DR. SOUNDRAM TRUST,DINDIGUL vs. ITO, EXEMPTION WARD,, MADURAI

The assessee raised the following grounds of appeal:

The CIT erred in holding that the appellant trust has not involved itself in any of the charitable activities and thus not eligible for approval u/s 80G.

The CIT erred in holding that the appellant's object did not fall within the meaning of education/medical/relief for poor and thus did not fall within the definition of section 2(15) of the Act.

The CIT clearly failed to appreciate that the appellant's object is for upliftment of rural communities and upliftment of their life.

The CIT erred in holding that the appellant's activities are only for the purpose of making profits and not charitable.

The CIT did not appreciate the fact that the Trust's objective is to do all or any of other charitable activities conducive to attainment of the objects of the Trust and furtherance of the objects, but shall not include activities of profit and that the income will be applied for charitable purposes.

The appellant craves the leave of the Hon'ble Tribunal to adduce additional grounds in support its contentions before and during the course of hearing of this appeal.

The brief facts of the case emanating from the records are that the assessee is a charitable trust, incorporated on 26.02.2009 and having registered u/s.12AA of the Act w.e.f. 01.04.2023. The trust has established with the object of relief of poor, providing employment to them and support education, medical relief and other activities particularly to promote and maintain economic activities for the relief to destitute women, orphans or the physically challenged women or children, small and marginal farmer’s indigent artisans or senior citizens. At the beginning it was started with one printing press i.e. publication division. Later in the middle of year 2010 two more units were added in the field of natural dyeing research and training and the other one is sanitary napkins. Presently, it is functioning with two units i.e. publication division and natural dyes research and training centres.

The assessee had obtained the provisional approval u/s.80G(5)(iv) of the Act on 24.09.2021 from 24.09.2021 to A.Y.2024-25. Consequently, assessee filed an application dated 26.06.2024 in Form 10AB under Rule 11AA of the IT :-3-: ITA. No:556/Chny/2025. Rules 1962 under clause (iii) of first proviso to sub-section (5) of section 80G seeking approval under clause (ii) of 2nd proviso to section 80G(5) of the Act.

During the proceedings, the assessee provided the details of objects and activities carried on by the trust along with the audited financials as on 31.03.2024. On perusal of the submissions along with the financials of the trust, the ld.CIT(E) is of the view that the assessee’s activities are of commercial in nature and relying on the decision of the Hon’ble Apex court in the Sole Trustee, Loka Shikshana Trust v.CIT[1975] 101 ITR 234, the trust activities cannot be held as education and hence rejected the application of renewal holding as under: “Trust activities cannot be held as relief of the poor: The applicant in its Form 10AB described its objects as relief of the poor. To consider any activities within the limb of "Relief of Poor" in the definition of charitable purpose:It must be for the poor; and there must be relief to the poor. Thus, the most important element to fall under "Relief of Poor" is that the person to whom the relief is provided must be from a section of poor class. Thus, relief of poor shall have a public character i.e. it must benefit to public rather than a few selected individuals. It is relevant to mention the CBDT circular no 11/2008 wherein it is clearly described that ‘Relief of poor’ encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, crphans or the handicapped, disadvantaged women or children, small and marginal farmers. indigent artisans or senior citizens in need off aid. From the details available on records and from the financials, it is seen that the trust is not actually engaged in any such activities which can be treated as relief of the poor. Neither, no amount has been spent towards "Charity".

6 Further, The applicant during the course of proceedings submitted that the Hon'ble ITAT in its own case has allowed the registration by directing that the application of the funds should not be verified at the time of registration. The ITAT has stated that what is relevant Is to see with reference to the objects of the Trust if they are charitable in nature or not.

7 Trust activities cannot be held as education: The applicant in its Form 10 mentioned one of its objects as Education. To consider the activities of the Trust as education and in turn a charitable one, it is necessary that such activities of the association should fit to the limb of education as set out by the Hon'ble apex court the case of Sole Trustee, Loka Shikshana Trust v. CIT (1975) 101 ITR 234. And New Nobile Educational Society v. CCIT (2022) 143 taxmann.com 276. However, from the notes on activities, the objects of the Trust as per its deed and its financials for various years, it is seen that the Trust does not engage itself in any of the educational activities as described in the above para.

8 Trust activities cannot be held as Medical relief: The applicant in its Form 10AB mentioned one of its objects as Medical relief. But in the instant case, none of the activities of the trust can be classified as medical relief as evident from its objects, notes on objects, notes on activities and financials.

9 Hence, from the above discussion it is clear that the applicant has not undertaken any charitable activities except for having some of them as its of as its :-5-: ITA. No:556/Chny/2025. objects. Besides, the applicant's argument of giving relief to the poor is not tenable to consider it as charitable when no expense was met towards it.

In view of the above, the application filed by the applicant in section code 80G(5)(ii) in Form 10AB is not maintainable as such deserves for rejection. Under the facts and circumstances of the case, its application dated 30.06.2024 filed in Form No.10AB under clause (iii) of first proviso to section 80G(5) of the Income Tax Act, 1961, seeking approval u/s. 80G is not maintainable for the reasons stated in para 3.1 to 3.9 of this order and hence the application is rejected.”

Aggrieved by the order of the ld.CIT(E) the assessee is in appeal before us.

The ld.AR for the assessee submitted that the ld.CIT(E) has erred in rejecting the application of the assessee, though the assessee has established that the assessee’s activities are of charitable in nature by providing the nature of activities along with audited financials.

The ld.AR submitted that the assessee is a Non- Governmental Organization incorporated in the year 2009 with the aim of providing relief to the economically and socially weaker sections of the society. The Trust was incorporated with objectives of providing relief to disadvantaged women and children, orphans, disabled, small and marginal farmers, indigent artisans and senior citizens by undertaking income generation and other economic activities like managing a printing press and to do fundamental research, develop and propagate natural dyeing and other related works.

Further, the ld.AR the Trust comes under the larger umbrella of activities of the Gandhigram Trust and steers clear of any commercial motives or profit-

The ld.AR argued that the ld.CIT(E) did not appreciate the fact that the Trust's objective is to do all or any of other charitable activities conducive to attainment of the objects of the Trust and furtherance of the objects, but shall not include activities of profit and that the income will be applied for charitable purposes. Further, ld.AR argued that the very purpose of carrying on the activity of Publication and natural dyeing activity itself is providing the complete training to make the people employable and providing employment to the local poor and women destitutes. The ld.AR submitted the paper book consisting of 26 pages, providing the trust deed, financials for the F.Y. 2017-18, 2018-19 and 2018-19 and drew our attention to the excess of expenditure over income in two years

Further, the ld.AR relied on the decision of the Chennai coordinate bench decision in the case of Jewellers and Diamond Traders Association v. ld.CIT(E) – [2025] 179 taxmann.com 43 (Chennai – Trib) has directed to grant registration under section 12AB of the Act. In view of the above, the ld.AR prayed for granting the approval u/s.80G(5) of the Act by setting aside the order of the ld.CIT(E).

Per contra, the ld.DR for the revenue supported the order of the ld.CIT(E) and submitted that as observed by the ld.CIT(E) the assessee has been carrying on the commercial activities and hence the same cannot be termed as charitable in nature. Therefore, the ld.AR prayed for confirming the same.

We have carefully considered the rival submissions, perused the material available on record and examined the order passed by the Ld.CIT(E). The short issue for adjudication is whether the assessee-trust is entitled to approval u/s.80G(5) of the Act.

At the outset, it is an undisputed fact that the assessee-trust was constituted in the year 2009 with objects aimed at relief of the poor, upliftment of disadvantaged women and children, promotion of employment opportunities to rural communities, support to small and marginal farmers, artisans and senior citizens, besides carrying on activities connected with training, publication, natural dyeing research and village industries. It is also not in dispute that the assessee has already been granted registration u/s.12AA/12AB of the Act and had earlier been granted provisional approval u/s.80G of the Act.

The primary reason assigned by the ld.CIT(E) for rejecting the application is that the assessee has allegedly not undertaken charitable activities and that :-8-: ITA. No:556/Chny/2025. the publication and natural dyeing activities are commercial in nature. The ld.CIT(E) further observed that no expenditure has been incurred directly towards charitable purposes and therefore the activities cannot be regarded as falling within the ambit of relief of the poor, education or medical relief. We are unable to subscribe to the above reasoning of the ld.CIT(E).

The material placed before us demonstrates that the assessee was established with the avowed object of generating employment opportunities to economically weaker sections, particularly rural women, artisans and marginalized communities. The publication division and natural dyeing centres are not standalone profit-oriented ventures but are intrinsically linked to the charitable objectives of the trust. The activities are undertaken as a means of providing livelihood, skill development, training and employment opportunities to disadvantaged sections of society. The very object clauses of the trust indicate that such activities are intended to further the charitable purposes and not to maximize profits. We further note that the financial statements placed before the authorities reveal substantial expenditure towards salaries and wages and, in certain years, even an excess of expenditure over income. These facts do not support the conclusion that the trust is carrying on activities with a predominant profit motive. On the contrary, they indicate that the receipts generated are being utilized towards achieving the objects of the trust and sustaining employment-oriented activities.

The ld.CIT(E) appears to have proceeded on the premise that unless separate charitable expenditure is incurred under a distinct head described as "charity", the activities cannot be regarded as charitable. Such an approach, in our considered opinion, is contrary to the settled legal position. Where the dominant object of an institution is charitable and the activities carried on are intrinsically connected with the attainment of such objects, the mere generation of receipts or carrying on of activities resulting in revenue cannot, by itself, render the institution non-charitable.

Further, while considering an application u/s.80G of the Act, the authority is required to examine whether the institution is genuinely carrying out its stated charitable objects and whether the conditions prescribed under the Act are satisfied. In the present case, the genuineness of the trust is not doubted. The trust has been in existence since 2009, possesses registration u/s.12AB of the Act and has been carrying on activities in furtherance of its stated objects. No material has been brought on record by the Revenue to establish diversion of funds, personal benefit to trustees, or utilization of income for non-charitable purposes.

In our considered view, the ld.CIT(E) has adopted an unduly narrow interpretation of the assessee's activities and has failed to appreciate the true nature and purpose of the activities undertaken by the trust. The rejection of approval u/s.80G of the Act merely on the ground that the trust generates revenue through its activities cannot be sustained when such activities are carried on as a means of achieving the charitable objectives of the institution. Accordingly, having regard to the objects of the trust, the nature of activities carried on, the material placed on record and the absence of any adverse finding regarding the genuineness of the institution, we hold that the assessee satisfies the conditions prescribed u/s.80G(5) of the Act. In view of the foregoing discussion, we set aside the order of the ld.CIT(E) dated 30.12.2024 and direct the ld.CIT(E) to grant approval to the assessee-trust u/s.80G(5) of the Act, in :-10-: ITA. No:556/Chny/2025. accordance with law. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.