2025 (5) TMI 1393 - AT - Income Tax

Rejection of applications for regular registration u/s.12AB(1)((b)(ii) and approval u/s.80G(5) - CIT(E) rejected both the applications on being not satisfied with the genuineness of the activities of the appellant trust and also for not having the sanction of the Charity Commissioner for the loans taken from the trustee during the year - as argued proper opportunity of hearing was not afforded to the appellant for furnishing any clarification on the issue of loan taken by it. HELD THAT - We deem it proper to remit the issue of regular registration u/s.12AB as well as approval u/s.80G(5) of the Act for denovo adjudication by CIT(E) who shall afford reasonable opportunity to the appellant to prove the genuineness of the activities and CIT(E) shall also deal with the issue on temporary loan taken from the trustee in light of the decision of Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha 2024 (7) TMI 1638 - ITAT NAGPUR and decide in accordance with law. Effective grounds raised by the appellant in both the appeals are allowed for statistical purposes.

Summary

Summary:The Income Tax Appellate Tribunal (ITAT), Pune Bench, in ITA Nos. 2500 and 2501/PUN/2024, heard appeals by a Public Trust against rejection of applications for regular registration under section 12AB(1)(b)(ii) and approval under section 80G(5) of the Income-tax Act, 1961 by the learned CIT(E). The CIT(E) had rejected the applications due to dissatisfaction with the genuineness of the Trust's activities and absence of Charity Commissioner's sanction for loans taken from a trustee.The appellant contended that the unsecured loans were temporary and taken from a trustee, relying on the Coordinate Bench decision in Prerana Samajik Sanskrutik Bahuddeshiya Shikshan Sanstha v. CIT(E), which held that small borrowings not from banks or financial institutions do not violate the Maharashtra Public Trust Act, 1960 or the Income-tax Act, 1961, especially when the Trust works for a noble cause.The Tribunal noted that the appellant was not afforded adequate opportunity to clarify the loan issue. It remitted the matter for de novo adjudication by the learned CIT(E), directing that a reasonable opportunity be given to the appellant to prove the genuineness of its activities and to address the temporary loan issue in light of the cited Coordinate Bench decision. The Tribunal allowed the appeals "for statistical purposes." Key holding: The issue of registration and approval under sections 12AB and 80G(5) must be reconsidered with proper opportunity to the appellant, particularly regarding temporary loans from trustees, consistent with established precedent.