SHAKUNTALA SURANA CHARITABLE TRUST, DURG, DURG vs. CIT( EXEMPTION), BHOPAL, BHOPAL

The sole issue raised vide five grounds of appeal, revolves around rejection of the assessee’s application for renewal of registration under section 12(1)(ac)(ii) of the Act.

The relevant facts giving rise to this appeal are that the assessee has filed the Form No.10AB of the Income-tax Rules, 1962 for renewal of registration under section 12(1)(ac)(ii) of the Act. The Ld. CIT(E) show-caused the appellant assessee to submit requisite details and documents so that he would be able to verify the eligibility of the appellant assessee engaged in charitable activities. In response, the assessee filed its Income & Expenditure Account for last three years which showed neither substantial receipts nor substantial expenses incurred to meet the objective of the trust. The Ld. CIT(E), opining that the minimal receipt and expenditure of the assessee showed the assessee a defunct trust, issued the notice to the assessee to explain that why not it might be treated defunct trust not carrying out substantial activities to meet its objective. However, the assessee did not ensure any response to the show cause notice providing opportunity of being heard on 21.03.2026. Consequentially, the Ld. CIT(E) did not grant approval for renewal of registration of the trust and rejected the said application. Aggrieved, the assessee is here.

None attended on behalf of the assessee to represent the case. However, an adjournment petition had been filed, which was not acceded to. On our specific query, Ld. CIT-DR did not object for remitting the matter back to the file of the Ld. CIT(E).

We have heard Ld. CIT-DR and have perused the material available on record. From the impugned order it is evident that the assessee has not received substantial receipts for incurring expenses to meet its objectives. We are of the considered view that a trust cannot be denied renewal of registration solely on the reasoning that it has not yet commenced or carried out substantial activities. The law only requires that the objects are genuine and that the activities the trust intends to carry out are legitimate. Following two primary conditions have to be checked by the Ld. CIT(E): i. Genuineness of Objects and ii. Compliance with Laws. The Ld. CIT(E), while rejecting the said application, has nowhere held that (i) the objects of the assessee trust are not exclusively charitable or religious, (ii) the activities carried out by the assessee are not genuine or violate the conditions of its registration, (iii) the assessee trust is engaged in non-incidental business activities or applied income for private religious purposes and (iv) the assessee trust has failed to comply with applicable laws. Primarily he rejected the said application on the reasoning that the assessee did not file any explanation to the last show-cause notice and established the genuineness of its activities. We are of the considered view that the quantum of expenditure does not determine the genuineness of the activities carried out by any trust. A genuine trust, in nascent stage, takes substantial time for getting approvals from various authorities, getting proper office premises, recruiting manpower, etc. Since the nascent trust having no much public attention does not get substantial fund to incur expenses on its objective. Rather, it incurs expenditure on its survival. The Ld. CIT(E)’s opinion that the trust is a defunct trust is not backed by any reason except that the quantum of expenditure is not substantial. It is hereby clarified that the above observation should not be treated as comment on the merit of the case.

Keeping in view of the facts of the case and in the interest of justice, we are of the considered view that the appellant assessee deserves reasonable opportunity of being heard to make shortcomings/non-compliance. Thus, we deem it fit to set aside the impugned order and remit the matter back to the file of the Ld. CIT(E) for deciding the case afresh/denovo. We Order accordingly. The appellant assessee should ensure compliance during the remitted proceedings before the Ld. CIT(E) and the Ld. CIT(E) is also required to provide reasonable opportunities of being heard to the appellant assessee before deciding the case on merit.

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