BHAGWANDAS ZALANI FAMILY CHARITABLE TRUST,INDORE V. CIT(EXEMPTION), BHOPAL

ITA 776/IND/2024

AI Insights

The case involves the Bhagwandas Zalani Family Charitable Trust, which appealed against the decision of the Commissioner of Income-Tax (Exemption), Bhopal, rejecting their applications for final registration under section 12AB and final approval under section 80G(5) of the Income-tax Act, 1961. The CIT(E) had earlier granted provisional registration and approval, which were later cancelled. The Tribunal examined the reasons provided by the CIT(E) for the rejection, including issues related to the reporting of donations in Form No. 10BD and the acceptance of a foreign donation. The Tribunal found that the CIT(E) had not adequately addressed the genuineness of the Trust's activities and the compliance with legal requirements, leading to the decision to remand the case for further examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 707250 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 28-10-2024
• Laws Referred To: Income-tax Act, 1961, Madhya Pradesh Public Trust Act, 1951, FCRA, 2010
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: FORASSESSEECARRIEDUSTOPARAPAGESTOOFIMPUGNED; FORASSESSEEATFIRSTCONTENDEDTHATTHISREASONGIVENBYCIT E; FORREVENUEFIRSTLYSUBMITTEDTHATTHECIT E HASTO; FORASSESSEEQUATHE; FORASSESSEESUBMITTEDTHATTHEASSESSEETRUSTWAS; FORREVENUEOPPOSEDTHESUBMISSIONOFLD..HE; FORASSESSEESUBMITTEDTHATTHECIT E SPRECISE; FORREVENUEEMPHASIZEDTHEOBJECTIONRAISEDBYAO; SHRIANOOPSINGH
• Assessee Lawyers: SANTOSH DESHMUKH
• Keywords: Charitable institution
• Section: 10B; 80G

Judgement Text

"Page 1 of 16 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER AND SHRI PARESH M. JOSHI, JUDICIAL MEMBER ITA No.776 & 777/Ind/2024 Bhagwandas Zalani Family Charitable Trust, Yasho Bhawan, Street no.2 New Palasia, Indore बनाम/ Vs. CIT (Exemption) Bhopal (Assessee/Appellant) (Revenue/Respondent) PAN: AAETB0936A Assessee by Shri Santosh Deshmukh, AR Revenue by Shri Anoop Singh, CIT-DR Date of Hearing 02.07.2025 Date of Pronouncement 08.07.2025 आदेश/ O R D E R Per B.M. Biyani, A.M.: The captioned two (2) appeals, first being ITA No. 776/Ind/2024 relating to registration u/s 12AB and second being ITA No. 777/Ind/2024 relating to approval u/s 80G(5), are filed by assessee against a composite order dated 29.08.2024 passed by learned Commissioner of Income-Tax (Exemption), Bhopal [“CIT(E)”] vide DIN: ITBA/EXM/F/EXM45/2024-25/1068119756(1), by which the assessee’s applications for grant of final registration u/s 12AB & final approval u/s 80G(5) of Income-tax Act, 1961 [“the act”] have been Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 2 of 16 rejected and the provisional registration u/s 12AB & provisional approval u/s 80G(5) granted earlier have also been cancelled. The assessee has raised the grounds as mentioned in Appeal Memo (Form No. 36). 2. The background facts leading to these appeals are such that the assessee is a charitable trust created vide Deed of Trust dated 18.06.2020 and registered by Registrar of Public Trusts, Indore vide certificate dated 08.03.2021 under the provisions of Madhya Pradesh Public Trust Act, 1951. The assessee filed applications for grant of provisional registration u/s 12AB and provisional approval u/s 80G(5). The Income-tax Department granted provisional registration u/s 12AB through Form No. 10AC dated 23.09.2021 for the period from AY 2022-23 to 2024-25 and provisional approval u/s 80G(5) vide a separate Form No. 10AC dated 30.11.2021 for the period from 30.11.2021 to AY 2024-25. Subsequently, the assessee filed applications for grant of final registration u/s 12AB and final approval u/s 80G(5) which have been rejected by CIT(E) through a composite order dated 29.08.2024. Now, the assessee has come in these two appeals impugning the order passed by CIT(E). 3. Since these appeals are inter-related, they were heard together and are being decided by this common order. We would first take up appeal relating to registration u/s 12AB and thereafter appeal relating to approval u/s 80G(5). ITA No. 776/Ind/2024 – relating to registration u/s 12AB: Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 3 of 16 4. Ld. AR for assessee carried us to Para 2 / Pages 3 to 7 of impugned order and demonstrated that the Ld. CIT(E) has rejected assessee’s application for three reasons. Thereafter, Ld. Representatives of both sides made their detailed submissions qua those three reasons, one by one. We present below the contentions raised and our adjudication in following discussions. 5. Reason 1: 5.1 The CIT(E) called assessee to submit copies of Form No. 10BD filed by assessee to Income-tax Department. In reply, the assessee filed copies of Forms of financial years 2021-22 and 2022-23 (Paper-Book Pages 74 to 78, 101). On perusal of Form No. 10BD for financial year 2021-22, the CIT(E) raised an objection that although the assessee was granted provisional approval u/s 80G w.e.f. 30.11.2021 but the assessee filed details of all donations received in Form No. 10BD i.e. the donations received during post-approval period as well as pre-approval period. Basically, the CIT(E)’s concern in this regard is such that on the basis of details so furnished by assessee in Form No. 10BD, the assessee would have generated and issued Form No. 10BE for all donations received, even for pre-approval period upto 30.11.2021, and the donors may claim deduction u/s 80G even for the period when the assessee-trust was not having any approval u/s 80G. The CIT(E) observed that it would have implication on exchequer. The CIT(E) further observed that the assessee’s action is non-compliant to the condition Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 4 of 16 imposed in Point No. 10(d) of the certificate of provisional approval u/s 80G issued by Income-tax Department. 5.2 Ld. AR for assessee at first contended that this reason given by CIT(E) is not at all relevant at the stage of granting (or denying) registration. According to Ld. AR, at the stage of granting registration u/s 12AB, the CIT(E) has limited power to verify only ‘genuineness of activities’ in terms of section 12AB(1)(b)(i)(A) r.w.s. 12A(1)(ac)(iii). He submitted that the issue raised by Ld. CIT(E) could at best be relevant at the assessment stage by Assessing Officer but certainly it could not be relevant at the state of granting registration by CIT(E). Therefore, Ld. AR submitted, the reason given by CIT(A) must instantly fail. Without prejudice, Ld. AR referred sub- rule (3)(i) of Rule 18AB of Income-tax Rules, 1962 which prescribes thus in the matter of filing Form No. 10BD: “(3) The reporting person, referred to in sub-rule (2), shall, while aggregating the amounts for determining the sums received for reporting in respect of any person, -- (i) take into account all the donations of the same nature paid by that person during the financial year; (ii) XXX” Ld. AR submitted that the requirement to file Form No. 10BD had come into statute from 01.04.2021 only and it was the first year of filing such Form by assessee. Therefore, on a plain reading of sub-rule 3(i) of Rule 18AB as re- produced above, the assessee gained an understanding, though such understanding may not be correct, that all donations received from a donor Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 5 of 16 during entire financial year have to be aggregated and reported in Form No. 10BD. Accordingly, the assessee made reporting for entire period although the assessee had no intention of giving any illegal benefit to donors for pre- approval period. Ld. AR further submitted an important fact that though it is true that the Form No. 10BE were generated for all donations of financial year on the basis of details furnished by assessee in Form No. 10BD but at the same time it is also a fact that the assessee did not provide those Form No. 10BE to any of the donors, consequently none of the donors claimed deduction u/s 80G. To substantiate this fact, Ld. AR submitted, the assessee has filed declarations from majority of donors at Pages 107 to 116 of Paper-Book wherein they have categorically confirmed (i) that they have not claimed deduction, and (ii) that the assessee did not provide Form No. 10BE to them. Lastly, Ld. AR also contended that although the CIT(E) has raised objection against wrong data furnished by assessee in Form No. 10BD but there is no dispute or objection raised by CIT(E) against ‘genuineness of activities’ of assessee. With these submissions, Ld. AR requested that the first reason assigned by Ld. CIT(E) is not valid and must be turned down. 5.3 Per contra, Ld. DR for revenue firstly submitted that the CIT(E) has to satisfy himself about the ‘genuineness of activities’ and in that process, he has called Form No. 10BD from assessee and raised queries in relation to such Form. He submitted that this action of CIT(E) cannot be said to be irrelevant at the stage of granting registration as being claimed by Ld. AR. Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 6 of 16 Therefore, the pleading made by Ld. AR in this respect is not correct and must be rejected. Going further, Ld. DR submitted that the assessee could very well revise Form No. 10BD, if there were wrong details furnished, but the same was not done. He submitted that the declarations of donors now filed in Paper-Book at Pages 107 to 116, were not filed to CIT(E) and these are new evidences. He submitted that the declarations are self-serving documents and not verified by CIT(E). Finally, he contended that the reason given by CIT(E) is very much correct and must be upheld. 5.4 We have considered rival submissions of both sides. At first, we would like to deal the preliminary objection raised by Ld. AR for assessee qua the ir-relevance of reason assigned by CIT(E). Ld. AR is claiming that the CIT(E)’s action to call the Form No. 10BD and make adverse comments thereon is not relevant at registration stage. We are not in agreement with such a claim of Ld. AR. We find that the provision of section 12AB(1)(b)(i)(A) empowers the CIT(E) to verify ‘genuineness of activities’ before granting registration. This power, rather function, of CIT(E) makes it imperative on the part of CIT(E) to look into various aspects of assessee’s activities such as donations received, funds applied, activities undertaken, etc. Therefore, when the CIT(E) called assessee to submit copy of Form No. 10BD, which is basically a statutory Form giving details of donations received, there is nothing wrong in the action of CIT(E). Needless also to mention that the assessee has, responding to the demand raised by CIT(E), submitted Form Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 7 of 16 No. 10BD without any objection. Therefore, we do not find any worth in the objection raised by Ld. AR, the same is hereby rejected. 5.5 However, we find a great degree of substance in the submission made by Ld. AR that the requirement of Form No. 10BD was a new requirement which came into statute from 01.04.2021 and it was the first year of such requirement. Further, the plain language of sub-rule 3(i) of Rule 18AB states that the donations of entire financial year shall be reported. Although the correct interpretation of this language might be such that the donations received during entire year for post-approval period should be given but the assessee might have generated a wrong understanding to report donations for whole year (including the donations for pre-approval period). In any case, such wrong filing of information in Form No. 10BD, does not mean that the activities of assessee are not genuine. In fact, the CIT(E) has only raised adverse comments on the information furnished in Form No. 10BD but nowhere stated that he was not satisfied with the genuineness of activities. The CIT(E) has raised a concern that because of information of pre-approval period filled in Form No. 10BD, the donors would have obtained benefit of deduction for pre-approval period but to dispel this concern, the assessee has filed declarations from donors that they have not claimed any such benefit. For the sake of discussion, even if we assume that the data of entire financial year furnished in Form No. 10BD is not in accordance with Rule 18AB(3) or the condition No. 10(d) imposed in Form No. 10AC, then also we find that the assessee has filed new evidences in the form of declarations of Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 8 of 16 donors to satisfy the CIT(E) that the donors have not claimed wrong benefit of deduction. Since the assessee has filed new evidences, in all fairness we remand this issue to CIT(E) for adjudication afresh after examining the declarations of donors. 6. Reason 2: 6.1 The CIT(E), on perusal of Form No. 10B (auditors’ report) filed for AY 2022-23, observed that the assessee received a foreign donation of Rs. 40,000/- and asked assessee to explain same. In reply, the assessee submitted that the donor contributed donation from her local a/c with State Bank of India and the assessee was not aware that it was a contribution from NRO A/c of donor much less foreign donation. Later, it came to the knowledge of assessee at the time of finalisation of accounts by auditors and accordingly it was reported as foreign donation in Form No. 10B and Income-tax Return. However, the CIT(E) rejected assessee’s submission and concluded that it was a violation of FCRA, 2010 to accept foreign donation without obtaining registration/permission from Govt. The CIT(E) further noted that the claim of assessee-trust that it was not aware of nature of donation, showed lack of monitoring by assessee qua the receipts. 6.2 Before us, Ld. AR for assessee submitted that the assessee-trust was created for the benefit of a pious purpose of public charity by family members of “Late Shri Girdhar Das Zalani” and all donations were received from different family members only and in that process, the impugned Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 9 of 16 donation of Rs. 40,000/- was received from Shashi Kumar, niece of author of trust. He emphasized that the donation was received from a local bank a/c held by donor with State Bank of India and the assessee-trust was neither aware nor any intention to receive foreign donation. He submitted that it is only when the auditors pointed out that the donation received from NRO A/c of donor could be termed as foreign donation that the assessee came to know about it. Ld. AR pointed out that the assessee has already refunded the sum of Rs. 40,000/- to donor on 17.10.2024; a confirmation of Shashi Kunar, donor dated 16.06.2025 to this effect is placed before bench during hearing. Ld. AR submitted that considering the facts of the issue and the petty amount involved, there should not be any adverse view on this point. Without prejudice, Ld. AR submitted that the act done by assessee, even if a violation of FCRA, 2010, does not impinge the “genuineness of activities” and cannot be a reason for denial of registration in terms of section 12AB(1)(b)(i)(A). 6.3 Per contra, Ld. DR for revenue opposed the submission of Ld. AR. He submitted that by accepting foreign donation, the assessee has committed a violation of FCRA, 2010. He submitted that the refund of impugned donation cannot exonerate the assessee from violation and in any case, the evidence of refund filed by assessee has not been examined by CIT(E). He invited our attention to section 12AB(1)(b)(i)(B) which prescribes another condition for denial of registration in these words “the compliance of such requirements of any other law for the time being in force by the trust or Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 10 of 16 institution as are material for the purpose of achieving its objects”. He submitted that the violation of FCRA, 2010, as committed by assessee in present case, triggers the restrictive provision of section 12AB(1)(b)(i)(B), if not 12AB(1)(b)(i)(A), and therefore the reason assigned by CIT(E) for denial of registration is valid. 6.4 We have considered rival contentions of both sides and perused the impugned order as well as the material held on record to which our attention has been drawn. At first, we find that the assessee-trust has been created by the family members of “Late Shri Girdhar Das Zalani” with an avowed objective of public charity and for that reason, the funds have been primarily contributed by family members of Zalani family. The assessee has explained that in the process of receiving donations, a donation of Rs. 40,000/- was received from one of the family members and that it was received from local bank a/c of donor, it is not a direct receipt in foreign currency or through foreign channel. However, when the auditors pointed out that the donation received from local a/c, which is NRO A/c, can also be termed as foreign donation, the same was reported in auditors report as well as income-tax return and the assessee has made refund to the donor also. Thus, the explanation given by assessee with regard to impugned donation is very bonafide and genuine. There is also a merit in assessee’s claim that it was neither intention of assessee-trust to receive foreign donation. Further, it is also not a case of revenue that by receiving such a donation, the activities of assessee would become non-genuine. Therefore, there is no Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 11 of 16 violation in terms of section 12AB(1)(b)(i)(A). Further, there is no violation of section 12AB(1)(b)(i)(B) also because the language of that provision requires only compliance of “such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects”. The donation of Rs. 40,000/- accepted by assessee in a bonafide manner and that too refunded subsequently, should not be construed as not obeying the requirement of other law as are material for the purpose of achieving objects. However, since the assessee has filed a new evidence in the shape of confirmation of donor with regard to refund of donation, in all fairness we remand this issue also to CIT(E) for adjudication afresh after examining the confirmation of donor. 7. Reason 3: 7.1 The third and last reason assigned by Ld. CIT(E) for denial of registration is such that the assessee could not file ‘direction letter’ of the donors in support of ‘corpus donations’ received. When the CIT(E) show- caused assessee qua this point, the assessee filed a copy of sample receipt No. 46 (the same is scanned by CIT(E) on Page 6 of impugned order) in an attempt to show that the receipt issued by assessee contained separate boxes for ticking (i) normal charity or (ii) corpus fund. It was further submitted that the donors gave verbal/telephonic instructions for utilization towards (i) normal charity or (ii) to be held as corpus and accordingly the trustees issued receipts to donors after ticking the relevant boxes. However, the CIT(E) concluded that the donation received with specific instruction in Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 12 of 16 writing from the donors to form as part of corpus, can only be termed as ‘corpus donations’. Accordingly, the CIT(E) insisted on ‘direction letter’ of donors and in absence thereof, rejected assessee’s submission. 7.2 Before us, Ld. AR for assessee submitted that the CIT(E)’s precise objection is such that the ‘direction letters’ of donors were not filed. But he submitted that the ‘corpus donations’ are proved by following documents: (i) He referred Pages 117 to 125 of Paper-Book where the “Will” and “Codicil” executed by “Late Shri Girdhar Das Zalani” are filed. He referred pages of these documents to show that it was a pious will of Late Shri Girdhar Das Zalani to use a part of his moneys/assets to form a public charitable trust with initial corpus of Rs. 15,00,000/- and in furtherance of such will, his survivors/family members contributed to the corpus of trust. He referred 1st sentence of Trust- Deed at Page 33 of Paper-Book which clearly contains that the assessee-trust has been created by the wishes of “Late Shri Girdhardasji Zalani”. (ii) He referred Pages 99 to 100 of Paper-Book where the minutes of the meeting of trustees held on 19.02.2022 are filed. In Clause No. 5 of minutes, it is clearly resolved to build up a corpus of Rs. 21 lakhs during the year and encourage donors to give more donations. He submitted that the figure of Rs. 21 lakh was an approximate figure and the actual amount of corpus donations received is slightly higher. Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 13 of 16 (iii) He submitted that the assessee has filed a sample receipt to the CIT(E) wherein the donations received from donors were marked as for (i) normal charity or (ii) corpus donations, as per instructions of donors. (iv) He produced the original ‘receipt-book’ maintained by assessee from which receipts were issued to the donors, in open court for verification by bench. This ‘receipt-book’ contains 2nd copies (i.e. carbon copies) of the receipts issued to donors containing ticks against respective donations i.e. normal charity or corpus. The assessee has also filed one blank receipt at Page 98 of Paper-Book (which is same as was filed to PCIT). The assessee has also filed photocopies of certain carbon copies of receipts at Pages 126 to 128 of Paper-Book. (v) He referred Pages 76 to 79 of Paper-Book where detailed statements giving names and addresses of donors, PAN numbers, Mobile numbers, Dates of donations, Amounts, Corpus/non-corpus classification, etc. filed to PCIT are held. As per these statements, the assessee received a total donation of Rs. 21,28,222/- and Rs. 1,66,000/- in AY 2022-23 and 2023-24 by way of corpus donations. In these Statements, Ld. AR has marked the relations of donors against respective donations. (vi) He referred Pages 56-57 & 72-73 of the Paper-Book where the audited accounts of assessee for the years ended on 31.03.2022 & 31.03.2023 are placed. Referring to same, he showed that the assessee has credited (i) normal donations as income in P&L A/c, and (ii) corpus Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 14 of 16 donations as liability in Balance-Sheet. He submitted that the assessee has maintained a separate Ledger A/c of all corpus donations. (vii) He submitted that there is a complete transparency in the nature of donations received by assessee, whether by way of normal charity or corpus donations, and the assessee has maintained adequate documents as well as correctly accounted for in books of accounts. The auditors have also verified and accepted without any adverse remark. 7.3 Per contra, Ld. DR for revenue emphasized the objection raised by AO that the ‘direction letters’ of donors were not filed. 7.4 We have considered rival contentions of both sides and carefully perused the impugned order as well as various documents held in Paper- Book to which our attention has been drawn. After a careful consideration, we find a strong merit in the submission of Ld. AR that the documents filed in Paper-Book, which have already been discussed in foregoing para, indicate that the assessee-trust has been created to carry the will of ‘Late Shri Bhagwan Das Zalani’ and a corpus has been built by receiving contributions primarily from family members. The minutes of assessee-trust clearly show a resolution to build a corpus of approx. 21 lakh. Further, the assessee has issued receipts to the donors marking/ticking towards normal ‘donations for charity’ and ‘corpus donations’. The assessee has maintained Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 15 of 16 a separate ledger of corpus donations from normal donations and accounted for two segments of donations differently. Thus, there is a proper documentation of corpus donations. However, it appears that the CIT(E) has not verified the documents referred by Ld. AR and stuck only to the point that the “direction letters” of donors were not filed. We find that under the scheme of the Act, there is no specific provision requiring that there must be ‘direction letters’ of donors for corpus donations. The various evidences referred by Ld. AR, as discussed by us in foregoing Para 7.2, are substantial enough to demonstrate to support the claim of corpus donations received by assessee. However, we find that the CIT(E) has not gone into these documents, we remand this issue also to file of CIT(E) for reconsideration afresh. 8. In view of above, we remand this matter back to the file of CIT(E) for re-examination of all reasons once again in the light of observations noted by us, without being influenced by his previous adjudication. Consequently, this appeal is allowed for statistical purpose. ITA No. 777/Ind/2024 – relating to approval u/s 80G: 9. The CIT(E) has passed a single consolidated order rejecting assessee’s application for registration u/s 12AB and approval u/s 80G. Learned Representatives of both sides agree that the approval u/s 80G is consequential to the registration u/s 12AB. Since we have remanded ITA No. 776/Ind/2024 relating to registration u/s 12AB to CIT(E), we also Bhagwandas Zalani Family Charitable Trust ITA No. 776 &777/Ind/2024 Page 16 of 16 remand ITA No. 777/Ind/2024 relating to approval u/s 80G to CIT(E). Accordingly, this ITA is also allowed for statistical purpose. 10. Resultantly, both of these appeals are allowed for statistical purposes. Order pronounced in open court on 08/07/2025 Sd/- Sd/- (PARESH M JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 08/07/2025 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore "