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Facts
The assessee trust applied for registration u/s 12AB of the Income Tax Act. The CIT(Exemptions) rejected the application, observing that the trust had not made substantial expenditure towards its objects and had not commenced its activities.
Held
The Tribunal held that the CIT(Exemptions) erred in rejecting the registration application solely based on the quantum of expenditure, without considering the genuineness of the activities and the fact that it was the first year of operation. The Tribunal emphasized that genuineness of activities is key, not the quantum of expenditure.
Key Issues
Whether the denial of registration u/s 12AB by the CIT solely on the grounds of insufficient expenditure, without considering the genuineness of proposed or actual activities, is justified.
Sections Cited
12AB, 12AA, 13(5)
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Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(Exemptions) Bangalore dated 17.12.2024 vide DIN & Notice No. ITBA/EXM/F/EXM45/2024- 25/1071305748(1) cancelling the registration u/s 12AB of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee trust was constituted vide Deed of Trust dated 17.1.2022 at Bangalore with the object of carrying out Charitable activities, assisting people in development programs, activities in corporate social responsibility and in entrepreneurship promotion, thrift and micro-credit, technology, self-help, education and research, environment conservation and other general cause. The assessee Trust filed for provisional registration u/s 12AB of the Act on 11.8.2022 against which the provisional registration was granted in Form 10AC on 19.8.2022. Thereafter, the Trust commenced its activities on 1.4.2022 and accordingly filed Form 10AB on 29.6.2024 vide acknowledgement No. 532100490290624. On receipt of application in form 10AB dated 29.6.2024 for registration u/s 12AB of the Act, the case was assigned to the JAO for verification. On perusal of the Hands On CSR Trust, Bangalore Page 3 of 8 submission made by the assessee, both the Range Head and JAO did not recommend for registration.
The ld. CIT(Exemptions) observed that the assessee trust has not made substantial amount of expenditure towards the objects and the assessee has not submitted any proof or evidence of activities and accordingly held that assessee has not commenced its activity towards the attainment of the objects. consequently, the ld. CIT(Exemptions) rejected the application in form no.10AB dated 29.6.2024 filed for registration u/s 12AB of the Act.
Aggrieved by the order of ld. CIT (Exemptions), the assessee has filed the present appeal before this Tribunal. The assessee has also filed a paperbook comprising 34 pages containing therein Submissions of the assessee along with copy of the resolution of trustees & Annual report of activities (FY 2022-23).
The ld. A.R. of the assessee submitted that ld. CIT (Exemptions) erred in observing that assessee has not commenced its activities towards the attainment of the objects especially when the report of the AO and the Range Head as reproduced by the ld. CIT (Exemptions) are self-explanatory. Further, the ld. A.R. of the assessee submitted that the assessee trust had produced all the necessary documents/details as required for registration as the ld. CIT (Exemptions) herself in para 5 of the Order had observed that the assessee submitted all the necessary documents/details as required for registration u/s 12AB of the Act. Lastly, the ld. A.R. submitted that it is only the genuineness of the activities and not the quantum of expenditure which are relevant for granting registration u/s 12AB of the Act.
The ld. D.R. on the other hand supported the order of ld. CIT (Exemptions).
We have heard the rival submission and perused the materials available on record. On going through the order of ld. CIT (Exemptions), we take note of the fact that the ld. Jurisdictional assessing officer as well as Range Head had reported that the assessee trust had incurred major expenses towards “programme related expenses” of Rs. 24,90,805/- during the assessment year 2023-24. Similarly, for assessment year 2024-25, the expenses are booked for “project related expenses” and “software and website maintenance” of Rs.1,33,592/-. In support of its claim, the assessee trust had also produced certain bills and vouchers towards programme related expenses and project related expenses. Therefore, we are not in agreement with the view of the ld. CIT (Exemptions) that assessee trust had not made substantial amount of expenditure towards the objects. We also completely disagree with the view of the ld. CIT(E) that the assessee had not commenced its activities towards the attainment of the objects. We are quite surprised to note that on the one hand the ld. CIT(E) has observed that the assessee had not made substantial amount of expenditure & on the other hand apprehended that the assessee has not commenced its activities which are contradictory.
8.1 We are of the firm opinion that for the purpose of granting registration, the ld. CIT(E) shall call for such documents or information or make such inquiry as he/she thinks necessary in order to satisfy himself/herself about the twin object:- (a) the genuineness of the activity of the trust and (b) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the Hands On CSR Trust, Bangalore Page 5 of 8 purpose of achieving its object. We are also of the considered opinion that at the time of granting registration, the ld. CIT(E) should not steps into shoes of the AO & in the guise of Registration proceeding starts assessing the Income of the assessee Trust. On going through the order of the ld. CIT(E), we take a note of the fact that there is not even a whisper about any non-genuineness of the activities carried on by the assessee trust. The JAO in his report has only doubted certain expenses to be excessive without bringing any adverse material on record. Further, the assessee by way of written submission has stated that the Trust had not carried out any charitable activities outside India. Further, the assessee has also submitted the copy of the resolution passed on 12/05/2025 wherein the trustees had proposed for an amendment in the Trust deed by deleting “and any other countries, especially in developing countries” in clause 5.0 & omitting “and improvement of international relationship” in clause 5.5.c. The assessee trust has also produced the annual report for the FY 2022-23 placed at page 15-30 of the paper book. We are of the opinion that it is not the quantum of expenditure, which is relevant for the purpose of granting registration but in fact the genuineness of the activity of the trust in accordance with the object of the trust, is relevant for granting registration u/s 12AB of the Act.
8.2 Under the similar facts and circumstances, this coordinate bench of ITAT in the case of Dhwani Shrishti Foundation Vs. CIT (Exemption), Bangalore reported in (2025) 75 taxmann.com 454 has held as under:
7. We have heard the rival submissions and perused the materials available on record. On going through the order of ld. CIT(E), we find that the ld. Jurisdictional assessing officer (JAO) observed that assessee had received general donation of Rs.48,40,444/- along with service income of Rs.2,09,000/- and interest income of Rs.1,92,024/-. Further, the ld. JAO also observed that medical relief expenses of Rs.5,90,512/- were incurred towards the object of the trust & could not Hands On CSR Trust, Bangalore Page 6 of 8 find it to be non-genuine. Therefore, we do not agree with the contention of the ld. CIT(E) that the assessee had not commenced its activity towards the attainment of the objects. Further, it is an undisputed fact that the assessee trust was registered as a public trust only on 28.6.2023. Therefore, we agree with the contention of the ld. A.R. of the assessee that since it was the first year of its operation, the assessee trust could not spend towards the large scale activity and accordingly the assessee trust had invested Rs.40 lakhs in the fixed deposits as per the modes prescribed in section 13(5) of the Act in order to spend for future applications. Further, we also take a note of the fact that the ld. CIT(E) on the one hand, herself observed that the assessee has submitted all the necessary documents/details as required for registration u/s 12AB of the Act and on the other hand, observed that assessee has not submitted any proof or evidence of activities, which in our opinion is contradictory in itself. We take a note of the fact that the main judiciousness in rejecting the registration of the assessee trust is that the assessee had not made substantial amount of expenditure towards the object. We are of the firm opinion that for the purpose of granting registration, the ld. CIT(E) shall call for such documents or information or make such inquiry as she thinks necessary in order to satisfy herself about the twin object:- (a) the genuineness of the activity of the trust and (b) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its object. 7.1 In the present case, the ld. CIT(E) has observed that the assessee had submitted all the necessary documents/details as required for registration u/s 12AB of the Act. Further, there is not even a whisper about any non-genuineness of the activities carried on by the assessee trust. The only allegation by the ld. CIT(E) is that the assessee had not made substantial amount of expenditure towards the object of the Trust. We are of the considered opinion that it is not the quantum of expenditure which are relevant for the purpose of granting registration but in fact the genuineness of the activity of the trust in accordance with the object of the trust is relevant for granting registration. Therefore, we agree with the contention of the ld. A.R. of the assessee that it is only the genuineness of the activity and not the substantial amount of expenditure which are relevant for granting registration u/s 12AB of the Act. In the present case, it is an undisputed fact that the assessee had already commenced its activity towards the attainment of the object as the assessee trust had incurred the medical relief expenses towards attainment of its objects as observed by the JAO & ld. CIT(E). Since it was the first year of its operation, the assessee was not able to spend towards the large scale activity and hence, filed Form No. 10 on 30.9.2024 vide ack. No.548944470300924 for accumulation of Rs.38,50,000/- for the purposes of “project vision and educational support for a period of 5 years and invested the amount in the fixed deposit as per the prescribed mode.
7.2 At this juncture it is worthwhile here to mention the observations of the Apex Court in the case of Ananda Social & Educational Trust v. Commissioner of Income taxreported in (2020) 426 ITR 340 as below- “We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant - Director of Income-tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. We therefore find that the view of the Delhi High Court in the impugned judgment is correct and liable to be upheld. Ms. Bhati, learned Senior Counsel for the appellant, fairly drew our attention to a judgment of the Allahabad High Court in IT Appeal No. 36 of 2013 titled as "Commissioner of Income Tax-II vs. R.S. Bajaj Society" which has taken the same view as that of the Delhi High Court in the impugned judgment. The Allahabad High Court has also referred to a similar view taken by the High Courts of Karnataka and Punjab & Haryana. Apparently, a contrary view has been taken by the Kerala High Court in the case of Self Employers Service Society v. Commissioner of Income-tax - [2001] Vol.247 ITR 18. That view however does not commend itself. However, the facts in Self Employers Service Society (supra) suggest that the Commissioner of Income-tax had observed that the applicant for registration as a Trust had undertaken activities which were contrary to the objects of the Trust. In the result, we find that there is no reason to interfere with the impugned judgment of the High Court of Delhi. The appeal is, accordingly, dismissed”
7.3 We respectfully following the above judgment are of the opinion that the purpose of section 12AB of the Act is to enable the registration only of such trust or institution whose objects and activities are genuine. In other words, the ld. CIT(E) is bound to satisfy herself that the object of the trust is genuine and that its activities are in furtherance of the objects of the trust, that is equally genuine. Since Section 12AB of the Act pertains to the registration of the trust and to assess of what a trust has actually done, we are of the view that the term ‘activities’ in the provision include proposed activities’. In the present case, the assessee trust had filed form 10 for accumulation of Rs.38,50,000/- for the purpose of “project vision and educational support” which in our view is a proposed activity in line with the objects of the Trust.
7.4 In these circumstances, we are of the considered opinion that the ld. CIT(E) grossly erred in not granting registration merely on the basis of not incurring the substantial amount of expenditure and accordingly, we allow the appeal of the assessee and direct the ld. CIT(E) to grant registration u/s 12AB of the Act as applied by the assessee trust on 20.4.2024 in form No. 10AB. It is ordered accordingly.”
8.3 Respectfully following the above decision of the coordinate Bench, We are of the opinion that the ld. CIT(Exemptions) grossly erred in not granting registration merely on the basis of not incurring the substantial amount of expenditure and accordingly, we allow the appeal of the assessee and direct the ld. CIT(Exemptions) to grant registration u/s 12AB of the Act as applied by the assessee trust on 29.6.2024 in form No. 10AB. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed. 9.