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TMI Blog2023 (9) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... such specified CSR activities / Public Charitable purposes. As seen that in the present cases the impugned orders of the the CIT (Exemptions) are non-speaking and without discussion in refusal to grant Registration u/s 12AB and approval u/s 80G of the Income Tax Act because, he has not addressed the objectives and activities of the Trust, in respect of the appellant, being ongoing entity for three financial years. CIT(E) order of rejection of the applications in arbitrary manner for the reason that he has not addressed the submission of appellant that the composition of the Trust is restrictive without considering clause ' 18' of the Trust Deed where the maximum numbers of the Trustees could be seven, and that there was no restrictive clause to limit the appointment of number of trustees, even the Directors of the company when there are no existing legal restrictive provisions that the directors of the company could not be the Trustees of Trust so formed. We consider it deem fit to remand back the matter to the file of the CIT exemption to adjudicate the issue of grant of registration under section 12AB and approval under section 80G. Appeals filed by the assessee are allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Trust on the grounds that the composition of the Trust is restrictive since failed to consider clause ' 18' of the Trust Deed where the maximum numbers of the Trustees could be seven, therefore, there is no restrictive clause to limit the appointment of number of trustees, to the Directors of the company only; And even otherwise there are no existing legal restrictive provisions that the directors of the company could not be the Trustees of Trust so formed. 4. That the assessee Trust craves to add, modify, delete any ground/s of Appeal during the course of Appeal proceedings. 3. Grounds of appeal in ITA No. 144/Asr/2023: 1. That the worthy CIT(Exemptions), have erred both on facts and in law and was unjustified to refuse to grant/approval Registration of Trust u/s 80G of the Income Tax Act, with the objects for carrying on CSR activities and for Public Charitable purposes, since failed to consider and appreciate, the followings, facts and legal provisions in right perspective : (i) That CSR provisions for Public Charitable objects/purposes u/s 135 of the Companies Act, read with Rule 4 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (E) has issued an additional query on 27.01.2023 to ascertain the genuineness of the activities of the trust and rejected the application for registration u/s 12AB and approval u/s 80G of the Act as under: 5.1(b) On perusal of the reply submitted by the applicant, following additional queries were raised on 27.01.2023 to ascertain the genuineness of the activities of the applicant: Please furnish date-wise details of charitable activities performed by Society/trust/ company as per its objects during the F.Yrs. 2020-21, 2021-22 and 2022-23 (Till date) along with documentary evidences i.e. Photographs, newspaper cuttings etc. Also furnish the year-wise details of expenditure incurred to carry out these activities along with copy of bills/vouchers. Sr.No. Particulars of charitable Date Expenditure incurred Detail of Payments Documentary evidence Activities (in Rs.) Please furnish copies of bank account statements for F.Yrs. 2020-21, 2021-22 and 2022-23 (Till date) and furnish the narration of debit and credit entries. Please corroborate the expenditure shown in Income Expenditure Account with the date-wise details of charitable activities and highlight the payments thereof in Bank acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other Acts in this regard. 8.1 Corporate Social Responsibility (CSR) implies a concept, whereby companies decide voluntarily to contribute to a better society and a cleaner environment - a concept, whereby the companies integrate social and other useful concerns in their business operations for the betterment of their stakeholders and society in general in a voluntary way. The above is the rationale that went behind the inclusion of CSR in the case of corporates supporting Government s efforts at nation building. Corporate Social Responsibility means and includes but is not limited to Projects or programs relating to activities specified in Schedule VII to the Companies Act, 2013. The Corporate Social Responsibility has been incorporated through Section 135(1) of Companies Act, 2013 in which 2% of average Net Profit for the last 3 years of some large companies has to be spent on C.S.R. There is no specific tax exemptions available on expenses incurred on C.S.R. However, there are several activities, part of Schedule VII of the Companies Act, 2013, that enjoy exemptions under the Income Tax Act. 8.2 Projects or programs relating to those activities which are undertaken by the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant trust through its Directors to implement CSR activities and other charitable activities. This is a close arrangement whereby a Limited company is not only able to claim redemption of its CSR obligation but also at the same time able to control the finances of the Trust. Seeking exemption of CSR amount u/s 11 12 of the Income Tax Act, 1961 is otherwise not allowed. 10. The method adopted by the applicant, which is controlled by single company and managed through trustees who are simultaneously part of the Company, is to build an in- house captive trust ostensibly for doing C.S.R. activity so that the amount, which is compulsorily to be spent, remains within their control The present represents an attempt to: (i) to create a closely held trust which in the instant case is controlled by M/s Puri Oil Mills Ltd through its directors. (ii) seek exemption from taxation by taking recourse to purported charitable activity u/s 2(15) of I.T. Act (iii) to retain control over money, invested in a closely held trust, that has otherwise been precluded from being claimed as business expenditure by the Finance Act of 2014. 11. Considering all of the above it is safe to conclude in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/Public Charitable purposes. The impugned Trust stated to have submitted its duly audited Financial Statement for the year ended 31.03.2021 and 31.03.2022 and also details of such expenditure incurred upto 31.12.2022, duly supported by Bills/vouchers/supporting documents evidencing amount spent/incurred for such specified CSR activities / Public Charitable purposes and no illegality/defects have been raised/pointed out to justify such refusal of Registration/approval u/s 12AB of the Income Tax Act and thus, it was contended that the Learned CIT(Exemptions) was unjustified in law for refusing registration/approval of the Trust on the grounds that the composition of the Trust is restrictive since failed to consider clause ' 18' of the Trust Deed where the maximum numbers of the Trustees could be seven, therefore, there is no restrictive clause to limit the appointment of number of trustees, to the Directors of the company only and that even otherwise there are no existing legal restrictive provisions that the directors of the company could not be the Trustees of Trust so formed. 7. Per Contra, the learned CIT (DR) supported the impugned order. 8. We have heard both the sides ..... X X X X Extracts X X X X X X X X Extracts X X X X
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