Commissioner Of Income Tax (Exemptions), Address: 3Rd Floor,Kailashheights,Lalkothi,Tonkroad,Jaipur v. M/S Hemdha Medi Resources Pvt. Ltd, Address: S

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 276 / 2016 Commissioner of Income Tax (Exemptions), Address: 3rd Floor,KailashHeights,LalKothi,TonkRoad,Jaipur ----Appellant Versus M/s Hemdha Medi Resources Pvt. Ltd, Address: S-8, AmrapaliMarg,NearMTSTowerVaishaliNagar,Jaipur ----Respondents __________________________________________ For Appellant : Mr. Sameer Jain __________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Judgment Per Hon’ble Mr. Jhaveri, J. 07/12/2016 1.By way of this appeal, the appellant has assailed thejudgment & order of the Tribunal whereby the Tribunal hasallowed the appeal preferred by the assessee. 2.Counsel for the appellant contended that for grant of approval u/s 80G of the Act due importance to rule 11AA has to be given. Learned counsel for the appellant invited ourattention towards para 4 of the order of CIT(A), which reads asunder:- “For registration u/s 12AA which wasnecessary for claiming exemption u/s 11and 12, CIT was not required to look intoactivities, where such activities had not orwere in process of its initiation. Where a trust set up to achieve its objects ofestablishing educational institution, was inprocess of establishing such institutions,and receives donations, registration u/s12AA cannot be refused on ground thatTrust had not yet commenced charitable orreligious activity. Enquiry of the CIT at suchpreliminary stage should be restricted togenuineness of objects and not activitiesunless such activities had commenced.” 3.In the light of above, he submitted that as the assesseetrust has not commenced its activities, certificate u/S 80Gcannot be given. He further submitted that the present case isdistinguishable on facts and in spite of the decision of Allahabad High Court in case of Hardayal Charitable and Educational Trustvs. CIT reported in (2013) 355 ITR 534, the Tribunal hasseriously committed an error in allowing the appeal of theassessee. 4.Mr. Sameer Jain also contended that the activity wasrequired to be started and the assessee started the same. 5. In this regard the Tribunal in para 2.9 has observed asunder:- “2.9. We have heard the rival contentionsand perused the material available onrecord. Firstly, it is interesting to note that itis for the third time that the appellant hasfiled the subject application under section80G(5) and on the previous occasions, thereasons cited by the ld CIT varies fromassessee not registered u/s 12AA toregistration certificate u/s 12AA not enclosedwith the application and hence, it is noteligible for approval u/s 80G(5)(vi). Thereasons cited in the impugned order statesthat seeing the insignificant nature ofactivity, the case does not seems to be fitfor granting exemption u/s 80G at this 5. In this regard the Tribunal in para 2.9 has observed asunder:- “2.9. We have heard the rival contentionsand perused the material available onrecord. Firstly, it is interesting to note that itis for the third time that the appellant hasfiled the subject application under section80G(5) and on the previous occasions, thereasons cited by the ld CIT varies fromassessee not registered u/s 12AA toregistration certificate u/s 12AA not enclosedwith the application and hence, it is noteligible for approval u/s 80G(5)(vi). Thereasons cited in the impugned order statesthat seeing the insignificant nature ofactivity, the case does not seems to be fitfor granting exemption u/s 80G at this stage. The question that arises forconsideration is whether the reason cited bythe ld CIT justifies denial of approval undersection 80G(5) of the Act. On perusal ofsection 80(5) as well as Rule 11AA, what isrequired to be seen is whether theinstitution/fund has been established inIndia for a charitable purpose or not.Secondly, it lays down certain additionalconditions under clause (i) to clause (v)which are required to be fulfilled. Rule 11AAprovides that where the CIT is satisfied thatone or more of the conditions specified inclause (i) to clause (v) of section 80G(5)are not fulfilled, he shall reject theapplication for approval after recording hisreasons for such rejection. In the instantcase, the appellant has been duly registeredunder section 12AA which shows beyond anydoubt that ld CIT has already verified thegenuineness of the objects and its activitiesare not doubted by the CIT. Hence, havinggranted registration u/s 12AA, the firstcondition regarding establishment ofinstitution for charitable purposes is fulfilled.Regardingsatisfactionofadditionalconditions specified in clause (I) to clause(v) of section 80G(5), there is no dispute asapparent from the order of the ld CIT. As canbe seen from Revenue’s stand of rejection ofearlier applications filed by the appellant,the approval under section 80G is closelylinked to approval under section 12AA. Nowonce, the registration under section 12AAhas been granted, the approval undersection 80G should not be denied unless thecase of the appellant falls under non-fulfillment of one or more of the conditionsspecified in section 80G(5) which is not thecase before us. Regarding the activitiescarried out by the appellant towardsachievement of its object for establishmentof the hospital and medical college, it cannotbe said that assessee has not yetcommenced any activity. The CIT hasaccepted that assessee has taken steps forimplementation of its objects in as much asit has acquired the land, converted the landfor institutional use for setting up thehospital project, appointed the architect.,carried out soil testing etc. All theseactivities are towards the achieving theobjects of the trust. The registration under section 25 of the companies Act has beengranted on 13.10.2012, subsequently theland was acquired on 29.3.2013 andthereafter other activities like conversion ofland use, appointment of architects and soiltesting has been done. The project of settingup hospital and medical college is a complexproject requiring various approvals,clearances etc which the appellant has beencomplying with. It is critical that as part offund raising programme for this project, theappellant has sought the approval undersection 80G whereby the donations can beaccepted for approved purposes and theproject can be expedited. The approvalunder section 80G will thus aid and providethe necessary support in successfulcompletion of the project. In our view, ldCIT (Exemption) was not correct in denyingthe approval under section 80G(5) to theappellant.” 6.We make it clear that the observations which are made bythe Tribunal are required to be accepted for this year. If theactivity is not started in two years, as contemplated, it will beopen for authority to take steps for withdrawal of theregistration. No substantial question of law is involved. 7.The appeal stands dismissed. (DINESH MEHTA)J. (K.S.JHAVERI)J. A.Sharma/90