Sabka Development Associated, New Delhi V. CIT(Exemption), Chandigarh

ITA 7304/DEL/2018

AI Insights

The case involves Sabka Development Associated, a not-for-profit company, which appealed against the decisions of the CIT(Exemption), Chandigarh, denying them exemptions under sections 80G and 12AA of the Income Tax Act, 1961. The CIT(Exemption) had rejected the applications primarily on the grounds that the company's activities were limited to a few villages and did not meet the broader public benefit criteria. The Tribunal found that the CIT(Exemption) had not adequately considered the submissions and activities of the assessee, nor had it provided a proper opportunity for the assessee to be heard, which are essential under the principles of natural justice.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131862 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-02-2023
• Assessment Year: misc
• Appeal Filed On: 18-11-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice
• Section: 80G; 12A; 12AA

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘G’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 7304/Del/2018 ITA No. 7305/Del/2018 Sabka Development Associated, C/o. Jindal & Co., 3803, David Street, Daryaganj, New Delhi-110002 Vs. CIT(Exemption), Chandigarh (APPELLANT) (RESPONDENT) PAN No. AAYCS8604B Assessee by : Sh. Ramesh Goyal, CA Revenue by : Sh. H. K. Choudhary, CIT-DR Date of Hearing: 21.02.2023 Date of Pronouncement: 28.02.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals have been filed by the assessee against the orders passed by the CIT(E), Chandigarh dated 31.08.2018. 2. In ITA No. 7304/Del/2018, the assessee has raised the following grounds of appeal: “(i) On facts and in law, the learned CIT (E) was wholly unjustified in refusing to grant exemption certificate of exemption u/s 80G of the I.T. Act. (ii) On facts and in law the learned CIT (E) has passed the order refusing to grant exemption without properly appreciating the facts of the case and providing proper opportunity of being heard. (iii) That the learned CIT(E) has failed to pass a speaking order. ITA No. 7304 & 7305/Del/2018 Sabka Development Associated 2 (iv) That the learned CIT (E) has failed to appreciate various submissions made before him and therefore the order is bad in law. (v) That the learned CIT (E) has failed to appreciate the fact that the objects of the association were clearly charitable within the meaning of section 2(15), the company having been formed for pursuing charitable objects. (vi) That the learned CIT (E) has failed to appreciate the replies filed giving full details for the queries raised by him. CIT (E) has not issued any show cause notice nor intimated the reason to the appellant for rejecting application u/s 80G exemption which is in violation of principles of natural justice; the order is bad in law and is liable to be quashed. (vii) That the learned CIT (E) has failed to appreciate the fact that in view of the CSR regulation of the Companies Act 2013 the company can establish their own CSR Company and CSR activities have to be carried through these companies hence any linkage is not detrimental to the benefit of the general public. (viii) That the learned CIT (E) has failed to appreciate the fact that the activities of the company are not restricted but in line with the object of the company and covered under the charitable purpose as defined u/s 2(15) of the Income Tax Act. (ix) That the learned CIT (E) has failed to appreciate the fact the objects of the company are fully charitable covered u/s 2(15) of the income tax Act. The object of the company such as development of rural villages, provision of good education and healthcare and access to clean water and sanitation are limbs directly covered in the definition of charitable purpose. (x) That the learned CIT (E) has grossly erred in denying the benefit of exemption to the assessee treating its activities as non charitable. The objects of the company Le; to engage in the smart village development, providing villages with access to sustainable energy services, providing villages with good education and healthcare, access to clean water, sanitation and nutrition are charitable activities under Income tax Act. ITA No. 7304 & 7305/Del/2018 Sabka Development Associated 3 (xi) That the learned CIT (E) has grossly erred in not raising any issues to the assessee or giving opportunity to the assessee to reply to his objections and the basis of his objection were never raised to the assessee on which basis he has rejected exemption u/s 80G. On facts and in law and in the circumstances of the appellants case the learned commissioner Exemption erred both in facts and in law in denying exemption u/s 80G of the income tax act 1961 without issuing proper reasons to appellant to respond, and also without affording the appellant an opportunity of being heard on those reasons, which is violative of principle of natural justice, the order is bad in law and liable to be quashed. (xii) That the learned CIT (E) was wholly unjustified in refusing to grant exemption u/s 80G despite various supporting facts were duly brought to his notice, wherein the charitable activity has been carried on by the assessee.” 3. In ITA No. 7305/Del/2018, the assessee has raised the following grounds of appeal: “(i) On facts and in law, the learned CIT (E) was wholly unjustified in refusing to grant exemption certificate of exemption u/s 12AA of the I.T. Act. (ii) On facts and in law the learned CIT (E) has passed the order refusing to grant exemption without properly appreciating the facts of the case and providing proper opportunity of being heard. (iii) That the learned CIT(E) has failed to pass a speaking order. (iv) That the learned CIT (E) has failed to appreciate various submissions made before him and therefore the order is bad in law. (v) That the learned CIT (E) has failed to appreciate the fact that the objects of the association were clearly charitable within the meaning of section 2(15), the company having been formed for pursuing charitable objects. (vi) That the learned CIT (E) has failed to appreciate the replies filed giving full details for the queries raised by ITA No. 7304 & 7305/Del/2018 Sabka Development Associated 4 him. CIT (E) has not issued any show cause notice nor intimated the reason to the appellant for rejecting application u/s 12A exemption which is in violation of principles of natural justice; the order is bad in law and is liable to be quashed. (vii) That the learned CIT (E) has failed to appreciate the fact that in view of the CSR regulation of the Companies Act 2013 the company can establish their own CSR Company and CSR activities have to be carried through these companies hence any linkage is not detrimental to the benefit of the general public. (viii) That the learned CIT (E) has failed to appreciate the fact that the activities of the company are not restricted but in line with the object of the company and covered under the charitable purpose as defined u/s 2(15) of the Income Tax Act. (ix) That the learned CIT (E) has failed to appreciate the fact the objects of the company are fully charitable covered u/s 2(15) of the income tax Act. The object of the company such as development of rural villages, provision of good education and healthcare and access to clean water and sanitation are limbs directly covered in the definition of charitable purpose. (x) That the learned CIT (E) has grossly erred in denying the benefit of exemption to the assessee treating its activities as non charitable. The objects of the company Le; to engage in the smart village development, providing villages with access to sustainable energy services, providing villages with good education and healthcare, access to clean water, sanitation and nutrition are charitable activities under Income tax Act. (xi) That the learned CIT (E) has grossly erred in not raising any issues to the assessee or giving opportunity to the assessee to reply to his objections and the basis of his objection were never raised to the assessee on which basis he has rejected exemption u/s 12A. On facts and in law and in the circumstances of the appellants case the learned commissioner Exemption erred both in facts and in law in denying exemption u/s 12AA of the income tax act 1961 without issuing proper reasons to appellant to respond, and also without affording the appellant an opportunity of being heard on those reasons, which is violative of principle of natural justice, the order is bad in law and liable to be quashed. ITA No. 7304 & 7305/Del/2018 Sabka Development Associated 5 (xii) That the learned CIT (E) was wholly unjustified in refusing to grant exemption u/s 12A despite various supporting facts were duly brought to his notice, wherein the charitable activity has been carried on by the assessee.” 4. The assessee company was incorporated on 16.01.2017 vide CIN No. U85320HR2017NPL067092. The company's registered office is situated at 1038/1039, sector 14, Hissar, Haryana. The company has been incorporated has not for profit company u/s 8 of the Companies Act, 2013 and has started its activities mainly with the following objects. 5. The primary objects of the company are smart village development, providing villages with access to sustainable energy services, providing villages with good education and health care, access to clean water, sanitation and nutrition, the growth of productive enterprises to boost income and enhance security, gender equality, democratic engagement and providing villages with smart energy and climate change measures. 6. It has been mentioned in the object clause of the company that none of the objects of the company will be carried out on commercial basis. All the activities of the company are purely for the welfare of the villages and their people without any discrimination of creed or religion. 7. The assessee company applied before the ld. CIT(E), Chandigarh for the registration of company u/s 12AA of the Income Tax Act, 1961 and u/s 80G(5)(vi) of the Income Tax Act, both were rejected by the ld. CIT(E) on the grounds that the area of operation of the applicant has been restricted to only a few villages adopted by the head of the group in his role ITA No. 7304 & 7305/Del/2018 Sabka Development Associated 6 as public representative. We hold that this cannot be a correct reason to reject the registration. We also find that the assessee has been sanctioned registration u/s 12A(1)(ac)(i) of the Income Tax Act from A.Y. 2022-23. Hence, we deem it proper to remand the matter to the file of the ld. CIT(E) to examine the objects afresh and pass a speaking order after affording an opportunity to the assessee. ITA No. 7304/Del/2018 8. The main reason for rejection of registration u/s 80G was that the trust/society is not registered u/s 12AA of The Act. Keeping in view the directions above, the ld. CIT(E) shall consider registration u/s 80G de novo. 9. In the result, the appeals of the assessee are allowed for statistical purpose. Order Pronounced in the Open Court on 28/02/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 28/02/2023 *Subodh Kumar/AK, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR