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Facts
The assessee, a trust providing education to children with special needs, applied for registration under section 80G(5) of the Income Tax Act. The CIT(Exemptions) rejected the application, citing the lack of donations and the use of student fees for activities not deemed charitable.
Held
The Tribunal held that an assessee cannot be denied registration merely for collecting fees from students, especially when there's no allegation of misuse. The Tribunal restored the issue to the CIT for fresh adjudication, directing the assessee to furnish necessary documents.
Key Issues
Whether denial of registration under section 80G(5) solely based on collecting fees from students and not receiving donations is justified. Whether the CIT(Exemptions) correctly identified defects in activities or documents submitted.
Sections Cited
80G(5), 12AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SHRI NARENDER KUMAR CHODHRY & SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the ld. CIT(Exemptions), Bangalore vide order dated 27/12/2024 in DIN No. ITBA/EXM/F/EXM45/2024-25/1071606313(1).
The only issue raised by the assessee is that the learned CIT (Exemptions) erred in denying the application for registration under section 80G(5) of the Act, without pointing out any defect in its activities.
The necessary facts are that the assessee, in the present case, is a trust and engaged in providing quality education to children who needs special education. The assessee filed an application for registration in Form 10AB dated 29 June 2024. This application was rejected by the learned CIT (Exemptions) vide order dated 27 December 2024 for the following reasons: • The assessee had not received any donation in the current year, i.e., between 1 April 2024 to 31 October 2024.
• The assessee received fees from students amounting to ₹30,87,600 which were used for the following purposes: o Rent expenses: ₹7,90,000 o Professional fees: ₹4,19,007 o Children’s welfare expenses: ₹2,34,023 o Other expenses: ₹9,00,210
Based on the above, the learned CIT (Exemptions) observed that the assessee had not received any donations and had used a large portion of fees for activities that were not charitable in nature. In view of the above, the learned CIT (Exemptions) was of the view that the conditions specified under clauses (i) to (v) of section 80G(5) of the Act had not been complied with. Further, the assessee failed to submit necessary documents to establish the genuineness of its activities. Therefore, the learned CIT (Exemptions) rejected the application for registration under section 80G(5) of the Act.
Being aggrieved by this order, the assessee has filed an appeal before us.
The learned AR before us submitted that there is no bar on collecting fees from students under the law. Also, the learned CIT (Exemptions) has not pointed out any defect in the objects of the trust. According to the learned AR, registration under section 12AB of the Act had already been granted to the assessee on similar objects. It was further submitted that the assessee, in order to carry out charitable activities, had to incur necessary administrative expenses. Without such expenses, the objects of the trust could not be achieved.
The learned AR also pointed out that the assessee had received donations in the earlier year amounting to ₹3,81,032.00 only. Hence, it was incorrect to say that no donations were received. According to the learned AR, the assessee had received donations in the subsequent assessment year as well. The learned AR requested that the matter be restored to the file of the learned CIT (Exemptions) for fresh adjudication as per the law.
On the other hand, the learned DR did not raise any objection if the matter is set aside to the file of the learned CIT (Exemptions) for fresh adjudication as per the law.
We have heard the rival contentions of both parties and have perused the materials on record. From the discussion above, we note that registration was denied on the ground that the assessee collected fees from students and used the same for the activities which were held to be not charitable in nature.
9.1 It is well-settled law that an assessee cannot be denied registration merely for collecting fees from students, especially when there is no allegation that such funds were misused or used in a manner contrary to the trust’s objects. It is also seen that the registration application was rejected for failure to submit necessary documents. However, the learned CIT (Exemptions) has not specified which documents were not submitted by the assessee. Further, there is no specific finding by the ld. CIT (Exemptions) about violation of any condition specified under section 80G(5) of the Act. Therefore, in the interest of justice and fair play, we are inclined to restore the issue to the file of the learned CIT (Exemptions) for fresh adjudication in accordance with law. The assessee is also directed to furnish necessary documents to establish its charitable activities. Hence, the ground of appeal of the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in court on 13th day of August, 2025