration u/s 12A and exemption for donation made to it u/s 80G of the I.T.Act.
10 ITA No. 3653/D/09
8. In the result, the appeal of the assessee is allowed for statistical purposes.
Pronounced in the open court during the course of hearing on 26.4.2010.
Sd/- Sd/- ( SHAMIM YAHYA ) ( VIMAL GANDHI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 26TH April, 2010 'GS' Copy forwarded to: -
1. Rotary Naqshband Institute for Physically Challenged, New Delhi.
2. DIT(E), New Delhi.
3. CIT(A)
4. CIT 5. DR By Order Dy.Registrar 11 ITA No. 3653/D/09