SEWA BHARTI SAMITI AJMER ,AJMER V. THE CIT EXEMPTION, JAIPUR

ITA 747/JPR/2024

AI Insights

The case involves Sewa Bharti Samiti Ajmer, a charitable society, appealing against the decision of the CIT (Exemptions), Jaipur, which rejected their application for registration under Section 80G of the Income Tax Act, 1961. The rejection was primarily based on the non-registration of the trust under the Rajasthan Public Trust Act, 1959, and the delay in application. The Tribunal found that the CIT (Exemptions) did not adequately consider the materiality of non-compliance concerning the achievement of the trust's objectives and that the rejection was based on an erroneous interpretation of the law and Supreme Court judgments. The Tribunal also noted that the society had been registered under the Rajasthan Public Trust Act post-rejection and had complied with the necessary legal requirements.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35326 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Other Referred Cases: New Noble Education Society, Shree Mahalakshmi Welfare & Charitable Trust v. Commissioner of Income-tax (Exemptions), Bhamashah Sundarlal Daga Charitable Trust vs The Commissioner of Income Tax-Exemption, Jaipur, Shree Navsari Modh Vanik Panch v. Commissioner of Income-tax (Exemptions)
• Laws Referred To: Income Tax Act, 1961, Rajasthan Public Trust Act, 1959
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR
• Assessee Lawyers: VISHAL GUPTA
• Keywords: Set aside; Opportunity of being heard; Charitable institution; Non compliance
• Section: 11; 12A; 13; 12; 10; 10(23C); 80G

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No.747/JPR/2024 Sewa Bharti Samiti Ajmer, Matra Mandir, Diggi Chowk, Ajmer cuke Vs. The CIT Exemption, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATS 3951 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vishal Gupta (C.A.) jktLo dh vksj ls@ Revenue by : Shri Arvind Kumar (CIT-DR) a lquokbZ dh rkjh[k@ Date of Hearing : 16/10/2024 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 07 /01/2025 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal filed by assessee is arising out of the order of the Ld. CIT(E) Jaipur dated 28.03.2024 2. In this appeal, the assessee has raised following grounds: - “1. On the facts and circumstances of the case, the Ld. CIT(Exemption) grossly erred in law and facts by rejecting the application of assessee for registration under Section 80G on the ground of mere non registration of trust under Rajasthan Public Trust act without making any observation on materiality of such non- compliance on achievement of the objects of the trust. Further, such rejection was made on the basis of erroneous interpretation of Hon’ble Supreme Court Judgment in the case of New Noble Education Society. Also, the fact that the application has already been made by the assessee for registration under the said act was completely ignored. It ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 2 is thus hereby prayed for quashing the rejection order so passed and order for grant of registration. 2. On the facts and circumstances of the case, the Ld. CIT(Exemption) grossly erred in law and facts by rejecting the application of assessee for registration under Section 80G on the ground of delay in application ignoring the legal precedents in the matter, extensions of dates allowed and even correct interpretation of law. It is also hereby thus prayed to allow this ground considering same. 3. On the facts and circumstances of the case, the Ld. CIT (Exemption) grossly erred in law and facts by cancelling the provisional registration. Thus, it is hereby prayed to quash the said order. 4. The assessee hereby craves the leave to add, delete, amend or abandon any grounds of this appeal at the time of or before the actual hearing of the case.” 3.1 As regards the appeal of the assessee relating to approval u/s 80G of the Act, it is noted that the ld.CIT(E)has rejected the appeal of the assessee by observing as under:- 04. In view of above discussion assessee's claim of approval u/s80G is liable to be rejected and thus being rejected on following grounds: -  Rajasthan Public Trust Act, 1959  Commencement of activities. 05. Further 2nd proviso to 80G(5) also state that if CIT is not satisfied has to pass order rejecting such application and also cancelling its earlier approval. Thus, it is clarified that applicant provisional approval under clause (iv) of first proviso to sub- section (5) of section 80G of the Income Tax Act, 1961 dated 02.10.2021 is also being cancelled. Further assessee has failed to give proper justification for regularization of provisional approval, thus with this order provisional approval is also lapsed and cancelled.’’ 3.2 During the course of hearing, the ld. AR of the assessee has filed following written submission in support of this appeal relating to Section 80G of the Act. ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 3 ‘’The assessee is a charitable society registered on 30.03.1994 with registrar of Societies, Ajmer under Rajasthan Society Registration Act, 1958 carrying on various charitable activities as per its legislation / regulations. A copy of registration certificate and regulations of society are attached as part of paper book vide Pages 1 and 2-6 respectively. An amendment was also undertaken in regulations of society on 26.02.2024, a copy of which is also attached with paper book vide Pages 7-13. The assessee filed an application in Form 10A seeking provisional approval under Section 80G of the act on 11.10.2021 which was granted vide order dated 18.10.2021 to it for the period 18.10.2021 to Assessment Year 2024-25. A copy of said order is enclosed vide Pages 14- 15 of paper book. Subsequently, the assessee filed an application in Form No. 10AB on 30.09.2023 seeking approval under Section 80G of the act. Certain documents / information were sought from the assessee vide various query letters which were time to time replied upon by the assessee. Finally, an order dated 28.03.2024 was issued upon the assessee rejecting the said application. A copy of said order is enclosed vide Pages 16-32 of paper book. Aggrieved by the said order, the assessee is in appeal before the H’ble ITAT, Jaipur bench. However, subsequent to the rejection, the assessee got further amendments in regulations of society and the amended regulations are attached as pages 33-40 of paper book. The assessee also got registered under Rajasthan Public Trust Act, 1959 (Devsthaan Vhibaag) subsequent to rejection order and a copy of registration certificate is enclosed as part of Paper Book vide Page 41. Now we hereby submit ground wise reply as under: Ground No. 1 On the facts and circumstances of the case, the Ld. CIT (Exemption) grossly erred in law and facts by rejecting the application of assessee for registration under Section 80G on the ground of mere non registration of trust under Rajasthan Public Trust Act without making any observation on materiality of such non compliance on achievement of the objects of the trust. Further, such rejection was made on the basis of erroneous interpretation of Honorable Supreme Court Judgement in the case of New Noble Education Society. Also, the fact that the application has already been made by the assessee for registration under the said act was completely ignored. It is thus hereby prayed for quashing the rejection order so passed and order for grant of registration. ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 4 In support of this ground of appeal, we hereby reproduce the relevant portion of order of Ld. CIT Exemptions which is as under: “221. Sub-clause (ii) of second proviso to sub-section (5) of section 80G of the Income-tax Act sates as follows: - “(a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about – (A) the genuineness of activities of such institution or fund and; (B) the fulfilment of all the conditions laid down in clauses (i) to (v);” From the plain reading of above section, it is evident that the trust or institution willing to get approval under section 80G of the Act has to comply with the conditions laid down in clauses (i) to (v) of section 80G of the Act. Further, Section 80G (5)(i) of the Act states as under: “(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10.” From the above, it is clear that any institution willing to get approved under section 80G, in addition to the conditions specified in clauses (i) to (v) of section 80G of the Act, should also comply with the conditions laid down in section 11 and 12 of the Income Tax Act, 1961. Here, it is imperative to produce Section 12AB(1)(b)(i) of the Income Tax Act: “(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about – (A) The genuineness of activities of the trust or institution; and; (B) The 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;” From the combined reading of above sections, it is conspicuous that the condition mentioned in 12AB(1)(b)(i)(B) of the Act is also applicable to the entities claiming approval u/s 80G since sub-clause (ii) of second proviso to sub-section (5) of section 80G imbibes in itself the compliance of any other ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 5 law that are in force at the time of registration, apart from genuineness of activities.” Firstly, the ld. CIT Exemption grossly erred in law by assuming that for granting approval under Section 80G(5), conditions mentioned in Section 11 & 12 of the act are again to be testified by him. We draw the attention of the Ld. Members towards clause (i) of Section 80G(5) marked bold above by us which has been relied upon by the Ld. CIT Exemption for rejecting the application of assessee while passing the order. It can be clearly seen that the only requirement in law in Section 80G(5) is that the income of the assessee must be exempted U/s 11 and 12. In the case of the assesse, we have enclosed as Page 42-44 of the paper book, a copy of permanent registration under Section 12A which entitles assessee to exemption of its income. Whether or not the conditions of Section 11 & 12 are complied with is matter of discussion in either assessment proceedings or in the proceedings for granting registration under Section 12AB, but not here. Hence, it is hereby prayed to hold the action of Ld. CIT Exemption as illegal. Without prejudice to above, we hereby draw attention of the H’ble bench to Section 12AB(1)(b)(i)(B) quoted by Ld. CIT Exemption, Jaipur in his order and in which it has been clearly mentioned that the application for approval of the assessee can be rejected on the ground of non compliance with other laws only when the assessee has not complied with any “such” requirement of any other law for the time being in force “AS ARE MATERIAL FOR THE PURPOSE OF ACHIEVING ITS OBJECTS”. In the present case, the Ld. CIT (Exemption) rejected the application of assessee for approval under Section 80G on the ground of non compliance of condition mentioned in Section 11 & 12, namely, non registration of assessee under Rajasthan Public Trust act, 1959 without making any observation on materiality of such non compliance on achievement of the objects of the trust which was the mandate of law. The word “such” marked bold clearly shows that the rejection cannot be done for non compliance with any provisions of other law but only for that provision which is material for the purpose of achieving its objectives. The non registration in RPT act law may attract penal action in that law but can in no way obstruct the assessee trust for achieving its objects. It is imperative to note that all the decisions quoted by Ld. CIT Exemptions in its order are expressing their view on mandatory requirement of obtaining registration under Public Trust Act only and not more than that. The assessee agree with the fact that registration is mandatory but assessee do not agree with the extra interpretation extracted by Ld. CIT Exemption from those decisions that if registration is not so done, it will make the assessee liable for rejection of its application for permanent approval. ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 6 Without prejudice to same, we further submit that such rejection was made on the basis of erroneous interpretation of Honorable Supreme Court Judgement in the case of New Noble Education Society, Civil Appeal No. 3795 of 2014. In Para 76 (g)of the said judgement which is operational part of the said judgement where observations of the court are expressly summarized, it has been mentioned as follows: “g. It is held that wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under Section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the trust, society etc. This reasoning is reinforced by the recent insertion of another proviso of Section 10(23C) with effect from 01.04.2021.” Thus, it can be clearly seen that there was no mandate observed by the H’ble court but the language used was ‘should’ and that too with the intent of facilitating the approving authority about the inquiry for genuineness of the trust. Also, the judgement does not apply to the case of the assessee even if the interpretation of the department is adopted as the amended law itself has provided that the compliance with other laws has to be read in conjunction with materiality of same with respect to achievement of objects. Further, this decision as well as all other decisions quoted by the Ld. authority belongs to period when the relevant section has not come into existence even in The Income Tax Act, 1961. In addition to this, it is pertinent to note that on Page 5 of order of the Ld. CIT(Exemption), it has been mentioned as under: It is pertinent in respect of recent Supreme Court decision, the H’ble Apex Court has clarified that it is applicable for approval U/s 10(23C) and also for registration under Section 12AB of te act. It is hereby submitted that no such clarification has been made by the H’ble Apex court as such in its order as observed by us. Thus, it is hereby prayed to quash the rejection order passed by the Ld. CIT(Exemption). Without prejudice to above submissions, the asseessee hereby pray that vide its letter dated 21.03.2024, the assessee submitted an acknowledgement of application for registration under Rajasthan Public Trust Act to the Ld. CIT Exemption. Further, the assesse is now duly registered under Rajasthan ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 7 Public Trust Act and a copy of registration certificate is enclosed with paper book submitted by the assessee. A copy of submission of assessee date 21.03.2024 is enclosed with paper book vide pages 45-47 for the perusal of the h’ble bench. Ground No. 2 On the facts and circumstances of the case, The Ld. CIT(Exemption) grossly erred in law and facts by rejecting the application of the assessee for registration under Section 80G on the ground of delay in application ignoring the legal precedents in the matter, extensions of the dates allowed and even correct interpretation of law. It is also thus hereby thus prayed to allow this ground considering same. We hereby draw the attention of the H’ble members to Para 3(ii) of Circular 07/2024 dated 25.04.2024 of CBDT which is enclosed with paper book vide pages 48-49 where the date for application has already been extended to 30.06.2024. Thus, it is hereby prayed to condone the delay in view of same. Further, it has been held in the case of Shree Mahalakshmi Welfare & Charitable Trust v. Commissioner of Income-tax (Exemptions) - [2024] 162 taxmann.com 841 (Surat-Trib.) that the said aforesaid circular is also applicable to old delayed applications which have been rejected and pending in appeals. The said order is enclosed as Pages 50-54 of paper book. Without prejudice to above, we further submit as under: Firstly, we reproduce relevant portion of Section 80G as under: “Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,— (i) where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020], within three months from the 1st day of April, 2021; (ii) where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period; (iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier; (emphasis supplied) ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 8 [(iv) in any other case, where activities of the institution or fund have–– (A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought; (B) commenced and where no income or part thereof of the said institution or fund has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 or section 11 or section 12 for any previous year ending on or before the date of such application, at any time after the commencement of such activities:] In the case of the assessee, it was registered on 30.03.1994 and was carrying its charitable activities since 05.11.2020, that is, much before getting the provisional approval which is an admitted fact even in assessment order (Page 12 of order, Second Para). The assessee filed an application in Form 10A seeking provisional approval under Section 80G of the act on 11.10.2021 which was granted vide order dated 18.10.2021 to it for the period 18.10.2021 to AY 2024-25. The assessee subsequently made an application under Form 10AB on 30.09.2023. This is to note that assessee never applied for Section 80G approval prior to new regime. In this case, the Ld. Commissioner of Income Tax(Exemption) has rejected the application of the assessee for approval u/s 80G of the Act on ground that the application has been filed beyond six months of commencement of activities and hence held it as time barred. Thus, as the society was already functional even before the new regime came into existence, the only time period which was applicable to assessee was “at least six months prior to expiry of the period of the provisional approval” and not the 6 months period. This has been categorically held in following judgement while making detailed interpretation of provisions of law on subject matter . A copy of same is also enclosed with paper Book vide Pages 55-63. a. Bhamashah Sundarlal Daga Charitable Trust vs The Commissioner of Income Tax-Exemption, Jaipur, ITA No.278/JODH/2023 Similar finds were also given in following judgement: b. Shree Navsari Modh Vanik Panch v. Commissioner of Income-tax (Exemptions) - [2024] 159 taxmann.com 1249 (Surat-Trib.) In light of these submissions, we hereby pray the Ld. authority to allow this ground of appeal of the assessee. ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 9 Ground No. 3 On the facts and circumstances of the case, the Ld. CIT(Exemption) grossly erred in law and facts by cancelling the provisional approval of the assessee on the basis of erroneous interpretation of law and further by reckoning it as a lapsed one. Hence, it is hereby prayed to quash the order so passed and restore the said approval. Ground No. 4 On the facts and circumstances of the case the Ld. CIT(Exemption) grossly erred in law and facts by cancelling the provisional registration. Thus, it is hereby prayed to quash the said order. We hereby take both these grounds together for submissions. Our first contention is that since the order of rejection of application for permanent approval is invalid for reasons mentioned in preceding grounds of appeals raised by us, it is hereby thus prayed to hold the cancellation of provisional approval also as invalid. Secondly, we hereby reproduce the relevant portion i.e Para 5 of the order of Ld. CIT Exemption hereunder: “05. Further 2nd proviso to 80G(5) also state that if CIT is not satisfied has to pass order rejecting such application and also cancelling its earlier approval. Thus, it is clarified that applicant’s provisional approval under clause (iv) of first proviso to Sub Section (5) of Section 80G of the Income Tax Act, 1961 dated 02.10.2021 is also being cancelled. Further assessee has failed to give proper justification for regularization of provisional registration, thus with this order provisional approval is also lapsed and cancelled.” We hereby humbly submit that automatic lapse of provisional approval with cancellation of application of permanent approval is not the intention of law. For same, we hereby reproduce relevant portion of Section 80G hereunder and mark the important portions as bold Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,— (i) where the application is made under clause (i) of the said proviso, pass an order in writing granting it approval for a period of five years; ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 10 (ii) where the application is made under clause (ii) or clause (iii) 20b[or sub-clause (B) of clause (iv)] of the said proviso,— (a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of such institution or fund; and (B) the fulfilment of all the conditions laid down in clauses (i) to (v); (b) after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub-clause (a),— (A) pass an order in writing granting it approval for a period of five years; or 20c [(B) if he is not so satisfied, pass an order in writing,- (I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and cancelling its approval; or (II) in a case referred to in sub-clause (B) of clause (iv) of the first proviso, rejecting such application, after affording it a reasonable opportunity of being heard;] 20d [(iii) where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application is made under clause (iv) of the said proviso as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the approval is sought,] ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 11 and send a copy of such order to the institution or fund: Thus, it can be clearly seen that “approved” and “provisionally approved” words are used in different sense in law. Thus, when it has been mentioned in second proviso to Section 80G(5) “and also cancelling its earlier approval” would only and only mean its permanent approval, if any, existing on date of impugned order and not provisional approval. It is hereby thus prayed to allow this ground of appeal of the assessee. Ground No. 5 The assessee hereby craves the leave to add, delete, amend or abandon any ground of this appeal at the time of or before the actual hearing of the case. This ground of appeal does not require any submission. With the above submissions, we hereby pray the Ld. Bench to allow the appeal of the assessee.” To support of its contention, the ld.AR of the assesee has filed following index of paper book S. No. Brief Description of document Page No. Filed / Available before Ld. CIT Exemption, Jaipur 1. Copy of Registration certificate of the Society 1 Yes 2. Copy of manual / regulations of society 2-6 Yes 3. Amended Regulations of society dated 26.02.2024 7-13 Yes 4. Copy of Form 10AC (Provisional Approval) dated 18.10.2021 14-15 Yes 5. Copy of rejection order dated 28.03.2024 16-32 Yes ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 12 6. Amended Regulations of society dated 13.07.2024 33-40 No 7. Copy of registration certificate with Devsthaan Vibhaag (Rajasthan Public Trust Act, 1959) 41 No 8. Copy of permanent registration U/s 12AB 42-44 Yes 9. Submissions made by assessee dated 21.03.2024 45-47 Yes 10. Copy of CBDT circular dated 25.04.2024, No. 07/2024 48-49 Yes 11. Copy of decision in the case of Shree Mahalakshmi Welfare & charitable Trust 50-54 - 12. Decision in the case of Bhamashah Sunderlal Daga Charitable Trust 55-63 - 3.3 On the other hand, the ld. DR supported the order of the ld CIT(E) 3.4 After hearing both the parties and considering the material available on record as to the approval u/s 80G of the Act, the Bench noted that since it is consequential to registration of the Trust u/s 12A of the Act which we have already seen in the paper book page 42, therefore, , the ld. CIT(E) is directed to consider approval u/s 80G in accordance with Income Tax Act, 1961 in set aside proceedings. It may be noted that the ld.AR of the assesee ITA No. 747/JPR/2024 Sewa Bharti Samiti Ajmer 13 has filed the copy of Registration Certificate issued on 06-06-2024 by Devsthan Vibhah, Ajmer under Rajasthan Public Trust Act, 1959. 5.1 Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. CIT(E) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the ld. CIT(E) independently in accordance with law. 6.0 In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 07 /01/2025. Sd/- Sd/- ¼jkBkSM +deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 07/01/2025 *Ganesh Kumar, Sr. PS * vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Sewa Bharti Samiti Ajmer Ltd. Shrimadhopur. 2. izR;FkhZ@ The Respondent- CIT Exemption, Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 747/JPR/2024} vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar "