Loading judgment…
Facts
The assessee, a society registered under the Karnataka Societies Registration Act, applied for approval under Section 80G of the Income Tax Act. The CIT(Exemptions) rejected the application, citing that the society had not received donations or government grants, had not made substantial expenditure towards its objects, and had not commenced its major activities. The assessee had previously been granted registration under Section 12AA and provisional approval under Section 80G.
Held
The Tribunal held that the scope of inquiry for 80G approval extends to the genuineness of activities and fulfillment of conditions, not necessarily the actual receipt of donations. The Tribunal found that the CIT(Exemptions)'s observations were sweeping statements without corroborative evidence. The Tribunal noted that the assessee had received substantial amounts from tuition fees and donations and had applied substantial funds towards its educational objects.
Key Issues
Whether the CIT(Exemptions) was justified in rejecting the application for approval under Section 80G solely based on the non-receipt of donations and alleged lack of substantial expenditure and commencement of activities, despite prior registrations and provisional approvals.
Sections Cited
80G, 12A, 12AA, 2(15), 12AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & 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 13/12/2024 vide DIN & Notice No. ITBA/EXM/F/EXM45/2024- 25/1071190088(1) rejecting the application filed for approval u/s 80G of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
The brief facts of the case are that the assessee is a Society registered on 27/07/2015 under the Karnataka Societies Registration Act, 1960 (Karnataka Act 17 of 1960) vide Society Number: GDG-S99-2015-16 (Certificate of Registration of society placed at pg-1 of PB). The assessee society was originally registered u/s 12AA of the Act by way of an Order dated 29/03/2021 passed by the ld. CIT(E) Bangalore granting registration No. CIT(EXEMPTIONS) BANGALORE/12AA/2020-21/A/10793 with salient activities as Education. Thereafter, as submitted by the AR, the assessee had been granted registration u/s 12A(1)(ac)(i) of the Act on 08/07/2024. (Copy not submitted before us). Further, the assessee trust had been granted the provisional approval vide URN – AANAS3730MF20221 dated 02/12/2022 under clause (iv) of first proviso to sub-section (5) of section 80G from 02.12.2022 to assessment year 2025-26 in Form No.10AC by the ld. PCIT/CIT. The assessee trust thereafter applied for Students Education Society, Gadag Page 3 of 8 permanent approval as per clause (iii) of first proviso to sub-section (5) of section 80G of the Act in Form No.10AB on 30.06.2024.
3.1 The ld. CIT(Exemptions), Bangalore after granting opportunity of being heard rejected the approval u/s 80G of the Act on the following grounds:
(i) As per the Financial statements for the years ending 31.03.2022, 31.03.2023 & 31.03.2024, the assessee society has collected fees but has not received donations or Govt. grants.
(ii) On perusal of financials submitted it is observed that assessee has not made any substantial expenditure towards the objects of the trust. Thus, assessee has not commenced its activity towards the attainment of the objects of the trust.
(iii) From the financials, it could be observed that no major activities had been conducted by the assessee.
3.2 In view of the above, the application filed by the assessee trust in form 10AB dated 30.06.2024 for approval u/s. 80G of the Act was rejected and accordingly, the approval was cancelled by the ld. CIT(E) vide Order in Form No. 10AD dated 13/12/2024.
Aggrieved by the order of ld. CIT(Exemptions), Bangalore dated 13/12/2024, the assessee has filed the present appeal before this Tribunal.
Before us, the ld. A.R. of the assessee vehemently submitted that the ld. CIT(Exemptions) erred in rejecting the grant of approval u/s 80G of the Act especially having satisfied with the genuineness of the Trust and also having satisfied with the activity of the trust Students Education Society, Gadag Page 4 of 8 and granted registration u/s 12AB of the Act. The ld. A.R. of the assessee also submitted that for grant of approval u/s 80G of the Act, the ld. CIT(Exemptions) should only be satisfied about the genuineness of the activity of the trust and fulfillment of the conditions laid down in clause (i) to (v) of section 80G(5) of the Act. Further, the ld. A.R. of the assessee submitted that the ld. CIT(E) grossly erred in holding that the assessee has not made any substantial expenditure & thus has not commenced its activities.
The ld. D.R. on the other hand vehemently supported the order of the authorities below and submitted that no major activities has been carried on by the assessee towards the objects of the trust.
We have heard the rival submissions and perused the materials available on record. It is not a case of the Revenue that no details/documents submitted by the assessee before the ld. CIT(E). In fact the ld. CIT(E) herself observed that AR of the assessee appeared before her & submitted the details. Further, we are of the considered opinion that at the time of granting the registration u/s 12AA/12AB of the Act, the ld. CIT(Exemptions) must have satisfied after calling for the document/information from the trust about the genuineness of the activity of the trust or institution and 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. Further, we also take a note of the fact that the ld. CIT(Exemptions) has also granted the provisional approval URN – AANAS3730MF20221 dated 02/12/2022 under clause (iv) of first proviso to sub-section (5) of section 80G from 02.12.2022 to assessment year 2025-26 in Form No.10AC.
Students Education Society, Gadag Page 5 of 8 7.1 Now on going through the annexure to Form No.10AD dated 13/12/2024, we observed that the first contention for rejection by the ld. CIT(E) is that the assessee trust has not received donations or Govt. grants. We are of the considered opinion that the scope of enquiry by the ld. CIT(E) while dealing with the application for grant of approval u/s. 80G of the Act extends only to the satisfaction of the genuineness of the activities of such trust/institutions and the fulfillment of all the conditions laid down in clauses (i) to (v) of Section 80G(5) of the Act and not the actual receipt of donations or Govt. grants. On going through the Statement of Accounts for the year ending 31.03.2022, 31.03.2023 & 31.03.2024, we observe that the assessee has received substantial amount not only from the student tuition fees but also from the donations & Fee Receipt (Society). Therefore, the observation as made by the ld CIT(E) is lack of merit & contrary to the material on record.
7.2 With regard to the second observation of ld. CIT(E) that the assessee has not made any substantial expenditure towards objects of the trust and thus the assessee has not commenced its activities, we are of the considered opinion that not having commence an activity & not making any substantial expenditure are two different & distinct things. We could not understand how if an assessee has not made any substantial (large) expenditure towards objects of the trust will be presumed that assessee has not commenced the activity at all. On going through the financials as above for three years, we take a note of the fact that the assessee trust had applied substantial amount towards attainment of its objects i.e. education which is within the meaning the definition “Charitable purpose”. We find that these are merely sweeping statement without any corroborative evidences.
Students Education Society, Gadag Page 6 of 8 7.3 Now with regard to the third observation of the ld. CIT(E) that no major activities had been conducted by the assessee, we again reiterate that these are merely sweeping statement without any corroborative evidences. On going through the audited Statement of Accounts & Form No. 10BB for the year ending 31.03.2022, 31.03.2023 & 31.03.2024, we observe that the assessee has applied huge amount towards the charitable purposes within the meaning of section 2(15) of the Act and the registration u/s 12A of the Act has already been granted after verifying the genuineness of the activities carried out by the Assessee trust.
7.4 We are of the clear opinion that, the ld. Commissioner (Exemptions) after receiving the application for granting approval u/s 80G of the Act shall call for such document or information and make such enquiry as he/she thinks necessary in order to satisfy himself/herself about the genuineness of the activity of such institution or fund and the fulfillment of all the conditions laid down in clause (i) to (v) as follows:
(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills the following conditions, namely:- (i)where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 [* * *] [ Certain words omitted by Act 21 of 1998, Section 29 (w.e.f. 1.4.1999).] [* * *] [ Certain words omitted by Act 20 of 2002, Section 30 (w.e.f. 1.4.2003).] [or clause (23-AA) or clause (23-C)] [ Substituted by Act 11 of 1987, Section 35, for " or clause (23-C)" (w.e.f. 1.4.1988).] of section 10: [Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if- (a)the institution or fund maintains separate books of account in respect of such business; Students Education Society, Gadag Page 7 of 8 (b)the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c)the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; (ii)the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii)the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv)the institution or fund maintains regular accounts of its receipts and expenditure; ][*] [ The word " and" omitted by Act 32 of 1994, Section 24 (w.e.f. 1.4.1994).] (v)[ the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, ] [Inserted by Act 11 of 1983, Section 39 (w.e.f. 1.4.1984).][* * *] [ Certain words omitted by Act 20 of 2002, Section 30 (w.e.f. 1.4.2003).][or is an institution financed wholly or in part by the Government or a local authority; ] [Inserted by Act 11 of 1983, Section 39 (w.e.f. 1.4.1984).][*] [ The word " and" omitted by Act 33 of 2009, Section 33 (w.e.f. 1.4.2009).] 7.5 In view of the above, we are of the opinion that at the time of granting of approval u/s 80G of the Act, the authority has to satisfy herself that the chartable institution is established in India for charitable purposes and the activities of the assessee trust are genuine and the assessee trust also fulfilled all the conditions as mentioned above. The ld. CIT(Exemptions) in our view has not brought any material on record to show that the activities of the assessee trust are not genuine or the conditions as specified above are not fulfilled by the assessee trust.
Students Education Society, Gadag Page 8 of 8 7.6 In view of the above discussion, we set-aside the order of ld. CIT(E) and direct to grant approval u/s 80G of the Act to the assessee society as applied in form 10AB on 30/06/2024 after due verification of registration certificate granted u/s 12AB of the Act as the assessee has not produced/submitted the same before us. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 26th June, 2025