LAKHANIS EDUCATIONAL MEDICAL AND RESEARCH FOUNDATION,VASHI vs. CIT (EXEMPTIONS), MUMBAI

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ITA 3904/MUM/2026Status: DisposedITAT Mumbai31 August 2026AY 2027-288 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that absence of expenditure does not automatically establish non-genuineness of charitable activities, citing Supreme Court precedents. The CIT's satisfaction should be based on the genuineness of objects and proposed activities, not solely on past expenditure.

What were the facts?

The assessee, a charitable trust, applied for renewal of registration under Section 12AB. The CIT (Exemptions) rejected the application because no expenditure was incurred towards charitable objects, deeming the trust's activities not genuine.

What were the issues?

Whether rejection of registration renewal solely on the ground of no expenditure towards charitable objects is sustainable. Whether the genuineness of activities should be assessed based on proposed roadmap or actual expenditure.

Which sections of the Income-tax Act were involved?

Section 12A,Section 12AB,Section 12AB(1)(b)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI

Before: SMT BEENA PILLAI & SMT RATNA DASGUPTA

For Appellant: Shri Nikhil Natekar
For Respondent: Shri B. Jayaraghvan, CIT DR
Hearing: 17/08/2026Pronounced: 31/08/2026

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SMT BEENA PILLAI (JUDICIAL MEMBER) AND SMT RATNA DASGUPTA (ACCOUNTANT MEMBER) ITA No. 3904/MUM/2026 Assessment Year: 2027-28 Lakhanis Educational CIT (Exemptions) Medical and Research Room No. 601, 6th Floor, Vs. Foundation, Cumballa Hill, MTNL, 408, Plot No. 74, Persipolis, Mumbai, Sector 17, Vashi, Maharashtra- 400026 Maharashtra- 400705 PAN NO. AAATL4888R Appellant Respondent Appellant by : Shri Nikhil Natekar Respondent by : Shri B. Jayaraghvan, CIT DR

Date of Hearing : 17/08/2026 Date of pronouncement : 31/08/2026

ORDER PER RATNA DASGPUTA, AM The captioned appeal in the present case, arises out of rejection by the Ld. CIT(Exemptions) of assessee’s application filed on 18/09/2025 in Form 10AB under Section 12A(1)(ac)(ii) seeking renewal of regular registration u/s 12AB of the Income-tax Act, 1961- (hereinafter referred to as "the Act").

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2.

The grounds of appeal, all converging on rejection of renewal of registration under section 12AB of the Act, are as follows:- i. The Learned CIT (Exemptions) grossly erred in rejecting the registration application solely on the ground that no expenditure was incurred towards charitable objects, without appreciating that: (a) absence of expenditure does not automatically establish non-genuineness of objects; (b) the Act does not prescribe cancellation or rejection of a regularly registered trust solely on this ground; and (c) the Trust's objects and genuineness remained intact throughout the period of registration. ii. The Learned CIT(Exemption) has not considered that appellant has already accepted voluntary contribution and incurred expenses, which tantamount to commencement of the activities of trust. iii. The Learned CIT (Exemptions) passed the impugned rejection order in violation of the principles of natural justice and in contravention of the mandatory procedure prescribed under Section 12AB(1)(b)(ii) (B) (II) of the Income Tax Act, 1961, by failing to afford a reasonable opportunity of being heard on the substantive grounds forming the basis of rejection, thereby rendering the impugned order void ab initio. 3. The facts of the case are that the assessee is a charitable trust established with objects relating to education, medical relief, and other allied charitable purposes. It was granted registration under Section 12A of the Act, which was valid from Assessment Year 2022-2023 to Assessment Year 2026-2027. Pursuant to amended provisions of the Act governing registration of charitable trusts, the assessee filed an application in Form 10AB on 18/09/2025 seeking

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regularization/renewal of the registration under Section 12AB of the Act. On verification of the said application, the Ld. CIT (Exemption) noted that certain requisite documents had not been furnished, and issued notice dated 02/01/2026 to the assessee calling for furnishing of complete set of documents/information in terms of Rule 17A(2). The assessee furnished reply on 29/01/2026 through ITBA/e-filing. On examination of financial statements and income and expenditure amounts submitted by the assessee, it was observed that no expenditure had been incurred towards the objects or charitable activities of the trust during the aforesaid years. So the Ld. CIT(E) rejected the assessee's application for grant of registration on the grounds that no expenditure towards charitable objects had been incurred during the impugned assessment years and that, therefore, the genuineness of the activities of the trust could not be established. He referred to Section 12AB of the Act, stating that registration is to be granted in terms of provision of Section 12AB(1)(b) after being satisfied about the objects of the trust, the genuineness of its activities, etc., and that these could not be verified in this situation where the assessee has not spent any amount on the professed charitable objects of the trust. Aggrieved by this order of rejection, the assessee has preferred appeal before this Tribunal.

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4.

Before us, the Ld. AR of the assessee has vehemently argued that Ld. CIT(E) grossly erred in holding that absence of expenditure towards charitable objects automatically establishes non- genuineness of the activities of the Trust. He pointed out that neither Section 12AB nor Rule 17A provides for cancellation or rejection of registration of a regularly registered trust solely on this ground, and argued that the concept of genuineness of activities has to be appreciated in the context of the entirety of the trust’s conduct and the objects as stated in the trust deed. It is his contention that there is no finding by the Ld. CIT(E) that the objects of the trust are not charitable, or that the activities are bogus or sham, or that that there has been any diversification or misapplication of funds for non-charitable purposes, or even that there was any violation of Section 13 of the Act or any other applicable law. These, as argued, are the parameters prescribed under Section 12AB(1)(b)(ii) for the authority's satisfaction, and unless the existence of any of these are established, rejection of the application for renewal of registration is unsustainable in law.

4.1 Without prejudice to the above, the Ld. AR pointed out that it is a matter of record that the assessee has accepted voluntary contributions and incurred expenses which show that the trust had commenced its activities. During the course of hearing, he referred

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to a chart furnished before the Ld. CIT(E) showing total receipts, financial year-wise, as follows:-

Financial Year Total Receipts 2021-22 12,000/- 2022-23 41,000/- 2023-24 1,00,000/- 2024-25 67,000/- He also submitted that in the years where direct programme expenditure could not be incurred, the assessee was constrained by limited financial resources. But then, dormancy on account of resource constraints does not extinguish the genuine charitable nature of the trust or its intention to carry out its stated objects.

4.2 The Ld. AR has cited various judicial pronouncements in support of his contention as above. These include :

(i) Hon’ble Supreme Court in Ananda Social & Educational Trust v. CIT (2020), reported in 17 SCC 254/426 ITR 340. (ii) Hon’ble Delhi High Court in Foundation of Ophthalmic and Optometry(2012), reported in ITA 1687/2012. (iii) Hon’ble Supreme Court in CIT(Exemption) v. International Health Care Education & Research Institute – SLP (Civil) No. 4564/2025, & (iv) Ujwal Foundation v. CIT (Exemption) - ITA Nos 167 & 168/Hyd/2025.

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All of these, as stated, broadly lay down that registration cannot be denied merely because the proposed activities had not yet commenced.

4.3 Per contra, the Ld. CIT-DR strongly supported the stand taken by the Ld. CIT (E).

5.

We have considered the submission of both the parties in the light of the material placed before us. It is a fact that the assessee had filed submissions in response to notice dated 02/01/2026 which, in its view, constituted sufficient compliance to the said notice. There is nothing on record to show that pursuant to examination of the documents submitted, the Ld. CIT(E) had called for further documents or had informed the trust of his intention to consider rejection of the application on the ground that no expenditure had been incurred towards the stated objects of the trust. It is difficult to find fault with the Ld. AR’s line of argument that absence of further communication from the Ld. CIT(E) led to the reasonable belief that the assessee had furnished documents to the satisfaction of Revenue. The Ld. CIT(E) has also not mentioned anything in his order about the amounts received by the assessee as voluntary contributions during the financial years concerned.

5.1 The Hon’ble Supreme Court, in Ananda Social and Educational Trust vs. CIT [supra], has, inter alia, held that while

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granting registration, the Commissioner is required to examine whether the objects of the trust are genuinely charitable and if the proposed activities are genuine, rather than assess whether the trust has already commenced actual charitable activities. It held that authorities must focus on the genuineness of the trust's objects and its proposed roadmap, not on its past operations. It is pertinent to mention here that when Revenue argued for reconsideration of the precedent in Ananda Social and Educational Trust in CIT vs. International Health Care Education and Research Institute [supra], the Hon’ble Apex Court declined to refer the matter to a larger Bench, and once again confirmed the principle that registration under Section 12AA can be granted even in the absence of actual charitable activities, provided the proposed objects and activities are found to be genuine and charitable. It ruled that the Commissioner's duty at the registration stage is confined to examining the objects of trust and whether the proposed activities align with those charitable objects.

5.2 Respectfully following the judicial pronouncements as above, we deem it appropriate to restore the issue to the file of the Ld. CIT(E) for fresh adjudication of the assessee's application for renewal of registration in the light of the relevant provisions of the Act and the decisions cited above.

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6.

With this, all the grounds raised by the assessee stand disposed of.

7.

In the result, the assessee's appeal is allowed for statistical purposes.

Order pronounced in the open Court on 31/08/2026

Sd/- Sd/- (BEENA PILLAI) (RATNA DASGPUTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/08/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai

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