C.H. Naniwadekar, for the Assessee. Kesang Y. Sherpa, for the Revenue.

This appeal by the assessee is directed against the order passed by the CIT(Exemption), Pune on 31-08-2019 denying recognition u/s.80G(5) (of Income Tax Act, 1961) (hereinafter also called ‘the Act’).

2. Briefly stated, the facts are that the assessee is a company incorporated on 10-03-2018 u/s 8 (of Income Tax Act, 1961) of the Companies Act, 1956. Registration u/s.12AA (of Income Tax Act, 1961) was granted on 15-02-2019. The assessee e-filed application in Form No.10G for grant of recognition u/s.80G (of Income Tax Act, 1961) on 20-02-2019. The ld. CIT (Exemption) required the assessee to furnish/upload certain information/clarifications for the purpose of verifying the genuineness of its activities carried out and utilization/application of proceeds towards the avowed charitable objects of the company.

The assessee furnished certain information. The ld. CIT(E) found that the assessee did not submit any proof in respect of activities carried out. From the Profit and loss account for the year ending 31-03-2018, the ld. CIT(E) found that the assessee incurred Nil expenditure on objects of the company. No financial statements for the F.Y. 2018-19 were furnished. When confronted, it was submitted on behalf of the assessee that the founder of the company was making some Research in Jhalana Leopard Sanctuary, Jaipur on co-existence of leopards and humans. Certain photographs were submitted by the assessee in support of its contention. The ld. CIT(E) did not grant registration on the ground that the assessee failed to lead any evidence about having incurred any expenditure in the financial statements in respect of the above stated activities. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

3. We have heard both the sides through Virtual Court and gone through the relevant material on record. Section 80G(5) (of Income Tax Act, 1961) provides for registration under the section. This sub-section in the opening part provides that: “This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and it fulfils the following conditions”. Clause (i) of sub- section (5) states that `where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of section 11 (of Income Tax Act, 1961) and 12...’. This deciphers that in order to be eligible for registration u/s 80G (of Income Tax Act, 1961), it is sine qua non that the assessee must be first registered, inter alia, u/s 12AA (of Income Tax Act, 1961) as a pre-condition so as to avail exemption u/s 11 (of Income Tax Act, 1961) etc. of the Act. Clause (vi) of section 80G(5) (of Income Tax Act, 1961) provides that : ‘in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf’.

Thus, it is essential that the fund or institution must be first registered u/s 12AA (of Income Tax Act, 1961) etc. of the Act and then, in addition, should have been registered in terms of section 80G(5)(vi) (of Income Tax Act, 1961) so as to confer benefit of deduction u/s 80G (of Income Tax Act, 1961) to the persons making donations. The relevant rule referred to in sub-section (vi) of section 80G(5) (of Income Tax Act, 1961) is rule 11AA (of Income Tax Rules, 1962). This rule, in turn, embodies `Requirements for approval of an institution of fund under section 80G (of Income Tax Act, 1961)’. Sub-rule (2)(i) of rule 11AA (of Income Tax Rules, 1962) states that the application shall be accompanied, inter alia, by a copy of registration granted u/s 12A (of Income Tax Act, 1961) etc. Sub-rule (3) of Rule 11AA (of Income Tax Rules, 1962) states that : “The Commissioner may call for such further documents or information from the institution or fund or cause such enquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund’. On a harmonious reading of section 80G(5) (of Income Tax Act, 1961) and rule 11AA (of Income Tax Rules, 1962), it becomes crystal clear that for seeking an approval for the purposes of u/s.80G (of Income Tax Act, 1961), the institution or fund must be registered u/s 12AA (of Income Tax Act, 1961) and then on filing the requisite application for registration u/s 80G (of Income Tax Act, 1961), the Commissioner should satisfy himself about the genuineness of the activities of such institution or fund. The contention of the ld. AR that since the assessee was registered by the CIT u/s 12AA (of Income Tax Act, 1961), he could not have embarked upon further examination of activities carried out for granting registration u/s 80G (of Income Tax Act, 1961), is ergo, meritless. It is quite clear that for registration u/s 80G (of Income Tax Act, 1961), the assessee has to be first necessarily registered u/s 12A (of Income Tax Act, 1961) for satisfying the mandate of section 80G(5)(i) (of Income Tax Act, 1961). It is only then that the proceedings for registration u/s 80G (of Income Tax Act, 1961) start. If the contention of the ld. AR that granting of registration u/s 12AA (of Income Tax Act, 1961) binds the CIT from making further examination for registration u/s 80G (of Income Tax Act, 1961) is taken to logical conclusion, it would mean that on grant of registration u/s 12AA (of Income Tax Act, 1961) etc., the registration u/s 80G(5) (of Income Tax Act, 1961) should automatically follow, which in our considered opinion is contrary to the directive of the provisions. It is quite clear that only after the institution or fund has been registered u/s 12AA (of Income Tax Act, 1961) etc. that, on an application made by it, the exercise of examination of the satisfaction of conditions of section 80G (of Income Tax Act, 1961) read with rule 11AA (of Income Tax Rules, 1962) gets triggered.

4. Adverting to the facts of the instant case, it is noticed that the assessee was incorporated on 10-03-2008. From the Profit and loss account of the assessee for the year ending 31-03-2018, the ld. CIT(E) found that no activities were carried out. We gave also gone through such P&L account and find that there is Nil expenditure on its Expenditure side. The assessee, in fact, filed application for recognition u/s.80G (of Income Tax Act, 1961) on 20-02-2019 and the impugned order came to be passed on 31-08-2019. It is the case of the assessee that when the ld. CIT(E) rejected the assessee’s application u/s.80G (of Income Tax Act, 1961), the accounts for the year ending 31-03-2019 were under preparation, which could not be filed and such accounts actually got finalized a little later. The ld. AR made a statement at the Bar that for the year ending 31-03-2019, the assessee received a sum of Rs.3.53 lakh as donation and incurred expenditure of Rs.4.04 lakh on the activities of the trust. Since such Profit and loss account showing expenditure on activities of the assessee was not available before the ld. CIT(E), without commenting on the merits of the matter, we set-aside the impugned order and remit the matter to the file of ld. CIT(E) for deciding the case afresh after considering the relevant evidence including Profit and loss account for the year ending 31-03-2019. Needless to say, the assessee will be allowed sufficient hearing opportunity before reaching any decision.

5. In the result, the appeal is allowed for statistical purposes.

Order pronounced in the Open Court on 04th September, 2020.