SS EARLY LEARNING SOCIETY,HYDERABAD. vs. CIT (EXEMPTION), HYDERABAD.

ITA 1208/HYD/2025Status: DisposedITAT Hyderabad16 October 2026AY 2026-2711 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Commissioner of Income Tax (Exemptions) erred in rejecting the assessee's application for registration under Section 12AB of the Income Tax Act, 1961. The Tribunal found no dispute regarding the assessee's aims and objectives, which are charitable in nature, and that its activities are carried out in accordance with these objectives. The Tribunal emphasized that merely charging fees or generating a surplus does not automatically render an institution non-charitable, especially when the surplus is incidental and applied for educational purposes. Reliance was placed on the Supreme Court's decisions in *New Noble Educational Society* and *Queen's Educational Society v. CIT* [2015] 55 taxmann.com 255 (SC), which held that disproportionate weight should not be given to surpluses if they are incidental to the primary charitable activity, and that at the stage of registration, the focus should be on the activity itself. The Tribunal also directed the CIT(Exemptions) to condone the delay in filing the application for renewal due to medical exigencies, as the order of the CIT(E) did not specifically discuss the issue of limitation. Consequently, the appeal filed by the assessee was allowed, and the CIT(E) was directed to grant registration under Section 12AB.

What were the facts?

The assessee, SS Early Learning Society, filed an appeal against the order of the Commissioner of Income Tax (Exemption), Hyderabad, dated 26.06.2025, for the assessment year 2026-27. The assessee, engaged in promoting education and operating a kindergarten school, had previously received provisional and final registration under Section 12A(1)(ac)(vi) and Section 12AB respectively. The assessee applied for renewal of registration in Form 10AB on 08.11.2024. The CIT(Exemption) rejected the application, citing exorbitant fees charged (Rs. 2,10,000/- to Rs. 3,50,000/- per annum) and a significant surplus of Rs. 1,34,24,945/- on total receipts of Rs. 3,45,93,501/- for AY 2024-25, indicating a profit motive rather than charitable purpose. The assessee contended that the surplus was incidental and applied for educational objects, and that the delay in filing the renewal application was due to medical exigencies.

What were the issues?

1. Whether the order dated 26.06.2025 passed by the Commissioner of Income Tax (Exemptions) rejecting the assessee trust's renewal application for registration under Section 12A(1)(ac)(ii) of the Income Tax Act, 1961, is justified? (Question of law and fact, turning on Section 12AB and Section 2(15)). 2. Whether the Ld. CIT(Exemptions) erred in rejecting the Appellant's application in Form 10AB for registration under Section 12AB, ignoring that the Appellant is solely engaged in the advancement of education, a recognized charitable purpose under Section 2(15)? (Question of law and fact, turning on Section 12AB and Section 2(15)). 3. Whether the Ld. CIT (Exemptions) failed to appreciate that the Appellant's activities squarely fall within the definition of "charitable purpose" under Section 2(15), being advancement of education, and not General Public Utility (GPU), thus the restrictive proviso to Section 2(15) is not applicable? (Question of law and fact, turning on Section 2(15)). 4. Whether the Ld. CIT (Exemptions) erred in drawing adverse inference based on the quantum of fees charged or surplus generated, without considering that mere surplus does not negate the charitable character, especially when applied for educational objects? (Question of law and fact, turning on Section 12AB and Section 2(15)). 5. Whether the Ld. CIT(Exemptions) erred in refusing to entertain the Appellant's application as "belated" without considering the condonation request dated 10.06.2025 filed due to medical exigencies? (Question of law and fact, turning on principles of natural justice and procedural rules). Assessee's Contentions: The Ld. CIT(E) erred in rejecting the application solely on grounds of exorbitant fees and surplus, without establishing non-genuine activities or non-charitable nature. The objects and activities remain unchanged since prior registration. Reliance was placed on *New Noble Educational Society v. CIT & Anr.* [2002] 448 ITR 594 (SC) and *Malco Vidyalaya Matriculation Higher Secondary School v. Chef CIT* [2019] 103 taxmann.com 104. Revenue's Contentions: The Ld. CIT-DR supported the order, arguing that exorbitant fees and significant surplus (approx. 38% for AY 2024-25) indicate a profit motive, not charitable purpose, making the activities non-charitable as defined under Section 2(15).

Which sections of the Income-tax Act were involved?

Section 12AB,Section 12A(1)(ac)(ii),Section 2(15),Section 13(1)(c),Section 10(23C)(vi)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G

PER MANJUNATHA.G, AM:

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Exemptions), Hyderabad, dated 26.06.2025, and pertains to assessment year 2026-27. ITA 1208/HYD/2025

2.

The assessee has raised the following grounds of appeal:

1.

The order dated 26.06.2025 passed under Section 12AB by th

The order continues below.

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