VAITHILINGAM PARASHAKTHI ELAMATHI TRUST,VIRUDHUNAGAR vs. CIT, EXEMPTIONS,, CHENNAI

ITA 1283/CHNY/2026Status: DisposedITAT Chennai07 October 202611 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the rejection of the applications by the CIT(E) primarily on the ground that the assessee earned substantial laboratory and academic fees, thus engaging in commercial activities, could not be sustained without a proper examination of the actual activities and supporting evidence. The Tribunal found the CIT(E)'s approach to be too narrow. It reasoned that an institution providing medical relief does not cease to pursue a charitable object merely by recovering fees from some beneficiaries. What is material is the overall nature of the institution, its objects, the manner of activities, and the application of its income. The Tribunal noted that the substantial component of laboratory receipts does not automatically conclude commercial nature; receipts must be examined in context of services, beneficiaries, rates, free/concessional services, expenditure, and surplus deployment. The principle of quid pro quo also requires reconsideration in light of the totality of activities and dominant purpose. The assessee had provided specific material indicating medical camps, assistance to needy patients, and free services, which should not be brushed aside. The Tribunal set aside the impugned orders and restored both applications to the CIT(E) for fresh consideration, directing the CIT(E) not to reject the applications merely on the ground of substantial fee receipts but to consider them independently based on the trust's objects and genuineness of activities, affording the assessee an adequate opportunity of being heard.

What were the facts?

The assessee, Vaithilingam Parashakthi Elamathi Trust, filed appeals against the orders of the Commissioner of Income Tax (Exemptions) (CIT(E)), Chennai, dated 29.12.2025. These orders rejected the assessee's applications for permanent registration under Section 12A and approval under Section 80G(5) of the Income Tax Act, 1961. The assessee is a charitable trust established on 23.07.2009, previously registered under Section 12A and recognized under Section 80G. It had obtained provisional registration and recognition for AYs 2022-23 to 2026-27. The applications for permanent registration and recognition were filed on 17.05.2025. The CIT(E) rejected these applications, citing that the trust operated like a private institution on a quid pro quo basis rather than charity, with a significant portion of its income derived from lab and academic fees.

What were the issues?

1. Whether the assessee's applications for permanent registration under Section 12A and approval under Section 80G(5) of the Income Tax Act, 1961, were rightly rejected by the CIT(E) on the grounds that the trust generated substantial income from laboratory and academic fees, indicating commercial activities? Assessee's contentions: The assessee argued that the CIT(E)'s rejection was too narrow and did not consider the overall nature of the institution, its objects, the manner of activities, and the application of income. The assessee contended that recovering fees from beneficiaries for medical diagnostic services does not inherently negate charity, and the issue should be viewed in totality. The assessee also submitted that medical camps were conducted, needy patients were assisted, and a portion of diagnostic facilities was provided free of cost, which should not be disregarded. The trust deed clearly includes objects for relief to the poor and education, and the assessee provided material concerning these activities. Revenue's contentions: The revenue, through the CIT(E)'s order, argued that the trust was not established on the principles of charity but purely on commercial lines with the principle of quid pro quo. The CIT(E) observed that a major source of income was lab income (genetic counseling fees and testing fees), constituting over 50% of its total income. The CIT(E) also noted that medical facilities were not provided free of cost and that the trust failed to prove it was a public charitable trust, thus considering it a private trust. The CIT(E) concluded that the activities could not be held as incidental or ancillary to the core activities and that the dominant purpose test failed.

Which sections of the Income-tax Act were involved?

Section 12A,Section 80G(5),Section 12(1)(ac)(i),Section 80G(5)(i),Section 80G(5)(ii),Section 12A/12AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA

For Respondent: Ms. T.M.Suganthamala, CIT
Hearing: 10.08.2026Pronounced: 07.10.2026

PER S. R. RAGHUNATHA, AM

These two appeals of the assessee are filed against the separate orders of the learned Commissioner of Income Tax (Exemptions), Chennai (in short ‘ld.CIT(E)’) vide both the orders dated 29.12.2025 rejecting the application for permanent registration u/s.12A and approval u/s.80G(5) of the Income Tax Act, 1961 (in short ‘the Act’) respec

The order continues below.

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