M/S. ACTION RURAL HOUSING ,CHENNAI vs. CIT EXEMPTIONS, CHENNAI

The Assessee raised the following grounds of appeal : “1. The order of the Commissioner (Exemptions) is bad on law and on facts.

Briefly, the facts of the case are that the assessee is company incorporated under the provisions of section 8 of the Companies Act, 2013 with the main motive of Relief for the Poor and Human Safety. It is formed with the following objects :

The appellant-trust filed the response to the questionnaire on 24.10.225. On due consideration of the information filed by the appellant-company, the Learned CIT(Exemptions) formed an opinion that the objects of appellant-company are similar to microfinancing. The activity of microfinancing held to be not to be charitable in nature and also referred to the decision of Hon’ble Madras High Court of Madras in the case of M/s.Kalanjiam Development Financial Services vs. ITO , wherein it was held that “when the objective of the Appellant-trust itself is microfinance to do lending operation in the microfinance sector to earn interest which is not charitable in nature”. Then, accordingly the Learned CIT(Exemptions) issued a show cause notice calling upon the appellant-company to show cause as to why the registration cannot be denied. In response to show cause notice, the appellant-company filed a detailed submission on 19.03.2026. According to the Learned CIT(Exemptions), the submissions made by the Assessee-company are “unreadable/invalid format/corrupted files and could not accessed”, therefore, treated that the aplanat-company had not complied with the show cause notice, accordingly, rejected the grant of registration u/s.12AB of the Income Tax Act, 1961.

Being aggrieved by the order, the appellant-company filed appeal before this Tribunal. Before us, it was contended by the Learned Counsel that the main objective of the appellant-trust are promoting hygienic and health living of the people in Rural Community through proper housing “Relief for the poor” as specified in the first limb of Section 2(15) of the Income Tax Act, 1961. The Learned Counsel further submits that the appellant- trust provides educational support completely free of cost funded by the nominal surplus generated from the 12% interest maintenance charges and further pleaded the interest so collected is not profit but is cross-subsidizing other direct charitable acts.

On the other hand, Learned CIT(DR) vehemently opposed the above submissions.

We heard the rival submissions and perused the material available on record. The issue that arises for our consideration is whether the Learned CIT(E), Chennai was justified in rejecting the grant of registration u/s.12AB of the Income-tax Act, 1961. On mere perusal of the impugned order, it would be evident that the Learned CIT(E) had denied the grant of registration only for the reason that the appellant-company had not complied with the show cause notice issued calling upon the appellant to explain why the registration u/s.12AB cannot be denied. On mere reading the impugned order, it is evident that the Learned CIT(Exemptions) held that the appellant-company had not complied with the show cause notice for the reason that the information filed in response to the show cause notice is “unreadable/invalid format/corrupted files and could not accessed”. When the information filed by the appellant-company is not accessible, it is incumbent upon the Learned CIT(Exemption) to give an opportunity to the appellant-company to file fresh reply to the show cause notice. The Learned CTIT(Exemption) had failed to do so. Therefore, in order to meet the ends of justice, we are of the considered opinion that the matter requires a remand to file of Learned CIT(E) for de novo disposal of the application in accordance with law after affording an opportunity of hearing to the appellant-company.

In the result, appeal filed by the assessee-company stands partly allowed for statistical purpose. Order pronounced in the open Court on 21st September, 2026.