No reference made to the clarifications of the appellant in the order for rejection of exemption, order to be set aside: ITAT

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No reference made to the clarifications of the appellant in the order for rejection of exemption, order to be set aside: ITAT 

There are a lot of cases wherein the application for permanent registration has been done by the trust for the first time after they have got the provisional registration. In many cases, one notice was issued asking to submit more information for permanent registration. All the trusts who are in a nascent stage and have carried out the activities on a smaller basis are denied the registration for the reason that no “credible evidence” has been furnished.

Before discussing on the future course of action, let us discuss one case here which was before ITAT Delhi, as under:

Federation of Delhi Textile Merchants vs ITO (Exemption) (ITA No. 7807/Del/2019)

Facts:

  1. The appellant filed an application electronically on 24/01/2019 in Form No. 10G seeking exemption u/s 80G of the IT Act. When the Commissioner (Exemption) sought justification of the expenses incurred, seminar bills along with hotel bills were submitted, which also contained payments made for consumption of liquor.
  1. The Commissioner (Exemption) held that the activity involving serving of liquor cannot be set to be charitable, usage of money collected from donors is to be utilized for welfare of the general public, not for enjoyment of people enjoying the state of affairs of the federation.
  1. Accordingly it was concluded that the activity involving serving of liquor cannot be set to be charitable, usage of money collected from donors is to be utilized for welfare of the general public, not for enjoyment of people enjoying the state of affairs of the federation. However, the details of clarification/reply given by the Applicant in the order have not been mentioned in the order.

ITAT New Delhi held as below:

  1. The Ld. Commissioner of Income Tax (Exemption) has relied on various bills of the Appellant wherein the service of liquor has been mentioned, but the Ld.CIT(A) has not mentioned the details of clarification/reply given by the Applicant in the order impugned and not adjudicated the reply given by the Applicant. The order of the Ld. CIT(A) is a non speaking one.
  1. Therefore, the matter is set aside to the file of CIT (Exemption) to decide the matter afresh in accordance with law and pass appropriate speaking order. Needless to say that an opportunity of being heard be given to the Appellant herein.

In short, non adjudication of the reply given by the applicant could be considered as improper and unwarranted.

The ratio of the above judgement can be applied wherein the permanent registration has been denied without considering the detailed submission and reply done by the assessee trust.

There are various other judgments in the earlier regime of charitable trust wherein it has been held that the registration cannot be denied for the reason that substantial activities have not been carried out by the trust. All such cases would be relevant in all such cases where permanent registration has been denied for non submission of credible evidence.

Let us hope that CBDT also comes out with a little soft corner for the charitable trusts who are doing noble tasks for the society.

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