RAJKOT DISTRICT NETWORK OF PEOPLE LIVING WITH HIV AIDS, RAJKOT V. HON INCOME TAX OFFICER (EXEMPTIONS) WARD-1, RAJKOT, RAJKOT

ITA 37/RJT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7346 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 12-03-2024
• Assessment Year: misc
• Appeal Filed On: 21-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMDEEP SINHA
• Keywords: Charitable institution; Principle of natural justice; Set aside
• Section: 147; 10; 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH VIRTUAL COURT] Before: Ms. Suchitra Kamble, Judicial Member And Shri Waseem Ahmed, Accountant Member Rajkot District Network o f People Living with HIV Aids, Old U. L. C. Office In Old Collector Offi ce, Near Hospital Chowk, Rajko t PAN: AABTR000 61 (Appellant) Vs The ITO(Exemption ), Ward-1, Rajkot (Resp ondent) Asses see by : Written Submis sion Revenue by : Shri Sh ramdeep Sinha , CIT-D. R. Date of hearing : 13-03 -2 024 Date of pronouncement : 08-05 -2 024 आदेश/ORDER PER : SUCHITRA KAMBLE, JUDICIAL MEMBER:- This is an appeal filed against the order dated 24-11-2023 passed by ld. CIT(Exemption) for Assessment Year N.A. 2. The grounds of appeal are as under:- ITA No. 37/Rjt/2024 Assessment Year :NA I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 2 “(1) The crux of the whole situation taking shape after compliances made and after conduct of proceedings required to be undergone due to amendment in the relevant sections of the Act w.e.f. 01-04-2021 is that the same has resulted into permanent cancellation of exemption certificate u/s 80G(5) originally obtained from 02-03-2007 and perpetually valid after 31-03-2012, without any commission of default by the Trust as to fundamental conditions, causing unimaginable hardship on livelihood of AIDS/HIV victims for whom and by whom the trust is functional Reinstatement is prayed (2) Your appellant reserves the right to add alter, vary and/or modify the grounds of appeal before the appeal is decided.” 3. The assessee got provisional approval u/s. 80G(5) w.e.f. 02-03-2007. The Trust was registered u/s. 12AA w.e.f. 01-04-2006 and its renewal was obtained upto assessment year 2026-27 as per written submissions of the assessee before us. The exemption u/s. 80G(5) was not renewed for three years i.e. 01-04-2009 to 31-03-2012. Thereafter, the same was perpetual as stated by the assessee because the trust was having exemption certificate as on 01-10-2010 as per the then amended provisions. Once, the assessee got provisional approval u/s. 80G(5) of the Act, the applicant was required to file application in Form No. 10AB under clause (iii) of 1 st proviso to sub- section (5) of section 80G of the Act within the period at least six months prior to expiry of period of the provisional approval or within six months of commencement of its activities whichever is earlier w.e.f. 01-04-2021, renewal process was introduced so an application in Form 10A was e-filed. The CIT(Exemption) did not review that attachment and instead issuing renewal for five years issued provisional certificate upto assessment year 2024-2025 as if the applicant was a new trust. The applicant’s case was that I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 3 it was not a new trust and therefore it could have filed valid renewal application in Form 10AB before 01-10-2023 (six months prior to 31-03- 2024), the same was e-filed on 03-05-2023 along with copy of exemption certificate u/s. 80G(5) which exited prior to the amendment came in. The CIT(Exemption) noted that the assessee filed Form 10AB u/s. 80G(5) of the Act on 03-05-2023 and the applicant was granted order for provisional approval in Form No. 10AC issued on 24-09-2021 under clause (iv) of first proviso to sub-section (5) of section 50G for the period commencing from 24-09-2021 to assessment year 2024-25. Notice dated 05-10-2023 was issued to the assessee. The applicant filed reply on 16-10-2023. The CIT(Exemption) vide order dated 24-11-2023 rejected the application of the assessee thereby stating that the applicant was required to file application in Form No. 10AB in the present case on or before 30-09-2022. 4. Being aggrieved by the order passed by the CIT(Exemption), the assessee is before us. 5. At the time of hearing, none appeared on behalf of the assessee but the written submission in advance was filed by the assessee applicant/appellant through Authorized Representative. The written submissions/advance submissions read as under:- “It may please be appreciated from the explanation given in subsequent paragraph (B) that the typical and special considerations are attached with the functionality of the appellant trust and they can be implemented under different projects commencing from 01-04-2024 only if the funds are sanctioned by implementing agency in the beginning of a financial year. The essential requirement for any state/district/taluka level institution working for prevention and cure of the HIV/AIDS is to hold inter alia, an exemption certificate u/s. 80G(5). The same is required for holding CSR Registration also. I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 4 (B) Why for this Trust, 80G registration becomes a must? The requirement of having 80G registration is there in general guidelines for NGOs and Trusts working for PLHA (this standard abbreviation often used connotes People Living with HIV AIDS) with a view to ensuring the carry out of activities from self raised funds, so that if some activity is not being undertaken in an yearly funded Projects, the institutions can independently carry out those activities There is specific requirement to have the registration in regularly run VIHAN Project. Please refer to copy submitted herewith. In case sufficient funds are not received by way of Donations/Voluntary Contributions from general public, the Trust has to obtain and keep ready, the CSR registration to avail funds from Public Limited Companies which are required to earmark profit to CSR Fund (Corporate Social Responsibility). As per the Companies Act, 2013 those funds are to be utilised for the society at large and can be paid only to those Trusts/organisations which are holding CSR registration granted by the Ministry Of Corporate Affairs. Attention is invited to enclosed copy of the application Form CSR-1, in which it can be found that the holding of valid exemption registration certificate u/s BOG is a must. The appellant also has obtained CS registration Copy of the same is attached herewith. Further to the above, we reproduce hereunder the initial paragraphs of our reply to the Questionnaire dated 16-10-2023, which are self-explanatory (Copy given on page 15 of Paper Book) “...Before proceeding to answer the Questionnaire we would further like to give back ground information about the assessee because the same is considered very meaningful and considerable favourably in this specific case. The assessee Charitable Trust is distinct from many other trusts and has typical functionality is set up by and functioning for the AIDS positive people only. The positive people have to get registration /membership on the record of the trust The Trustees are also selected from amongst them. Thus the members only can be beneficiaries without any differentiation as to caste creed or religion. No normal person is in any way benefited in each district one such centre is there The implementing and controlling entity for a state has to be again a Charitable Trust like GSNP (Gujarat State Network of People Living with HIV/AIDS in our state having main office in Surat city.. In a way it is extended arm of Government for fulfilling its intent of and attaining the goal of noble cause of prevention and cure of the disease. Periodical programmes are given based on availability of registrations like those under Income Tax Act u/s 12AA and 80G and also other registrations like CSR Over and above some help from the Government the entity has to raise funds and carry out the activity. Thus, denying the registration in the I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 5 present case can cause irreparable loss to a mass of people who are deprived of normal lifestyle by the almighty. Sir, we sincerely bag to draw your attention that this is the case of a Charitable trust run for HIV/AIDS victims only, so please consider the evidences and our submission and pass order on humanity ground also in favour of the assessee As can be verified from the softcopy evidences submitted, the assessee trust is having the registration since long and last such certificate for the period from 01-04- 2009 to 31-03-2012 has also been made perpetually applicable as per provisions contained then in the Act in granting renewal as requested there is no revenue loss to the department and the need for renewal of the exemption certificate for five years has arisen only on account of technical/procedural lapse in first application for which we regret the inconvenience Although, in the supporting evidences the existing registration copy was positively submitted, it happened only for filling in a particular clause in the application form We sincerely pray that Substance should prevail upon the Form meeting with the ends of natural justice.....” In addition to the above facts, further clarification as regards exact working of the trust and its fund requirement is humbly submitted hereunder: First of all it is to be clarified that the activities carried out are broadly divided into two parts (1) Those which are to be carried out in a given period, with a given budgeted fund from Global funds-through-implementing agency (in present case the GSNP+) and (2) Those to be carried out by the Trust from funds raised. It is simple to understand that there is immense scope of activities for PLHA. To try to maximise them, locally, funds have to be raised so that benefit of existence of such entity is spread over more number of victims. As for activity at category (1), the annual Projects are allotted to different Trusts in different areas through implementing agencies. Periodical disbursement of Funds is followed, once the entity signs MOU. Few copies of such MOUs are enclosed herewith for having clearer view of this submission. The example of one such project which is being undertaken every year is VIHAN Project. Under that, the Trust is required to appoint persons as Project Director, Project Co- ordinator, Project Counsellor etc. Other projects are JATAN Project. In that, the patients are paid travel allowance for coming from villages and such places to Civil Hospital for treatment. Another such project which was there in past was "Khel Khel Mein. I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 6 As for activity as per category (2), the Counsellor and other trustees, over and above the work as per Vihan project-attends to PLHA on day to day basis for preparing their claims and forms for Medical expenses reimbursable from Civil Hospitals, arranges meeting at different villages and cities for counselling people as regards prevention and cure of the HIV/AIDS, arranges festival meets and celebration for PLHA. The trustees also look after children who have become orphan due to death of HIV/AIDS affected parents, for their educational support, living etc. The Trustees also spend funds on Ration Kits distributed to poor PLHA. Additionally, it may be mentioned that for office premises of the RDNP+, Hon District Collector, Rajkot manages for office accommodation in Government building, without any requirement to pay rent. (Copy of the recent order attached). (C)Hon. CIT (Exem)'s reason for rejecting the 80G(5) exemption renewal application: “The date of commencement of activities in this case is 03/03/2005. In view of discussion in Para 3 and Para 4 above, the applicant was required to file application in Form 10AB in this case on or before 30/09/2022, which he has failed to submit. Therefore, the present application in Form 10AB u/s. 80G(5) of the Act has not been filed within the time limit prescribed therein and therefore the same is liable to be rejected as such as non maintainable... ....Therefore, the present application in Form 10AB u/s 80G(5) of the Act is rejected as non maintainable and also provisional approval granted in Form 10AC, under clause (iv) of First Proviso to sub-section (3) of section 80G vide URN: AABTR0006JF20218 is hereby cancelled....” (D) Proceedings Highlight for information and due consideration. (D). 1 Form 10A: The same was submitted on 28-08-2021 (D). 2 Other registrations mentioned included 8OG Certificate (before it was made perpetual) for 01-04-2009 TO 31-03-2012. 80G exemption held continuously from 02-03-2007 (D). 3 in Form 10A Code mentioned was 12: sub-clause (A) of Clause (iv) of First Proviso to sub-section (5) of section 80G (D).4 Additionally, the back up of entire account books in Tally software Audited Accounts, Donation and Expenditure figures, Photographs were also submitted I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 7 (D).5 Form 10AB: The same was submitted on 03-05-2023 (E) Appellant's contentions: The legislative intent behind amending the relevant provisions w.e.f. 01-04-2021 are understood to be for providing a sort of filter to the ongoing utilization of such exemption registration, with a view to eliminating those institutions who misused that for direct or indirect pecuniary gain for unwanted use of properties of the trust and on top of that-for carrying out activities which are otherwise categorised as moral turpitude The amendment is made also to reintroduce a system of periodical review of the exemption certificate holders management and activities undertaken at an interval of 5 years. In cases of withdrawal of such registration, the provisions are also introduced for subjecting their accounts and ITR to a detailed scrutiny. In total contrast to that the Appellant is as good as a group of people working for noble cause of prevention and cure of HIV/AIDS and supporting its victims by taking care of their health social placement and acceptability providing support to orphanage caused to children due to loss of parents because of HIV/AIDS, and supporting widows. Such an institution, cannot have any intention to misuse the legislative intent behind the exemption section. It may be noted that provisions such as section 80G are primarily and basically meant to support and promote social wellbeing, feeling of oneness, help poor people in the country. Before rejecting such exemption certificate application of the kind of institution that the appellant is the authorities should have been verified such claim and all surrounding circumstances and the intent behind such provisions should not be overlooked, such exemption provisions are, therefore, liberally and broadly construed by Courts they are not intended to punish bona fide cases by permanently withdrawing such exemption certificate. In the light of the above grievance, following specific grounds are raised: (E).1 The RDNP+ trust was having the exemption certificate from 02.03.2007 Earlier, as per provisions applicable prior to 01-10-2010, renewal of the certificate was obtained at an interval of every three years Last such renewal was for the period from 01-04-2009 to 31.03.2012 After that, because of amendment in the Act, the same was made perpetually valid. However, with a view to complying with subsequently amended provisions applicable from 01-04-2021, an application in the Form 10A was made, attaching therewith the exemption certificates then existing, report of activities, photographs of the activities and last three year's Audited Accounts were also submitted They were adequate enough to establish that activities were commenced way back in March 2005 (ke I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 8 well before the amendment effective from 01.04.2021) Such attachments were compulsory as per the amended stipulations and obviously therefore, they needed to be considered. Despite that as if the Trust were a new applicant a PROVISIONAL registration was granted. That was an unlawful decision As the provisional registration was valid for three years, just to avoid undue litigation and to save its expenses, the appellant did not agitate the matter. (E).2 Considering the above, in making renewal application, obviously NO DELAY can be considered to have taken place on grounds of natural justice. The rejection of renewal application for FIVE years made in Form 10AB for that reason tentamounts to unlawful action followed by another unlawful action because if one considers the back ground facts of the appellant as stated above, the appellant was eligible to have exemption certificate valid for FIVE year tenure right from 01-04-2021. (E).3 The Notice dated 05-10-2023 contained complexity about choosing appropriate part out of options of Part A/ Part B/Part C. (E).4 in the reply to the Questionnaire dated 16-10-2023, an Undertaking was also given by Trustee, confirming that there is no violation of any stipulations to continue to hold the previous 80G exemption certificate, viz. no violation under Section 13(1)(c), further that no infringement of section 2(15) was made, no violation of section 12AB(4) was committed further that no violation of Sections: 11(4),11(4A), 11(5) was committed further that trust has not incurred any religious expenses Hon CIT(Exemptions) has not disputed those facts. yet permanent cancellation has been done, Further the rejection of the application is not made on account of breach of any of such pre-conditions/fundamental clauses stipulated in the sections 80G(5) (i) to 80G(5)(x) The same is therefore bad in law. (E).5 in reply to the Questionnaire other enclosures were (1) Note on Activities done in past years. (2) Audited Income & Expenditure A/cs. (3) Audited Balance Sheets, etc. (E).6 in reply to the Questionnaire, at Part A., Annex 5, error committed as regards mentioning CODE was indicated and confirmed. To substantiate the plea that had the existing exemption certificate been considered, question of rejection would not have arised--we take support from a recently pronounced order passed by Hon ITAT Indore Bench on 18.07.2023. Similar kind of case was there. Please refer to Mr. Vijesh-Samule-Sultanabad- Bhopal vs. ITO Ward 3(1), Bhopal- ITA/No. 64/Ind/2023. In the Appeal filed in Form No 35, the appellant had committed mistake of mentioning wrong section reference. On the date fixed for hearing, none appeared on behalf of the assessee yet the appeal filed has been allowed with following remarks at paragraph 4 on I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 9 page 3 of the order copy attached. "It is pertinent to note that the assessee has raised the grounds before the Ld CIT(A) against the assessment order passed u/s. 144 rws 147 of the Act however, in the Form 35 the assessee has mentioned section under which the order was passed by the ITO as 271(1)(b) of the Act. Thus, it is apparent that there is a mistake in Form 35 if it is considered in light of the grounds of appeal raised by the assessee. Further in the Statement of Facts the assessee has clearly stated his grievance against the assessment order passed by the A.O. Therefore, in the facts and circumstances of the case and in the interest of justice we set aside the impugned order of the Ld. CIT(A)....” In conclusion, it is sincerely prayed to consider the Grounds of Appeal and this Advance submission made and pass an order at the earliest for reinstatement of the exemption from 01-04-2021 and its validity for 5 years, so that necessary application for Projects can be made by 31-03-2024. Enclosures: (1)Hon District Collector's order for Office accommodation (2)Sample MOU/Contract VIHAN PROJECT (3)CSR-1 Form (Application) (4)CSR Registration Certificate (5)Text of Hon ITAT-Indore bench decision. (6)Sample MOU/Contract Khel Khel Mein (7)Sample MOU/Contract -CHETANA (8)Sample MOU/Contract -Drop-in-Centre (9)Sample MOU/Contract -PPTCT (10)Sample MOU/Contract -JATAN (11)Sample-Annual Report of the trust for F.Y. 2022-23 Dated 12-02-2024” 6. The ld. Departmental Representative submitted that the trust never applied for 12AA as envisaged in page 3 of the order of the CIT(Exemption). The ld. Departmental Representative further submitted that since the Form No. 10AB was filed beyond the prescribed period for asking 80G exemption, the CIT(Exemption) has rightly rejected the application of the assessee. 7. We have heard the ld. Departmental Representative and perused all the relevant materials available on record. As regards ld. Departmental I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 10 Representative’s contention that the applicant trust has not been granted registration u/s. 12AA appears not set out in the written submissions filed by the assessee and in fact the statement of facts annexed along with the Form No. 36 only states that the applicant trust is a charitable trust registered u/s. 12AA under the provisions of Income Tax Act, 1961 as they stood before 01-04-2021. But the details of registration u/s. 12AA has not been given. As regards the application u/s. 80G exemption which was supposed to be filed in Form No. 10AB was filed by assessee on 03-05-2023 as the provision certificate u/s. 80G(5) was granted upto assessment year 2024-25. The assessee/applicant trust has filed the renewal application before 01-10- 2023 i.e. six months prior to 31-03-2024. But the CIT(Exemption) states that the assessee was required to file application in Form No. 10AB on or before 30-09-2022 needs to be verified in the context of new provisions envisaged w.e.f. 01-04-2021. In fact, the circular reproduced in the order of the CIT(Exemption) clearly sets out that in case of application under clause 3 of the first proviso to clause 23C of section 10 are under sub-clause 3 of clause AC of sub-section (1) of section 12A of the Act till 30-09-2023 where the due date for making such application has expired prior to such date. But in the present case, the assessee has filed Form No.10A as well as Form 10AB on 03-05-2023 which was totally ignored by the CIT(Exemption). Hence, the CIT(Exemption) is directed to decide the case of the assessee on merit as per Income Tax Statute and not only on the ground of late submission of Form No. 10AB. Needless to say, the assessee be given opportunity of hearing. I.T.A No. 37/Rjt/2024 A.Y. N.A. Page No Rajkot District Network of People Living With HIV Aids vs. ITO 11 8. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 08-05-2024 Sd/- Sd/- (WASEEM AHMED) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 08/05/2024 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot