The Jodhpur Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that where a trust (appellant) had applied for registration under section 12AB of the Income Tax Act and approval under section 80G of the Act with objects of providing medical relief by establishing a hospital, and such objects were charitable in nature, then non-commencement of activities at application stage could not justify rejection of registration. Consequently, the ITAT accorded approval under section 80G of the Act to the appellant.
The Division Bench comprising Sudhir Pareek (Judicial Member) and Dr. Mitha Lal Meena (Accountant Member) found that the appellant society’s objects are charitable in nature and there was no adverse finding given by the Commissioner (Exemption) on the charitable object of the appellant trust. It is also undisputed on record that the activities proposed to be undertaken are directly aligned with the stated charitable objects of the appellant trust.
On the date of application for registration under section 12AB, the Bench noted that the construction of hospital building was undertaken by the appellant trust with the preparatory activities including acquisition of land and development of infrastructure. The Bench said that at the stage of consideration of application under section 12AB(1)(b), the Commissioner (Exemption) is required to examine whether the objects are charitable in nature and whether the activities, if commenced, are genuine in the context of the objects of the trust and does not require that full scale of charitable activities must have commenced before the registration to be granted to a charitable trust.
Therefore, in the absence of any adverse observation of the Commissioner (Exemption) on the charitable objects of the trust and the genuineness of activities in consonance with the object of the trust, the Bench clarified that mere objections of the Commissioner (Exemption) based on presumption that whether the applicant has genuinely carried out charitable activities cannot be a valid ground for rejection of appellant’s claim under section 12AB.
The Bench found that in the present case, the appellant’s object of providing medical relief by way of establishment of a hospital is not disputed by the Department and hence the appellant society’s objects fall within the definition of charitable purpose under section 2(15). Further, the hospital is under construction and the activities proposed to be commenced are in line with the stated objects.
Hence, following the Apex Court judgment in the case of Ananda Social & Educational Trust v. CIT [426 ITR 340 (SC)], it held that non-commencement of operation of hospital (activities) cannot be a ground for refusal of registration under section 12AB. The Commissioner (Exemption) is accordingly, directed to grant registration to the appellant trust under section 12AB(1)(b) and consequential approval under section 80G to the appellant society.
Briefly, the appellant–trust/society applied for registration under section 12AB and approval under section 80G, stating that its primary object was to provide medical relief by establishing a hospital for economically weaker sections. It submitted that preparatory activities, including acquisition of land and construction of the hospital, had been undertaken, and that it had been providing medical help to poor persons.
The Commissioner (Exemption) rejected the application for registration under section 12AB on the ground that activities had not commenced, genuineness of activities could not be verified, and no supporting evidence/details were furnished to substantiate the claim of providing medical help; consequently, approval under section 80G was also denied.
Appearances:
CAs Sunil Surana and Rahul Parmanandani, for the Appellant/ Taxpayer
CIT-DR, O.P. Meena, for the Respondent/ Revenue
