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2017 (2) TMI 697 - ITAT CHANDIGARH

2017 (2) TMI 697 - ITAT CHANDIGARH - TMI - Grant of registration 12AA denied - Held that:- Since the assessee was in process of acquiring land for achieving the aims and objects of the assessee trust, therefore, there is nothing wrong in acquiring land by the assessee. Preparation of the balance sheet for part period is no ground to reject application for registration under section 12AA of the Act because assessee field application for registration on 23.11.2015 and as such, it is difficult to p .....

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ese are not relevant criteria to be considered at the time of grant of registration because aims, objectives and activities of the assessee in reference to objects shall have to be considered. Application of income for charitable purposes can be examined at the stage of assessment when trust would file the return of income. - Considering the fact that there is no denying the fact that assessee's main aims and objects are charitable in nature i.e. running educational and medical institutions, .....

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r section 12AA of the Income Tax Act on the following grounds : "1. That the learned CIT(E) has wrongly passed order u/s 12AA of the Income Tax Act, 1961 refusing the grant of registration 12AA to appellant trust who was formed mainly for purpose of educational & medical relief. 2. The learned CIT(E) has also erred by refusing registration U/s 12AA on irrelevant grounds & without any material on record in respect of genuineness of its activities of appellant trust. That the appellan .....

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same, however, has not been reflected in the bank accounts. The aims and objectives of the trust have been narrated in 21 points but main aim apparently is to start educational institution where course in engineering, technical, medical, management etc. will be taught. In addition, there is a proposal to run a hospital also. In order to corroborate the work being done by the trust vis-à-vis the stated objectives, some photographs have been appended wherein medical aid is shown being provi .....

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ed order that submissions of the assessee have been examined and it revealed that assessee furnished balance sheet on 18.10.2015 and of 31.03.2016. No return of income have been filed for the period ending 31.03.2016 as the same was not due. No PAN number provided. It was noted that balance sheet for the part period was prepared without any reason because there was no need as per the given principles as well as requirements of the various laws to draw a balance sheet for 18.10.2015. It was also .....

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n is, therefore, not free from encumbrances. The OD limit was sanctioned for purchase of land, copies of the Registered Deed have been filed which revealed that payments have been made from OD limit of PNB, Baddi and amounts have been paid through DD. However, in case of land purchased for ₹ 1.40 Crores on 28.08.2015, an amount of ₹ 37,85,000/- was paid in February,2015 predates the opening of the trust and as such, apparently the amount have been paid before start of the trust and t .....

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purchase of land as the limit from PNB Baddi was sanctioned on 16.06.2015. The OD limit from State Bank of India Chandigarh has cash deposits and excess OD amount of ₹ 60,281/- have been withdrawn and there is a credit balance of ₹ 3,90,241/-. The OD limit has not been closed. Apparently, the assessee had taken OD limit for purchase of lands but after sanction of the OD limit from PNB Baddi, this amount has been more or less kept as unutilized. 4. The balance sheet ending 31.03.2016 .....

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PNB Baddi and the corpus donation received in the intermittent period was utilized for payment to PNB Baddi and ultimately, OD limit was nullified. The corpus fund has been shown to have been received from various persons whose names were pro vided through the initial reply. There was no address and PAN number provided. Individuals in their confirmation have explained to have contributed for corpus and PAN numbers of some of them were also filed. The ld.CIT, however, noted that large number of .....

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expenditure made belies logic as to how a trust claiming to be of a public charitable character can utilize the entire amount collected as corpus donation on activities like purchase of land which in itself is not a charitable activity. The corpus fund is not allowed to be utilized for attainment of the purpose/objects of a trust. Instead it is to be retained as a source from which trust can earn income which in-turn can be utilized as well as accumulated. In the case of the assessee, corpus fun .....

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ovisions of Section 11(1)(d) of the Income Tax Act which can be termed as corpus donations only after recognition and registration of the trust by prescribed authority. In the absence of registration certificate, these amounts may simply be treated as unsecured loans. 5. The ld.CIT, considering the above aspects, noted that assessee has taken the garb of donations for re- payment of the OD which in turn was taken by pledging security of FDR of another trust which is claimed to be registered unde .....

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trust remained to be ostensible and not convincing at all. The registration application was, accordingly, rejected. The assessee is in appeal. 6. We have heard ld. Representatives of both the parties and perused the material on record. The ld. counsel for the assessee submitted that the Trust Deed clearly show that the settler has given a sum of ₹ 11 lacs for the trust property which is deposited in the bank account, copy of the bank account is filed at page 26 of the Paper Book. Therefore .....

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. counsel for the assessee further submitted that purchase of land is the first step to attain the objectives of the trust. The land acquired by the assessee was not sold or used for any other purposes other than the aims and objects mentioned in the Trust Deed. Further, construction of building of the school and hospital would take some time, therefore, trust has been created on 27.05.2015 and assessee applied for registration of the trust under section 12AA of the Act. At the stage of registra .....

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ition in Section 12AA of the Act to purchase land out of over draft limit. M/s Vishav Manav Roohani Kendra has been allowed registration under section 12AA of the Act by the CIT, Panchkula vide order dated 17.09.2007 as per direction of the ITAT. Copies of both the orders are filed in the Paper Book. He has further submitted that for purchase of land, advance was given by Shri Balbir Singh and Shri Jasvir Singh to the owners, however, they could not arrange the balance money and requested trust .....

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cific purpose i.e. to purchase the land for aims and objects of the assessee trust and therefore, it is part of the corpus and moreover, it is not voluntary contribution without any purpose. Details of the same are filed from pages 47 to 66 of the Paper Book. The nature of corpus fund does not change irrespective of the fact whether application under section 12AA has been filed or not. The nature of corpus fund is just like a capital which is used for fixed assets and not current assets. The vol .....

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to be made within one year of the creation of the Trust and there is no requirement that the Trust or the institution should have started all its envisaged activities in the first year itself. Under Section 12AA of the Act satisfaction regarding the genuineness of the activities of the Trust is to be seen and the stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Thus the contention that Trust was not set up for charitable purposes and it was u .....

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r of Income-tax, Bathinda Vs M/s Baba Deep Singh Educational Society, SCF 23, Bharat Nagar, Bathinda decided on 13.10.2011, followed 7(i) Decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs Surya Educational & Charitable Trust 355 ITR 280 in which it was held as under : As per s. 12AA, an application for registration of the trust and institution is required to be made within one year from the date of creation of the trust or the establishment of such institution. Th .....

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ot carried out in accordance with the objects of the trust or institution. Therefore, the object of s. 12AA, is to examine the genuineness of the objects of the trust but not the income of the trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such trust or institution files its return.-CIT vs. Devi Educational Institution & Ors. (1984) 43 CTR (Mad) 48 : (1985) 153 ITR 571 and Aditanar Educational Institution Etc. vs. Addl. CIT (1997) 1 .....

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ct that addresses of the donors from whom donation has been claimed to be received were missing cannot form basis of rejection of registration under s. 12AA. 7(iii) Decision of ITAT Chandigarh Bench in the case of Shri Gurudas Educational Trust Vs CIT 177 TTJ 25 in which it was held as under : Genuineness of the activities of the Trust has to be seen keeping in mind the objects of the Trust. The Ld. CIT has to satisfy himself about the fact that the activities are genuine and in consonance with .....

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in aims and objectives of the assessee trust are charitable in nature. Even this fact is not denied by the CIT (Exemption) in the impugned order. The CIT noted that the amount of ₹ 11 lacs have not been reflected in the bank account. However, the bank account of the assessee clearly show that the amount mentioned in the trust deed has been reflected in the bank account of the assessee. The purchase of land is the initial stage for formation of the trust so that the assessee could achieve i .....

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n under section 12AA of the Act, CIT is required to examine the objects of the assessee trust and genuineness of its activities. At the time of registration under section 12AA of the Act, which is necessary for claiming exemption under section 11 and12, the CIT (Exemption) is not required to look into the activities, where such activities have not or are in the process of its initiation. Where assessee trust is set up to achieve its objectives of establishing educational/medical institutions, is .....

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time of registration under section 12AA of the Income-tax Act, 1961, which is necessary for claiming exemption under sections 11 and 12, the Commissioner is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institutions, is in the process establishing such institutions, and receives donations, the registration under section 12AA cannot be refused, on the groun .....

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t is registered under Section 12AA and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused. Held, allowing the appeal, (i) that it was not denied that for the subsequent year the assessee had been granted exemption under section 12AA and had also been approved under section 80G, subject to certain conditions. If the Commissioner was satisfied with the genuineness of the objects of the trust for the subsequent ass .....

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ime of examining the return. (iii) That the registration under section 12AA and approval under section 80G would not by itself entitle the trust to exemption of the income of its donors or of the trust for the assessment year 2011-12. For claiming such exemption the returns of the donor and the trust will be examined, for orders to be made in accordance with law." 8(ii) The other decisions relied upon by ld. counsel for the assessee as reproduced above, clearly support the claim of the asse .....

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ground for rejection of the registration application. The genuineness of the activities of the trust has to be seen keeping in mind the objects of the trust. The CIT (Exemption) has to satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust. The other points noted by CIT (Exemption) in the impugned order have been satisfactorily explained by ld. counsel for the assessee. Since the assessee was in process of acquiring land for achieving the .....

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