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TMI Blog2025 (5) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... maintainable taken benefit of section 11 or 12 3. Arguments heard. File perused. ITA No. 904/JP/2024 4. Ld. AR for the appellant has submitted that the appellant is a company incorporated on 25.11.2021 dedicated towards helping young adult who have grown up in orphanages or institutional care. It provides these individuals with crucial support while they transition into independent adulthood, by providing them assistance in finding housing, continuing their education, and securing employment. Learned AR has submitted that as further claimed by the appellant, it has support from UNICEF. This partnership aims to provide essential support to young adults leaving institutional care, focusing on areas such as education, health and livelihood. 5. As noticed above, one of the grounds for rejecting the application u/s 12AB of the Act is that there were discrepancies in the Article of Association. In this regard, the observations made by Ld. CIT(E) need to be reproduced for ready reference. Said observations read as under:- "03. Discrepancies in Article of Association 3.1. On perusal of the AOA of the institution, some discrepancy was found in Para. 35 of Article of Association of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. The purpose of an irrevocable trust is to move the assets from the grantor's control and name to that of the beneficiary (public at large). In other words, the settior has to give up ownership and all beneficial interests in the property. Here, in the present case, section 8 Company is the settlor. Therefore, the settlor cannot buy back its own shares/property once it has been given for the charitable purposes. In view of the above, furnish an explanation as to why the application filed by you for registration u/s 12AB should not be rejected." However, the applicant has failed to furnish any explanation in this regard and hence, it can be concluded that the applicant intends to indulge in non-charitable activities and thus is ineligible for registration u/s 12AB. 3.2 Para, 65 of Article of Association of the applicant is also reproduced as under:- "65. If the company shall be wound up, the liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act, divide amongst the members, in specie or kind, the whole or any part of the assets of the company, whether they shall consist of property of the same kind or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016] Thus, it is evident from the above that you are in clear violation of Sec. 8(9) of the Companies Act and hence, ineligible for registration u/s 12AB. In view of the above, fumish an explanation as to why the application filed by you for registration u/s 12AB should not be rejected." However, even after giving sufficient opportunities, the applicant has failed to furnish explanation on the same. Thus, it is evident from the above that the applicant is in clear violation of Sec. 8(9) of the Companies Act and most importantly lose the character of public charitable institution where it is necessary to hold assets for the benefit of general public. Hence the applicant is ineligible for registration u/s 12AB." 6. Ld. CIT(E) further observed that in view of stipulation of para 35 of its Article of Association, the applicant can go for earning and distributions of the profits which clearly violated the spirit of charitability; that the said clause also clearly violated the conditions that any institution claiming to be a public religious or public charitable or both, should be irrevocable in nature, so that the assets may move beyond the control of the grantor to the beneficiari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inability of the application u/s 12AB 10. The application having derived u/s 11 & 12 of the Act, as regards the said ground made based for rejection of the application u/s 12AB as well as u/s 80G of the Act, ld. CIT(E) observed as under:- "02. Application non maintainable taken benefit of section 11 or 12 2.1 Since applicant filed its application in form 10AB and verification of same says that applicant is applying for registration/ approval under the section code 4A u/s 12A(1)(ac)(vib). The provision of section 12A(1)(ac) (vib) are as under:- "(vi)(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-clause (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities. From the plain reading of this section, it is evident that, the applicant can apply only if, it has commenced activities and not taken benefit of section 10, 11 & 12 in earlier years. Thus, to verify taking of benefit of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f clause (23C) of section 10 or section 11 or 12 for any previous year ending on or before the date of making this application on 31.10.2023, at any time after the commencement of such activities I further undertake to communicate forth with any alteration in the terms of the Trust, or in the rules governing the institution, made at any time hereafter. I further declare that I am filling this form in my capacity as MTR (designation) having PAN FAMPM3218K and that I am competent to file this form and verify it. 2.3 From above the applicant itself stated that he has never taken benefit of section 11, 12 or clause (iv) (v) (vi) & (via) of 10 (23C) however on perusal of ITR of the applicant it is seen that the applicant has taken benefit of section 11,12 or clause (iv)(v)(vi) & (via) of 10 (23C) in the F.Y. 2022-23. In view of the above, the present application filed in Form No.10AB is liable to be rejected as non-maintainable. 11. As noticed above, Ld. CIT(E) observed that for the purpose of registration/approval u/s 12A, it is to be established that if applicant has commenced activities, it has not taken benefit of section 10, 11 & 12 of the Act in the previous years. As finds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stee are the persons specified in section 13(3) (3A) of the Act. They have retrieved property of the trust for their personal use, and not for any charitable purpose. While so observing, Learned CIT(E) arrived at the conclusion that the trust violated provisions of clause (a) of explanations below section 12AB(iv) of the Act. 15. Ld. AR for the appellant has submitted that the above said persons were drawing salary, as permissible under the law and withdrawal of salary could not said to be unreasonable, particularly when they had to discharge duties to achieve objects of the trust. 16. On the other hand, Ld. DR for the department has pointed out that the applicant has two bank accounts i.e. one with State Bank of India and other HDFC Bank; that Shri Girish Mehata, director of the applicant received a sum of Rs. 21,47,577/- that M/s Anita Sharma, another director of the applicant received at Rs. 7,04,078/-; that Shri Kushal Gaur received a sum of Rs. 6,04,548/- during the F.Ys 2022-23 and 2023-24, from account of the assessee with State Bank of India; that in addition thereto Sh. Girish Mehta, director also received a sum of Rs. 1,71,056/- in the said financial year, from HDFC ban ..... X X X X Extracts X X X X X X X X Extracts X X X X
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