NEHRU SMARAKA VIDYA KENDRA TRUST,BANGALORE vs. COMMISSIONER OF INCOME TAX, EXEMPTIONS, BANGALORE

The learned Commissioner of Income Tax (Exemptions) has failed to comprehend the fact that, appellant has not only having fees receipts it also has other than fees receipts, which are eligible for deduction under section 80G of the Income tax Act, 1961. 5. The learned Commissioner of Income Tax (Exemptions) has failed to comprehend the fact that, "fees receipts" is the revenue generated out of the regular activities carried by the Institution/Trust, which does not comes under the definition of Donation Received under section 80G of the Income tax Act, 1961. 6. The learned Commissioner of Income Tax (Exemptions) has wrongly assumed the chair of Appellant Trust by creating her own opinion at 6.4 of the order dated 17.1.2025 i.e., answer to (i) is "No" whereas answer to (ii) is Yes, by doing so, learned CIT(E) overlooked the fact that, the answer to (i) and (ii) may be vis a vis.

The learned Commissioner of Income Tax (Exemptions) while arriving at the excess of income over expenditure has grossly ignored the capital expenditure applied during the year as application of income under section 11(1) of the Income tax Act, 1961. 8. The learned Commissioner of Income Tax (Exemptions) erred in law in not allowing accumulation under section 11(1)(a) of the Income tax Act, 1961, being 15% of the gross receipts, as application of income.

The learned Commissioner of Income Tax (Exemptions) has failed to understand the method of computation of total income ie., application income in Trust cases.

The learned Commissioner of Income Tax (Exemptions) was not satisfied with the existing materials furnished by the appellant for granting approval in the interest of justice and having failed to do so, the order of denial is opposed to law and liable to be cancelled.

For these and such other grounds that may be urged at the time of hearing, the Appellant prays that the appeal may be allowed.”

The brief facts of the case are that the assessee is a charitable trust running educational institutions. The assessee trust also got the registration u/s. 12AB of the Act and the same is in force till date. The assessee had received donations and also received fees from students for imparting education. Based on the registration granted u/s. 12AB of the Act, the assessee sought for an approval u/s. 80G of the Act insofar as the donations received by the assessee are concerned. The assessee had not claimed the school fees u/s. 80G and only claimed the donations received from the donors. The Ld.CIT(E) had rejected the said application on the ground that the fees receipts do not fall under the purview of receipts u/s. 80G of the Act and thereby denied the approval u/s. 80G of the Act.

As against the said order, the present appeal has been filed by the assessee before this Tribunal.

At the time of hearing, the Ld.AR filed a synopsis and also filed the financial statements as well as a paper book and submitted that the assessee had claimed 80G only on the donations received by them which find place in schedule 12 of the consolidated income and expenditure account for the year ended 31/03/2024. The Ld.AR further submitted that the accounts were audited and a report to that effect was also filed before the authorities and therefore the Ld.AR submitted that the finding given by the Ld.CIT(E) is not correct and also not based on the materials furnished

The Ld.DR relied on the order of the Ld.CIT(E) and prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

We have perused the rejection order passed by the Ld.CIT(E). In the said order, the Ld.CIT(E) had observed that it is seen from the financial statements, the assessee had collected fees and therefore concluded that the provision of 80G would be applicable to the receipts in the form of donations only and therefore rejected the application filed for approval u/s. 80G(5) of the Act. We have also perused the financial statements furnished by the assessee and in schedule 12, the assessee had shown the donations received under the other income heads whereas the fees received was shown separately under schedule 10 to the consolidated income and expenditure account filed for the period ending 31/03/2024. From the said details, the assessee had not added the fees receipts for the purpose of claiming deduction u/s. 80G of the Act. In fact, the financials shows the separate details of the fees collection as well as the donations received from the donors. No doubt, the assessee is not entitled to utilise the 80G for the fees received from the students but it will apply only to the donations received from the donors. The assessee had also shown separately the fees collections as well as the donations received from the donors and therefore to the extent of the donations received by the assessee, they can utilise the approval granted u/s. 80G of the Act. If the authorities are able to establish that the assessee had also utilised the approval granted u/s. 80G of the Act in respect of the fees collected by them, then the Ld.CIT(E) may be correct in Page 5 of 7 No. 322/Bang/2025 vide order dated 25/04/2025 and in the case of Academy of General Education vs. CIT(E) in ITA No. 716/Bang/2025 vide order dated 17/06/2025. The Coordinate Bench in its order dated 25/04/2025 had considered a similar issue and gave the following finding: “8. In our considered opinion, the receipt of fees for educational services by a charitable institution registered under section 12AB of the Act does not disqualify it from seeking approval under section 80G of the Act, provided the institution's activities are genuine and falls within the purview of charitable purposes as defined under section 2(15) of the Act. Imparting education is recognized as a charitable purpose, and merely charging fees from students to sustain the functioning of the institution does not vitiate its charitable character, especially where no profit motive is evident, and the institution operates in accordance with its stated charitable objectives.

1 We also note the learned AR before us claimed the that the assessee has already been granted registration under section 12AB of the Act, thereby confirming the genuineness of its charitable activities. In such a situation, unless there is a specific adverse finding as to misuse of funds or deviation from the stated charitable purpose, denial of approval under section 80G of the Act solely on the ground of receiving fees from student is not legally sustainable.

2 Accordingly, we hold that the rejection of the application under section 80G of the Act by the learned CIT(E) is not justified and is liable to be set aside. The matter is restored to the file of the learned CIT(E) to examine the application afresh in accordance with law, after affording the assessee a reasonable opportunity of being heard and without being influenced solely by the ground of fee receipts. The ld. CIT(E) shall evaluate whether the donations, if any, are applied towards charitable purposes and whether all statutory conditions for approval under section 80G of the Act are met. Hence the ground appeal raised by the assessee is allowed for statistical purposes.”

Considering the facts involved in the present appeal as well as the principles laid down by the Coordinate Benches, we are of the view that the order of the Ld.CIT(E) is not a well considered one and therefore we are setting aside the same and remitted the same to the file of the Ld.CIT(E) for granting the approval u/s. 80G(5) of the Act, if there is no other impediments in granting the same.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 03rd December, 2025. (WASEEM AHMED) Judicial Member

Respondent 3. CIT

DR, ITAT, Bangalore

Guard file

CIT(A)