GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR,HULKOTI vs. PRINCIPAL COMMISSIONER OF INCOME TAX, BENGALURU

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ITA 904/BANG/2026Status: DisposedITAT Bangalore21 July 2026AY 2025-266 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(E) erred by not considering the assessee's submitted replies and documents. The assessee's activities were charitable, funded by government agencies and banks, and not commercial in nature.

What were the facts?

The assessee, a society registered for over 25 years, applied for renewal of registration under Section 12AB and approval under Section 80G. The CIT(E) rejected both applications, alleging the assessee collected fees exceeding 20% of total receipts, thus engaging in trade or business.

What were the issues?

Whether the assessee's activities constituted trade or business due to alleged fee collection, and if the CIT(E) properly considered the submitted evidence before rejecting the applications.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 80G,Section 2(15)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.

PER SHRI SOUNDARARAJAN K., JUDICIAL MEMBER:

These appeals are filed by the assessee challenging the separate orders of Ld.CIT(E) both dated 24/12/2025 in which the approval sought for u/s. 80G of the Act as well as the registration sought for u/s. 12AB has been rejected by the Ld.CIT(E).

2.

The brief facts of the case are that the assessee is a society and got their registration u/s. 12A of the Act more than 25 years ago. The assessee was also granted approval u/s. 80G

ITA Nos. 899 & 904/BANG/2026 GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR of the Act. The assessee got their registration and approval renewed without any adverse orders. The society is mainly doing the welfare activities of giving training for the rural youth and women without getting any fees and the assessee got the grants from the various government agencies. In fact, it is the program sponsored by the government and therefore no separate registration or license is required for conducting the said training program. The assessee being a registered society under the Societies Registration Act, 1960, they filed their audited financials and returns and complied with the provisions of the various laws. On 03/04/2025, the assessee had applied for the renewal of their registration u/s. 12AB of the Act as well as for the approval u/s. 80G of the Act. The Ld.CIT(E) was of the view that the assessee trust is collecting fees from the students and on that basis, a show cause notice was issued on 07/11/2025 and sought for an explanation that the receipts constitutes more than 20% of the total receipts and therefore, as per the proviso to section 2(15) of the Act, the assessee is carrying on the trade, commerce or business. The Ld.CIT(E) had found that the assessee had not responded to the said notice and therefore he concluded that the activity of giving training to the rural youth and women is a service rendered for consideration rather than a charitable activity carried out primarily for public benefit. Therefore, the Ld.CIT(E) had rejected both the applications filed by the assessee.

3.

As against the said rejection orders, the assessee is in appeal before this Tribunal.

4.

At the time of hearing, the Ld.AR submitted that the assessee is an institute sponsored by the State Bank of India along with Agricultural Science Foundation, a society registered at Gadag District in the name and style of “Gadag Institute for Training in Self Employment and Rural Development”. The Ld.AR further submitted, based on the memorandum of association and rules and regulations, that the objects of the assessee institution is for the welfare of the rural youth and women to take up self employment ventures and the assessee has earned income in the form of donations, grants, subscriptions or aids in cash or kind from the sponsors / public / banks / institutions / corporations / government / foreign sources etc. and if at all any profit has been earned by the assessee, it would be utilized for the purpose of the objects of the assessee and not to be distributed among the members of the assessee. The Ld.AR also submitted that the assessee has not received any fees from the trainees and all the expenses for conducting the training program was sponsored by the government or other agencies and therefore the finding of the Ld.CIT(E) that the assessee had received fees from the students which is more than 20% of the receipts is not correct. The Ld.AR further

ITA Nos. 899 & 904/BANG/2026 GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR submitted that the assessee society was formed 25 years ago and all along, the registration as well as the approval has been duly granted by the revenue and the revenue also does not point out any mistakes in the running of the institute and therefore there is no doubt in the genuineness of the activities carried on by the assessee. The Ld.AR also furnished the copies of the financial statements for the year ending March 2022, March 2023, March 2024 and March 2025 and submitted that the books of accounts were duly audited by the auditors. The Ld.AR also filed copies of the letters issued by the SBI, Khadi and Village Industries Commission and other organisations who have sponsored the training programs to pay the expenses towards the said training. The Ld.AR also submitted that they have submitted their reply to both the show cause notices on 29/10/2025 and 07/11/2025 enclosing the objections as well as the required documents. The Ld.AR also furnished the said acknowledgments and also furnished the copy of the reply filed by the assessee and also the receipts and payments statement for the A.Y. 2022-23 and submitted that the Ld.CIT(E) without considering the said facts had concluded that the assessee had not furnished the details and rejected both the applications and prayed to set aside the orders and direct the Ld.CIT(E) to grant approval as well as the registration u/s. 12AB of the Act.

5.

The Ld.DR relied on the order of the Ld.CIT(E) and prayed that the appeal may be dismissed.

6.

We have heard the arguments of both sides and perused the materials available on record.

7.

We have perused the memorandum of association and rules and regulations of the assessee society in which the following objects have been prescribed: “The objectives of the GITSERD are as under :- 1) To identify potential rural entrepreneurs, motivate and train them to take up self-employment ventures. 2) To create gainful employment opportunities for the unemployed youth migrating from rural areas. 3) To provide need based training and to assist them it getting required financial assistance through the bank branches for productive vocations. To create a sense of confidence for the successful utilization of credit with post-training follow-up actions. 4) To brief them about efficient methods of production, managerial techniques and latest marketing techniques,

ITA Nos. 899 & 904/BANG/2026 GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR 5) To initiate in them self-help method, leadership qualities, group approach developments, habit of thrift arid co-operative concepts. 6) To initiate extension programmes to educate youth in better use of modern agricultural technology, animal husbandry, and allied fields. 7) To propose suitable academic programmes, conduct seminars and workshops and to organize training courses to persons involved in self employment to take up project consultancy work including monitoring and evaluation work in respect of Rural Development Project. 8) To take up arty other relevant activity which can bring about qualitative improvements in the above objectives. 9) To co-ordinate with institutes engaged in developmental activities for Upliftment of poor. 10) Any other relevant activity approved by the Governing Council” 8. The assessee society is run by the governing council comprising the officials of the State Bank of India as well as the Agricultural Science Foundation. It is also a fact that the assessee society is giving training to the rural youths for motivating them to take up self employment ventures as well as to create gainful employment opportunities for the unemployed youth migrating from rural areas. The assessee society is also assisting the rural youth in getting financial assistance through the bank branches for productive vocations. In a nutshell, the assessee society is helping the rural youths to find out self employment ventures without receiving any fees from the said youths. In fact, this assessee institute is mostly funded by the Ministry of Rural Development and also through the sponsoring bank i.e. SBI through the CSR funds. We also find that the assessee society is giving training for the rural youth and women for self employment through practical skill based programs such as Junior beauty practitioner, tailoring, embroidery, videography, photography, pottery, dairy farming, sheep rearing, cell phone repairs & services etc. The various communications furnished by the assessee would indicate that the training programs are funded by the government agencies and public sector undertakings and therefore no commercial activities were carried out by the assessee. This fact was also evidenced from the audited financial statements filed by the assessee. Further, there is no contravention of any other law by the assessee society. We have also seen that the assessee had filed form 10 for the A.Ys. 2023-24 and 2024-25. From the above said facts, we find that the assessee is a society established solely for the welfare of the rural youth and women without receiving anything from the beneficiaries and therefore they are doing the charitable activities which in turn help the public at large.

ITA Nos. 899 & 904/BANG/2026 GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR 9. We have also perused the copy of the acknowledgment downloaded from the portal of the department which shows that the assessee had submitted the reply as well as the documents in pursuant to the notice issued by the Ld.CIT(E). The Ld.CIT(E) without considering the said documents and replies, had concluded that the assessee had not furnished the reply as well as the documents to the show cause notice issued by him.

10.

In such circumstances, the order of the Ld.CIT(E) rejecting the applications for registration as well as for granting approval are bad in law. We also not found any materials to show that the assessee had received fees from the students for imparting the training but the Ld.CIT(E) had observed that the assessee trust is earning income through fees which is more than 20% of the total receipts and therefore they are doing the commercial activities. We have also considered the fact that the assessee is not a newly formed society and in fact, it exists for more than 25 years and all along, the assessee society is regularly got registration as well as approval u/s. 80G, in such circumstances, the impugned orders rejecting the applications by giving some invalid reasons are liable to be set aside. We, therefore, set aside the orders of the Ld.CIT(E) and restore these issues to the file of the Ld.CIT(E) for considering the granting of the registration u/s. 12AB as well as the approval u/s. 80G of the Act in accordance with law. It is needless to mention that the Ld.CIT(E) may also consider the observations made by us in this order.

11.

In the result, both the appeals filed by the assessee are allowed for statistical purposes.

Order pronounced in the open court on 21st July, 2026.

Sd/- Sd/- WASEEM AHMED SOUNDARARAJAN K. ACCOUNTANT MEMBER JUDICIAL MEMBER

Bangalore Dated: 21st July, 2026

ITA Nos. 899 & 904/BANG/2026 GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR Copy to: GADAG INSTITUTE FOR TRAINING IN SELF EMPLOYMENT AND RURAL DEVELOPMENT DIRRECTOR, 1 KHPATIL KRISHI VIGYAN KEN, DRA CAMPUS HULKOTI, GADAG-582205, KARNATAKA

PRINCIPAL COMMISSIONER OF INCOME TAX (EXEMPTIONS) BANGLORE, 2 UNITY BUILDING ANNEXE, MISSION ROAD, BENGALURU-560027, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH

BY ORDER

ASSISTANT REGISTRAR, I.T.A.T., BANGALORE.

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