2014 (12) TMI 469 - AT - Income Tax

Rejection of claim of the assessees for registration u/s 12AA and 80G(5) - details of donation received in Cash - Genuineness of the objectives of the assessee Held that - Assessee contended that he has claimed receipt of cash donation of ₹ 44.73 lacs and he is not satisfied about the details provided in respect of these donations - there is no objection of CIT regarding the objects of these assessee trusts the basis of CIT in doubting the genuineness of cash donation is that the identity of Shri Pawan, who has issued the receipts is not known and no salary was debited in the books of account on account of payment to Shri Pawan - this is not valid for deciding the claim of the assessee regarding registration - regarding the receipt of donation from various persons below ₹ 5,000/- each, although some doubt are raised by CIT but names and addresses of the donors are brought on record by the assessee and the amount of donation from each donor being very small being less than ₹ 5,000/- each, there is no merit in the objection of CIT in rejecting the claim of the assessee for registration u/s 12AA of the Act. Regarding the second donation of receipt of donation, Bhalchandra Educational Trust, the finding of CIT is not correct because the amount of ₹ 40 lacs was given by Bhalchandra Educational Trust to both the assesses trusts as a loan and not as donation and moreover, the third trust has already been granted registration on 08/12/2009 u/s 12AA and no adverse inference can be drawn on this account - trustees and objects of the trust is identical with these two trusts under identical facts, registration is already granted by learned CIT himself to Bhalchandra Educational Trust, there is no reason to deny registration to these two trusts - assessee has invested an amount on acquiring the land and on account of building the two trusts have already undertaken activities to fulfill their charitable objects in a big way thus, CIT was not justified in rejecting the claim of the assessees for registration u/s 12AA and 80G(5) of the Act Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the receipt of Rs. 40 lacs by Vikat Educational Trust and Vinayak Educational Trust from Bhalchandra Educational Trust is a donation or a loan.
2. The genuineness of the cash donations received by Vikat Educational Trust and Vinayak Educational Trust.
3. The eligibility of Vikat Educational Trust and Vinayak Educational Trust for registration under section 12AA and approval under section 80G(5) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Receipt of Rs. 40 Lacs from Bhalchandra Educational Trust:
The main contention by the assessee was that the Rs. 40 lacs received by both Vikat Educational Trust and Vinayak Educational Trust from Bhalchandra Educational Trust was a loan and not a donation. The balance sheets of all three trusts showed this amount under loans and advances. The CIT's objection was based on the same address and trustees for all three trusts, questioning the genuineness of the transactions. However, the Tribunal found that Bhalchandra Educational Trust was already registered under section 12AA and 80G, which supported the assessee's claim. The Tribunal concluded that the amount was indeed a loan and not a donation, and since Bhalchandra Educational Trust had already been granted registration under similar facts, there was no reason to deny registration to the other two trusts.

2. Genuineness of Cash Donations:
The CIT raised concerns about the cash donations received by the trusts, noting that the donations were received almost daily from different persons without precise addresses. The Tribunal noted that the list of donors, including names, addresses, and amounts, was provided, and each donation was below Rs. 5,000. The CIT's objections included the lack of specific addresses and the improbability of donors having ready cash daily. The Tribunal found these objections insufficient, stating that the genuineness of the objectives of the trust should be the primary consideration for registration under section 12AA. The Tribunal referenced judgments from the Allahabad High Court and Punjab & Haryana High Court, which supported the view that only the genuineness of the objects and activities should be examined, not the income or specific details of small donations.

3. Eligibility for Registration under Section 12AA and Approval under Section 80G(5):
The Tribunal emphasized that for granting registration under section 12AA, the CIT should focus on the genuineness of the trust's objectives and activities. The Tribunal found that both trusts had undertaken significant activities towards their charitable objectives, including substantial investments in land and building construction for educational purposes. The Tribunal also noted that the application for approval of the D.ELED (BTC) program had been submitted, indicating active steps towards fulfilling their charitable aims. Given these facts, the Tribunal concluded that the CIT was not justified in rejecting the registration and directed that both trusts be granted registration under section 12AA and approval under section 80G(5).

Conclusion:
The Tribunal allowed all four appeals, directing the CIT to grant registration and approval to both Vikat Educational Trust and Vinayak Educational Trust. The order was pronounced in the open court.