Permanent Registration of the Trust: There is no error in claiming exemption under ss. 11 and 12 of the Act when the trust was armed with provisional registration – Nagpur ITAT
There are various cases wherein the application done by the charitable trust for final registration has been denied by the CIT (E) by pointing out that
1. The trust has filed the ITR in form No. 7 for earlier years.
2.The trust has claimed exemption under ss. 11 and 12 of the Act even without any permanent registration even though the trust was armed with provisional registration.
3. Application under Section 12A(1)(ac)(vi)-Item ‘B of the IT Act, 1961 can be done only if trust has not claimed any deduction under section 11/12 in earlier years.
With above observation, the application of trust for final registration is rejected in most of the cases.
The fact that the trust has a provisional registration is often ignored during the entire proceeding. Rather, in some cases, the CIT (E) often orders for cancellation of the provisional registration.
Here in one of the case before Nagpur ITAT wherein the CIT (E) has rejected the application by making following observation:
“Considering the above, and since the assessee’s activities were already commenced at the time of filing the present application and it has claimed deduction under s. 11 for previous year before the date of the present application, the assessee trust is found not eligible to file application under s. 12A(1)(ac)(vi)-Item ‘B’ of the IT Act, 1961. Therefore, the application filed by the rejected.”
However, Nagpur ITAT very reasonably and categorically reviewed the entire submission of the Appellant and has held as under:
“We have given a dispassionate hearing to the averments before us. It is crystal clear that nowhere the genuineness of objects, activities or non-compliance of any law, material to objects achievement of objects has been painted out by the learned CIT (Exemption). The grounds for rejection are ring fenced and the learned CIT (Exemption) does not have any authority to overstep the same. There is no error in claiming exemption under ss. 11 and 12 of the Act when the trust was armed with provisional registration. Moreover, taxability or otherwise of the income of the assessee would have to be separately considered as per provision of the Act. Quoting a wrong provision if at all so, cannot be held to be fatal to militate against the well-deserved beneficial provision to be extended. Thus, the assessee is entitled to final registration. Accordingly, we set aside the impugned order passed by the learned CIT(Exemption) and direct the authorities below to grant registration keeping in mind the aforesaid findings. Accordingly, all the grounds raised by the assessee are allowed”.
In short, Hon’ble Nagpur ITAT has ruled as under:
1. There is no error in claiming exemption under ss. 11 and 12 of the Act when the trust was armed with provisional registration. Moreover, taxability or otherwise of the income of the assessee would have to be separately considered as per provision of the Act.
2. Registration under s. 12AB could not be denied to the assessee on the ground that it has already claimed exemption under s. 11 for the previous year when it was enjoying provisional registration.
3. Quoting a wrong provision if at all so, cannot be held to be fatal to militate against the well-deserved beneficial provision to be extended. Thus, assessee is entitled to final registration.
The copy of the complete order is reproduced hereunder:
ITAT, NAGPUR BENCH
Member(s) : V. Durgarao, J.M. & K.M. Roy, A.M.
ITA Nos. 267 & 563/Nag/2024
Date of Decision 27th January, 2025
Source (2025) 39 NYPTTJ 675 (Nag)
Statutes referred to :
Income-tax Act, 1961, s. 12AB
Case decided in favour of :
In favour of : Assessee
Sapan Usrethe, for the Assessee : Sandipkumar Salunke, for the Revenue
ORDER
K.M. Roy, A.M. :
The appeal by the assessee is emanating from the impugned order dt. 13th March, 2025, passed by the learned CIT(Exemption), Pune, [“learned CIT(Exemption)”].
ITA No. 267/Nag/2024
Assessee’s Appeal
2. In its appeal, the assessee has raised following grounds :
“1. On the facts and circumstances of the case the learned CIT(Exemption) was not justified in rejecting the application in Form 10AB for grant of registration under s. 12AB of the Act without properly appreciating the facts of the case.
2. On the facts and circumstances of the case the learned CIT(Exemption) was not justified in rejecting the application in Form 10AB for grant of registration under s. 12AB of the Act and also cancelling the provisional registration dt. 31st Dec., 2021 without appreciating that appellant was prevented with reasonable cause in not filing the reply on 10th March, 2023 as the mother of the secretary who is dealing in the income-tax matters was severely ill and had to undergo treatment due to which her health condition deteriorated over a period of time and the Secretary was not in a position to do the routine office work including correspondence with regulators and hence reply could not be filed, but on earlier occasions complete reply along with documents were duly filed and as rejection was done without giving proper opportunity of hearing is not justified.
3. On the facts and in the circumstances of the case, the order of the learned CIT(Exemption) in rejecting the registration under s. 12AB of the IT Act, 1961 on the ground that the genuineness of activities could not be ascertained, whereas the detailed activity report which totally synchronizes with the activities reflected in the Audited Statements of accounts was duly submitted and still showing in attachments in e-portal. Thus, the reason for rejection is without properly understanding the facts of the case and the documents submitted.
4.On the facts and in the circumstances of the case, the order of the learned CIT(Exemption) was not justified in rejecting the registration under s. 12AB of the IT Act, 1961 by wrongly observing that he was not being able to draw satisfactory conclusion about the compliance of requirements of any other laws, whereas the copy of the annual FCRA returns filed, the undertaking about the compliance of all applicable laws that are material for achieving its objectives were submitted and the same is still seen on the IT portal. Thus, the second reason for rejection is also without any basis and without appreciating the charitable activities of the applicant.
5. On the facts and in the circumstances of the case, the order of the learned CIT(Exemption) rejecting the registration under s. 12AB of the IT Act, 1961, dt. 13th March, 2023 is unjustified and against the principles of natural justice as it was passed without giving proper opportunity.
6. The appellant craves for leave to amend, add to or omit any ground upto the time of hearing of the appeal.”
3. During the course of hearing, at the very onset, the learned Authorised Representative appearing for the assessee fairly submitted that in view of common grievance against non-granting of registration under s. 12AB of the Act in both the appeals, he does not want to persecute the appeal being ITA No. 267/Nag/2024. Accordingly, the same is dismissed as infructuous.
4. In the result, appeal being ITA No. 267/Nag/2024, is dismissed.
ITA No. 563/Nag/2024
Assessee’s appeal
5. The grounds raised by the assessee are as under :
“On the facts and circumstances of the case the learned CIT (Exemption) was not justified in rejecting the application in Form 10AB for grant of registration under s. 12AB of the Act without properly appreciating the facts of the case.
2. On the facts and circumstances of the case the learned CIT(Exemption) was not justified in rejecting the application in Form 10AB for grant of registration under s. 12AB of the Act by wrongly observing that activities were already commenced at the time of filing the present application and it has claimed deduction under s. 11 for previous year before the date of the present application, and therefore assessee trust is found not eligible to file application under s. 12A(1)(ac)(vi) of the IT Act, 1961.
3. On the facts and circumstances of the case the learned CIT(Exemption) was not justified in rejecting the application in Form 10AB for grant of registration under s. 12AB of the Act without appreciating the facts that during the asst. yr. 2022-23 appellant is having valid registration and therefore, exemption was claimed which is as per law.
4. On the facts and in the circumstances of the case, the order of the learned CIT (Exemption) rejecting the registration under s. 12AB of the IT Act, 1961, dt. 29th Aug., 2024 is unjustified and against the principles of natural justice as it was passed without assigning any good reasons and when appellant have filed all the details and no error was found, the rejection is bad in law and is against the spirit of s. 12 of the IT Act.
5. The appellant craves for leave to amend, add to or omit any ground upto the time of hearing of the appeal.”
6. The learned Authorised Representative further invited the attention of the Bench to the impugned order dt. 29th Aug., 2024, passed by the learned CIT (Exemption), Pune, denying registration under s. 12AB of the Act. The operating portion of the impugned order from paras 3 to 6, are reproduced below :
“3. On verification of the details submitted by the assessee in response to the said notice and the documents submitted along with the application, various discrepancies were noticed. Another notice was then issued to the assessee on 18th July, 2024 and the discrepancies were duly communicated to it as reproduced below:
“(i) It is seen from the financial statements that you have received donations from Abroad. Kindly submit the details along with specific instructions received from donor, if any.
(ii) Furnish copies of bill/invoices of expenses done on activities as shown in your financial statement.
(iii) Without prejudice to the above, it is seen that at point 2(ii) of notice dt. 30th April, 2024, you have been stated that the trust has not claimed exemption under s. 11 of the Act. However, as per financial statements and ITRs filed by you, it is seen that the trust has claimed deduction under s. 11. Therefore, said provisions of s. 12A(1)(ac)(vi)(B) of the Act are not applicable to your case. As such, your present application is liable to be rejected. Please clarify with supporting documents.”
3.1 The assessee was requested to show-cause as to why the application should not be rejected and why the registration granted under s. 12AB of the IT Act, 1961 should not be cancelled. The assessee was also given opportunity of being heard vide the said notice. The assessee was specifically informed that in the event of failure to comply by the due date, the application shall be liable to be rejected and the registration shall also be liable to be cancelled. The compliance to the said notice was due on 25th July, 2024. The notice was duly served on the assessee through e-portal and email. However, the assessee neither submitted explanation to the show cause notice till date nor availed the opportunity of being heard.
4.The assessee responded to the said notice and furnished the compliance on 24th July, 2024. The assessee has furnished so many bills wherein most of the bills were related to administrative and establishment expenses i.e., petrol, stationery, repairs and maintenance, etc., some of bills are for foods like chicken biryani, mutton curry, boiler chicken, etc. These bills are not related to the charitable activities.
5. Further, regarding the point No. (iii) of the show-cause notice, the assessee has contended that it has claimed deduction under ss. 11 and 12 for asst. yr. 2022-23. The part of the submission reproduced as under:
“Your Goodself may kindly note that the applicant trust has filed ITR-5 for the asst. yrs. 2021-22 and 2023-24 and has not claimed any benefit under s. 11 of the Act.
During the asst. yr. 2022-23, the applicant trust was having Provisional Registration of s. 12A and thus has filed its return in ITR-7.
Your Goodself if may kindly note that the previous application was rejected by the CIT (Exemptions), Pune only due to the reason that the applicant could not furnish the documents/submissions in time.”
5.1 The contention of the assessee is considered. However, the same is not found to be acceptable. The assessee has itself confirmed that the assessee has claimed deduction under ss. 11 and 12 for asst. yr. 2022-23 and also accepted that the assessee has failed compliance to its earlier application too and its earlier application was rejected due to non-compliance.
6. The assessee has filed the present application under s. 12A(1)(ac)(vi)-Item ‘B’ of the IT Act, 1961. The extract of the said provision is reproduced herewith for ready reference :
“12A(1)(ac)(vi) in any other case, where activities of the trust or institution have—
(A) ……
(B) commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-cl. (iv) or sub-cl. (v) or sub-cl. (vi) or sub-cl. (via) of cl. (23C) of s. 10, or s. 11 or s. 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities,”
6.1 It can be thus seen that the provisions of said section apply to a case where activities of the trust or institution have ‘commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-cl. (iv) or sub-cl. (v) or sub-cl. (vi) or sub-cl. (via) of cl. (23C) of s. 10, or s. 11 or s. 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 light of said provision, the submission of the assessee trust has been verified. It is seen that the assessee trust has uploaded copies ITR for the financial years 2021-22, 2022-23 and 2023-24. As noticed from the ITR for said period, the assessee has claimed deduction under s. 11 for asst. yr. 2022-23 as under:
| FY 2022-23 | |
| (i) Amount applied to charitable purposes under s. 11 lakhs | Rs. 20.05 |
| (ii) Amount accumulated under s. 11(1)(a)/11(1)(b) lakhs to the extent 15 % | Rs. 3.19 |
As stated by the assessee, its activities were commenced in 3rd Nov., 2003. Thus, the assessee’s income pertaining to previous year i.e., asst. yr. 2022-23, to the extent discussed above, has been excluded from the total income on account of applicability of s. 11 which occurred after the commencement of such activities.
6. Considering the above, and since the assessee’s activities were already commenced at the time of filing the present application and it has claimed deduction under s. 11 for previous year before the date of the present application, the assessee trust is found not eligible to file application under s. 12A(1)(ac)(vi)-Item ‘B’ of the IT Act, 1961. Therefore, the application filed by the rejected.”
7. He vehemently submitted that the order is unsustainable and has relied on following documents and evidences in support of his contention.
| Sr. No. | Particulars | Page No. |
| 1. | Copy of Form No. 10AB filed on 20/02/2024 | 1-8 |
| 2. | Copy of notice issued on 30/04/2024 | 9-12 |
| 3. | Copy of e-acknowledgment along with copy of reply filed on 15/05/2024 | 13-18 |
| 4. | Copy of notice dt. 18/07/2024 | 19-20 |
| 5. | Copy of e-acknowledgment and reply dt. 24/07/2024 | 21-25 |
| 6. | Copy of ITR Ack for asst. yrs. 2021-22, 2022-23 and 2023-24 | 26-28 |
| 7. | Copy of provisional 12A Certificate | 29-31 |
8. He pointed out that provisional registration was granted on 31st Dec., 2021, from asst. yrs. 2022-23 to 2024-25 and there was no apparent error in claiming exemption under ss. 11 and 12 of the Act. Provisional registration was granted under s. 12A(1)(ac)(vi) of the Act. He thus prayed that final registration may be granted.
9. On the other hand, the learned Departmental Representative strenuously pointed out that application was made erroneously under a non-applicable provision which is an incurable defect. Hence denial of registration is justified.
10. We have given a dispassionate hearing to the averments before us. It is crystal clear that nowhere the genuineness of objects, activities or non-compliance of any law, material to objects achievement of objects has been painted out by the learned CIT(Exemption). The grounds for rejection are ring fenced and the learned CIT(Exemption) does not have any authority to overstep the same. There is no error in claiming exemption under ss. 11 and 12 of the Act when the trust was armed with provisional registration. Moreover, taxability or otherwise of the income of the assessee would have to be separately considered as per provision of the Act. Quoting a wrong provision if at all so, cannot be held to be fatal to militate against the well-deserved beneficial provision to be extended. Thus, the assessee is entitled to final registration. Accordingly, we set aside the impugned order passed by the learned CIT(Exemption) and direct the authorities below to grant registration keeping in mind the aforesaid findings. Accordingly, all the grounds raised by the assessee are allowed.
11. In the result, appeal by the assessee is allowed.
12. To sum up, assessee’s appeal being ITA No. 267/Nag/2024 is dismissed and assessee’s appeal being ITA No. 563/Nag/2024 is allowed.
14-Feb-2025
The copy of the order is as under:
