INSPIRED LEADERSHIP GURUKUL,GURGAON vs. ITO WARD - EXEMPTIONS, FARIDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, A: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No.- 4985/Del/2026 [Assessment Year: NA] ITA No.- 4986/Del/2026 [Assessment Year: NA] Inspired Leadership, ITO, Plot No.-76, Sector-44, Gurugram- Ward (Exemption), 122003. Vs Aaykar Bhawan, New CGO Complex, NH-IV, Faridabad, Haryana-121001. PAN- AACCI9890B Assessee Revenue Assessee by Sh. Ajay Vohra, Sr. Adv. Sh. Deepesh Jain, Adv. & Sh. Shaurya Jain, CA Revenue by Ms. Pooja Swaroop, CIT(DR) Date of Hearing 22.07.2026 Date of Pronouncement 05.08.2026 ORDER Per Renu Jauhri, Accountant Member:

These two appeals by the assessee are directed against the orders both dated 21.03.2026 of the ld. Commissioner of Income Tax (Exemption), Chandigarh,

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership [hereinafter referred to as the ‘Ld. CIT(E)], rejecting the application for registration u/s 12AB and approval u/s 80G of the Act. 2. The assessee has raised the following grounds of appeal (ITA No.- 4985/Del/2026):

“1. That on the facts and circumstances of the case and in law, order dated 21.03.2026 in Form No. 10AD passed by Commissioner of Income Tax (Exemption), Chandigarh CIT(E) under section 80G(5) of the Income tax Act, 1961 (the Act) rejecting/dismissing application for registration is illegal and bad in law. (Ground No.1) 2. That the CIT(E) erred on facts and in law in denying registration under section 80G(5) on the ground that in absence of registration under section 12AB (being rejected vide separate 2 order dated 21.03.2026), the appellant does not meet the requirement for approval, without appreciating that denial of registration under section 12AB of the Act is per-se incorrect and bad in law. (Ground No.1.1) 3. That the appellant respectfully craves leave to add, amend, alter and /OR forego any ground(s) at OR before the time of hearing.”

2.1 The assessee has raised the following grounds of appeal (ITA No.- 4986/Del/2026):

“1 Re: Jurisdictional grounds/issues 1. That on the facts and circumstances of the case and in law, order dated 21.03.2026 in Form No. 10AD passed by Commissioner of Income Tax (Exemptions), Chandigarh ['CIT(E)'] under section 12AB(1)(b)(ii)(B) rejecting/ dismissing application for registration under section 12A(1)(ac)(ii) of the Income tax Act, 1961 ('the Act') is illegal and bad in law. 1.1 That on the facts and circumstances of the case and in law, rejection of application for registration by the CIT(E) is beyond the scope of section 12AB of the Act inasmuch as the (i) activities carried on by the appellant are genuine; and (ii) the appellant has undisputedly complied with all other laws which are material for achieving the objects.

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership 1.2 That the CIT(E) erred on facts and in law in rejecting the application for registration based on various factually incorrect, bald and/or irrelevant allegations and on the basis of mere conjectures and surmises, holding that the appellant failed to satisfy the genuineness of the activities carried out. Re: Allegations/observations in the impugned order 2 That on the facts and circumstances of the case and in law, the CIT(E) erred in alleging that the appellant has indulged in systematic and scalable profiteering/ commercialization of education by charging exorbitant fees and generating surplus, which is against charitable intent. 2.1 That the CIT(E) erred on facts and in law in not appreciating that the appellant undisputedly operates education institution, Soil School of Business Design, which provides a Post Graduate Diploma in Management thereby imparting 'education' to the students in India, which is purely a charitable activity in terms of section 2(15) of the Act. 2.2 That the CIT(E) erred in alleging that the assessee charged high fees from students, without bringing on record any cogent or credible or comparable evidence to substantiate such allegation and/ or establish that the fees charged was excessive. 2.3 That the CIT(E) erred in not appreciating that mere charging of fees, even if high as alleged, does not, by itself, negate the charitable character of an educational institution or establish absence of genuineness of activities. 2.4 That the CIT(E) erred in not appreciating that-(i) fees charged is fair and reasonable vis-à-vis quality education and continuous investment in infrastructure, technology and upgradation; (ii) surplus in some year(s) is on account of higher student enrolment, and (ii) funds are undisputedly utilized for the objects and hence activities of the appellant cannot be branded as commercial. 3 That on facts and circumstances of the case and in law, the CIT(E) erred in alleging that the unsecured loan provided to the appellant by its holding company is structured with a motive to provide unwarranted control to its holding company, without bringing on record any cogent or credible evidence/ reason to substantiate such allegation. 3.1 That the CIT(E) erred on facts and in law in not appreciating that (i) the fundamental educational activities are independently carried on by the appellant; and (ii) financial support (loan) drawn from holding company on arm's length basis, cannot undermine independence of the appellant. 3.2 That the CIT(E) erred in completely ignoring the fact that such loans were primarily availed in the initial years of establishment of the appellant for the purpose of construction and development of the campus of the appellant.

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership 4 That the CIT(E) erred in doubting the genuineness of the rent expenses of Rs.3.20 crores incurred by the appellant during the assessment year 2024-25 alleging the same to be diversion of funds for benefit of related parties. 4.1 That the CIT(E) erred on facts and in law in not appreciating that(i) the premises taken on rent were used for purposes of the educational institution; (ii) the rentals paid are on arm's length basis; and (iii) no cogent evidence has been brought on record to allege such rentals to be excessive or to doubt genuineness of utilization of properties taken on rent. 5. That the CIT(E) erred in doubting the genuineness of the marketing expenditure of Rs.2.67 crores incurred by the appellant during the assessment year 2025-26 holding that the appellant is undertaking aggressive promotional campaigns with the objecting of increasing revenue rather than pursuing charitable activities. 5.1 That the CIT(E) erred on facts and in law in not appreciating that appellant has undertaken structured, transparent and need based promotional activities to expand its educational outreach in a competitive environment and to create awareness amongst prospective students, in line with the educational objects/ activities of the appellant. 6. That the CIT(E) erred on facts and in law in not appreciating that the genuineness of the charitable activities and independent status of the appellant has not been disputed by the Revenue officers during past assessment(s). 7. That on the facts and circumstances of the case and in law, the CIT(E) exceeded jurisdiction in holding that the 'rejection would also supersede any registration granted u/s 12AB of the Act by any authority at any earlier time' without appreciating that the said action is beyond the scope/ powers vested in the authority as per section 12AB(1)(b)(ii)(B) of the Act. 8. That the CIT(E) erred on facts and in law in passing the impugned order rejecting the registration without issuance of any prior show cause notice confronting the appellant with reasons for proposed rejection of registration, which is not only violative of the statutory provisions but also the principles of natural justice. 8.1 That the CIT(E) erred on facts and in law in rejecting the application for registration without affording adequate opportunity of being heard and without judiciously considering the replies/details furnished by the appellant. That the appellant respectfully craves leave to add, amend, alter and /or forego any ground(s) at or before the time of hearing..”

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership 2.2. Since these two appeals are against the rejection of applications for registration u/s 12AB and approval u/s 80G and the facts involved are identical, these are being disposed of vide a common order and ITA No. 4986/Del/2026 is taken as a lead case. 3. Brief facts are that the assessee trust filed an application for registration u/s 12A(1)(ac)(ii) on 29.09.2025 seeking registration u/s 12AB of the Act. The assessee is running an education institution namely, SOIL School of Business Design/SOIL Institute of Management at Manesar, Gurugram offering management education programs. Ld. CIT(E) observed that the assessee was generating high surplus income from its activities. Further, it had received unsecured loans amounting to Rs. 30.74 cr. from its holding company, Grow Talent Company Ltd., despite earning substantial surplus income each year. Upon examination of the financial statements, the CIT(E) noted sharp rise in marketing expenditure and rental expenses during A.Y. 2024-25 as compared to the immediately preceding year. After considering the assessee’s replies to his various queries, the CIT(E) rejected the application with the following observations: “6. In view of the foregoing, it is evident that the applicant institution is charging substantial fees, generating large surpluses year after year, undertaking extensive marketing campaigns for admissions and maintaining financial arrangements with related entities, which collectively indicate that the activities are being carried out in a commercial manner with profit-oriented objectives.

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership 7. For the purposes of registration under section 12AB, the Commissioner is required to satisfy himself about the genuineness of activities and the charitable nature of objects and operations. In the present case, the pattern of operations, high surplus margins, large marketing expenditure for admissions and related-party financial arrangements indicate that the activities of the applicant are not being carried out solely for charitable purposes but have significant commercial characteristics. 8. In view of the foregoing, the undersigned is of the considered view that the applicant has also not been able to establish that the activities of the society are genuinely charitable and free from elements of private benefit. It is seen that the financial transactions display notable commercial characteristics. The onus lies on the applicant to dispel such doubts with cogent and verifiable evidence, which has not been satisfactorily done in the present case. Accordingly, the present application of the applicant filed in Form 10AB u/s 12A(1)(ac)(ii) of the Act is rejected for the reasons discussed above. This rejection would also supersede any registration granted u/s 12AB of the Act by any authority at any earlier time.

Aggrieved, the assessee has filed appeal before the Tribunal. Ground no. 1 to 7: In these grounds, the rejection of application for renewal of registration has been challenged. 4. Before us, Ld. AR has argued the case at length and made the following written submissions: “Scope of enquiry at time of grant of registration by CIT(E): 13. In terms of provisions of section 12A(1)(ac)(ii), a charitable institution already registered/approved under section 12AB of the Act is required to apply for renewal of registration at least six months prior to the period when registration/ approval is due to expire. Such application for renewal is required to be dealt by the Commissioner in the manner provided in section 12AB(1)(b) of the Act, which reads as under: "Procedure for fresh registration. 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,-

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) or item (B) of sub-clause (vi)] of the said clause,- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about- (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i), (A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing.- (1) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 124 rejecting such application and also cancelling its registration: (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 124, rejecting such application, after affording a reasonable opportunity of being heard; (c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution." (i) 14. The aforesaid provisions provide that on receipt of application for renewal of registration, the Commissioner shall call for documents and information to satisfy himself about genuineness of activities; and (ii) compliance of other laws for time being in force as are material for the purpose of achieving its objects. After being satisfied about the objects of the trust or institution, genuineness of activities thereof and compliance with other laws, the Commissioner would pass an order in writing registering the trust and institution for period of five years; if the Commissioner is not satisfied, he may pass an order rejecting/ cancelling the registration after affording opportunity of being heard. 15. The scope of enquiry at the time of registration under section 12AB is, it is respectfully submitted, limited to examination to the satisfaction of the CIT(E) about (A) the

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership genuineness of the activities and (B) compliance with other laws as are material to the objects to the institution. 16. In the case of DIT vs. Garden City Educational Trust: 330 ITR 480 (Kar. HC), the Hon'ble High Court upheld the findings recorded by the Tribunal in holding that, notwithstanding the discrepancies and misapplication of the funds of the trust as noticed by the Commissioner, the trust nevertheless having the object of running educational institutions, would qualify as a trust having a charitable purpose as one of its objects. It further held that the scrutiny as to the application of funds was an exercise required to be undertaken by the Assessing Officer and not by the Commissioner while granting registration under section 12A of the Act. 17. In the case of Muni Education Society vs. ITO: ITA No.1709/Del/2026 (Del. Trib.) dated 10.07.2026, the assessee was running a CBSE affiliated Senior Secondary School. While dealing with rejection of registration under section 12AB(1) by CIT(E) by drawing adverse inference from the financial credentials and application of funds, this Hon'ble Tribunal observed that registration under section 12AB of the Act is only an enabling provision for claiming exemption and that the grant of registration, by itself, does not render the income exempt. It further held that, at the stage of considering an application for registration, the prescribed authority is required to examine only the objects of the trust, the genuineness of its activities, and whether there is any violation of any other law for the time being in force, issues relating to the actual eligibility of exemption are to be examined during the assessment proceedings and not while deciding the application for registration. The Tribunal accordingly directed the CIT(E) to allow the application and issue registration. The relevant findings of the Tribunal are reproduced as under. 6. The law in this regard is settled that at this stage only the object of the trust and genuineness of the activities were to be examined along with the fact if there was any infringement of any other law for the time being in enforce. The certificate of registration is only an enabling provision to claim exemption and by merely granting registration, income is not exempted. The Id. Tax authorities have sufficient powers to subsequently examine the application of funds and to then deny the exemption as claimed. Further, with provisions of specified violation coming into effect the ld. Tax authorities have powers to cancel registration once granted if any specified violation is found to be committed. However, at this stage by examining the application of funds, registration cannot be denied by alleging that some parts of the funds are diverted. Reliance in this regard is placed on the decision of Hon'ble Karnataka High Court in CIT, CC Vs. AS Kupparaju Brothers Charitable Foundation Trust (2012) 17 taxman.com 242 (Karnataka); the Coordinate Bench decision in the case of Pista Devi Education Society Vs. CIT(Exemptions) Chandigarh 2026 (5) TMI 993-ITAT Delhi & ITAT Chandigarh decision in the Indian Institute of Model Education Society, Chandigarh Vs. The CIT(E) Chandigarh 2026 (5) TMI 36-ITAT Chandigarh. 7. In the light of aforesaid discussion we sustain the grounds. The appeal is allowed and the ld. Prescribed authority is directed to allow the application and issue the registration"

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership 22. In light of the aforesaid legal position, attention is invited to the objects of the appellant being imparting higher education and promoting research across various academic disciplines, as evident in the Memorandum of Association (pages 99-100 of PB):  Establishing and running schools, colleges and educational institutions for the community at large, to build competent, compassionate and inspiring leaders;  Operating non-commercial training, research and information centres to develop ethical and effective leadership in all walks of life;  Providing advisory and training services across all management and knowledge streams;  Granting scholarships and financial assistance to poor, blind and underprivileged students;  Providing education and community training to street children, orphans and the handicapped;  Undertaking any ancillary welfare activities that promote the overall well-being of society;

- The objects of the appellant are not disputed/ doubted by the CIT(E) in the impugned order. - The factum of appellant imparting education is not in dispute. A detailed note on activities, the details of educational institution run by the appellant (SSOBD), post graduate programmes/ courses run by the appellant, year-wise details of total receipts from students along with corresponding number of students enrolled etc. was placed on record before the CIT(E) [refer pages 79- 101 of PB]. - It is not in doubt or dispute that appellant solely runs the aforesaid institution (SSOBD); the institution is well renowned and carries a brand for post- graduation programme it runs; the institution has eminent faculty, dependable administration, suitable infrastructure and impeccable placement record. - The charitable nature of the appellant's objects and activities have not been doubted by the Revenue/ assessing officer in any past year. The appellant has 10

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership consistently been claiming exemption under sections 11/12 of the Act, which has never been disallowed. Copy of the assessment order passed under section 143(3) of the Act for the assessment year(s) 2018-19 and 2023-24 are attached as Annexure 1A and 1B respectively. - The appellant is answerable to the ACITE for any contraventions and is required to comply with the directions issued by the it from time to time, for conducting its PGDM programme. The compliance on part of the appellant has never been disputed by the competent authority; the appellant has an unblemished track record. Similarly, there is no violation of any other law as may be material for the object of the assessee. The competent authority constituted under the relevant law governing education have not raised any doubts on the activities undertaken by the appellant. Accordingly, it may not be open for the querist to doubt the same [refer Kids-R-Kids International Education & Social Welfare Trust vs Pr. CCIT: ITA No. 781/Chd/2015- Revenue's appeal dismissed by Punjab & Haryana High Court in [2017] 399 ITR 572 (P&H), Mukund Bhavan Trust vs. CIT(E): [2025] 174 taxmann.com 36 (Pune Trib.), CMR Educational Society vs. DCIT: [2025] 179 taxmann.com 424 (Hyd. Trib.)]. - Application of fund has been consistently for the purposes of institution i.e., for charitable purposes. 25. In view of the aforesaid, particularly considering the objects and that the factum of appellant providing education through institute run by it (SSOBD), the action of the CIT(E) in denying registration is patently beyond jurisdiction, erroneous, illegal and bad in law.”

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership 6. We have heard the rival submissions and perused the material available on record. Various judicial pronouncements on the issue of registration and denial thereof have also been carefully considered. 6.1 Admittedly, the assessee is running an educational institution imparting management courses in accordance with the objects of the trust, which is to establish and run educational institutions. At the stage of registration u/s 12AB under the new regime, CIT(E) is required to examine the objects of the charitable entity and the genuineness of its activities, as also the compliance of requirements under any other law by it. Relevant provisions in this regard are reproduced below: “Procedure for fresh registration. 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,— (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub- clause (iv) or sub-clause (v) or item (B) of sub-clause (vi) of the said clause,— (i)call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— (A)the genuineness of activities of the trust or institution; and (B)the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii)after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),— (A)pass an order in writing registering the trust or institution for a period of five years; or (B)if he is not so satisfied, pass an order in writing,— (I)in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (II)in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub- section (1) of section 12A, rejecting such application,

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership after affording a reasonable opportunity of being heard; (c)where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution: (2)………………….” (emphasis supplied by us)

6.2 We note that the CIT(E) has neither pointed out any issue in the objects of the assessee trust nor doubted the fact that it is running an education institution. He has denied registration for the reasons that the institution is being run on commercial lines with a profit motive and fees charged are exhorbitant. He has further doubted the excessive expenditure on marketing, rent etc. besides related party transactions to conclude that the activities of the assessee are not charitable in nature but with a profit motive and hence rejected the application. 6.3 After careful consideration of the relevant provisions as well as the judicial citations relied upon by the assessee, we are of the considered view that the assessee is admittedly running an education institution as per its objects and the same is covered under charitable activities for the purpose of registration. Ld. CIT(E) is, therefore, not justified is rejecting the application at the registration stage for the reasons mentioned in his order. We, accordingly, hold that the rejection order of mainly because the assessee is generating surplus income by charging high fees from the students is without any justification. We therefore, restore the matter to the

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership CIT(E) for granting the registration subject to the fulfilment of requirements u/s 12AB of the Act. Needless to add, reasonable opportunity of being heard should be given to the assessee before finalizing the orders. 5. Since application for approval u/s 80G has also been rejected on similar ground, above decision will apply mutatis mutandis to ITA No. 4985/Del/2026 also. 5. In the result, both appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on 05.08.2026

Sd/- Sd/- [SATBEER SINGH GODARA] [RENU JAUHRI] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 05.08.2026 Pooja, Sr. PS. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR

Asst. Registrar, ITAT, New Delhi,

ITA No.- 4985 & 4986/Del/2026 Inspired Leadership

1 Date of dictation of Tribunal order 3.8.26 2. Date on which typed draft order is placed before 3/8/26 the dictating Member 3 Date on which typed draft order is placed before the other Member (in the case of DB) 4. Date on which the approved draft order comes to P.S/Sr.P.S 5. Date on which the fair Order is placed before the dictating Member for sign 6. Date on which the fair Order is placed before the other Member for sign ( in the case of DB) 7. Date on which the Order comes back to P.S./Sr.P.S for uploading on ITAT website Date of uploading, if not, reason for not 8. uploading 9. Date on which the file goes to the Bench Clerk 10. Date on which order goes for xerox 11. Date on which order goes for endorsement 12. Date on which the file goes to the Superintendent/O.S. for checking 13. Date on which the file goes to the Assistant Registrar for signature on the order 14. Date on which the file goes to dispatch section for dispatch the Tribunal Order 15. Date of dispatch of order Date on which file goes to Record Room after 16. dispatch the order