By TIOL News Service

KOLKATA, FEB 02, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether a trust or institution which is yet to start any charitable activity, can be denied registration u/s 12AA, if the approval authority is satisfied that its objects are charitable in nature. NO IS THE ANSWER.

Facts of the case:

The Assessee, a registered society, during the relevant year, made an application for grant of registration u/s 12AA and also for grant of approval u/s 80G. The CIT(Exemption), Kolkata on going through the application, noticed that after getting registration under Societies Registration Act, the assessee started its charitable activities and had incurred expenses by providing medical facilities and paying fees to the doctors, giving medicines and providing spectacles. It was noticed that payment to the doctors and staff, incurring of medical expenses as also purchase of spectacles had been made paid for by another charitable trust M/s Bimla Devi Bhutoria Charitable Trust, and the said trust made payments directly to the doctors and staff and for purchase of spectacles. This trust however confirmed that those payments were in the form of donation. According to the assessee, also the payments made by M/S.Bimla Devi Bhutoria Charitable Trust were accounted by it as donations. The Assessee did not open a Bank Account and therefore it had requested donations to be made by payments directly for meeting expenses. M/s. Bimla Devi Bhutoria Charitable Trust had also confirmed the said facts. The CIT(Exemption) however was of the view that on the payments by M/s Bimla Devi Bhutoria Charitable Trust they would claim such payments as donations and application of income for charitable purpose. The Assessee on the same payments would claim the same also as application of income for charitable purpose. This way there would be double benefit for the same expenditure. Accordingly, he rejected the claim, as he was of the view that for granting registration u/s 12AA, the trust or other institution apart from showing genuineness of its activities should also prove that they had carried out charitable activities. As far as application of grant of approval u/s 80G, the CIT(E) also refused the same.

Tribunal held that,

++ it is clear from the order of CIT(E) that the only reason given by him for rejecting the assessee's application for grant of registration u/s 12AA is that the trust or institution which is yet to start any charitable activity cannot be granted registration u/s 12AA on the basis of its objects which are charitable in nature. It is thus clear that the CIT(E) was satisfied with the objects of the assessee which were charitable in nature. Though the CIT(E) has made reference to the assessee's action of having met its expenses for doing charitable activities by directing the donors to meet all these expenses directly, yet the CIT(E) has not drawn any adverse inference against the assessee in this regard.The assessee filed several decisions of the High Courts in which a view has been taken that at the time of grant of registration it is not proper to insist on charitable activity having been already carried out by the society or charitable institution seeking registration. In the light of the judicial pronouncements, this Tribunal is of the view that in the order of CIT(E) the denial of registration u/s 12AA to the assessee cannot be sustained. Since the registration u/s 12AA is allowed to the assessee and since the only reason for the CIT(E) to deny grant of approval to the Assessee u/s 80G was that there is no registration u/s 12AA granted to the assessee, the approval u/s 80G is also directed to be granted to the assessee.

(See 2018-TIOL-188-ITAT-KOL)