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Facts
The assessee, an educational institution running a school, applied for registration under Section 12AB and Section 80G of the Income Tax Act. While provisional registration was granted and final registration under Section 12AB was approved, the CIT(E) rejected the application for Section 80G registration. The rejection was based on the CIT(E)'s view that Section 80G applies to donations, and the assessee charges fees from students for educational services.
Held
The Tribunal held that the CIT(E)'s interpretation was flawed. It clarified that receiving fees for educational services by a charitable institution, already registered under Section 12AB, does not disqualify it from Section 80G approval, provided its activities are genuine and fall within charitable purposes. Consequently, the matter was remitted back to the CIT(E) for re-examination without being influenced by the receipt of fees.
Key Issues
Whether charging fees for educational services by an institution registered under Section 12AB disqualifies it from obtaining registration under Section 80G of the Income Tax Act.
Sections Cited
80G, 12AB, 12AA, 2(15)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the ld. CIT(E), Bangalore dated 06/11/2024 in DIN No. ITBA/EXM/F/ EXM45/2024-25/1070153230(1) for the assessment year 2024-25.
The only issue raised by the assessee is that the learned CIT(E) erred in not granting the registration under section 80G of the Act.
The relevant facts are the assessee is running a School in Hubballi, Karnataka. The assessee filed Form 10A as on 2nd March 2022 for registration under section 12AB and under section 80G of the Act.
Subsequently, the assessee filed Form 10AB as on 1st June 2024 4. for final registration under section 12AB as well as under section 80G of the Act. The registration under section 12AB was granted vide order dated 6th November 2024.
However, the application for registration under section 80G of the Act was rejected by the learned CIT(E). While dismissing the application of the assessee learned CIT(E) found that the assessee is receiving fee from the student in the form of “School Fee”, “School Bus Fee” and “Books and Uniform Fee” whereas section 80G of the Act applies on the donation.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us submitted that the learned CIT (E) has not pointed out any infirmity in the objects and bylaws of the institution. As such, the objects and the bylaws of the institutions have been accepted while granting the registration under section 12AA of the Act. Thus, the learned AR contended that the registration under section 80G of the Act cannot be denied in the given facts and circumstances.
On the other hand, the learned DR before us vehemently supported the order of the authority below.
We have heard the rival contentions of both the parties and perused the material available on record. The only issue involved in the present appeal pertains to the denial of registration under section 80G of the Act. We note that the assessee, is engaged in running a School, with the stated objective of promoting education.
The assessee had initially filed Form 10A on 2nd March 2022, 9.1 seeking registration under section 12AB and section 80G of the Act, pursuant to which it was granted provisional registration under both provisions on 10th March 2022. Subsequently, for final registration, the assessee submitted Form 10AB on 1st June 2024. While registration under section 12AB was granted vide order dated 6th November 2024, the registration under section 80G was denied by the learned CIT(E).
9.2 In the rejection order, the learned CIT(E) observed that the assessee collects fees from students and concluded that since section 80G of the Act pertains to donations made to charitable institutions, and not fee-based receipts, the assessee does not qualify for such registration. This interpretation, however, is found to be flawed and inconsistent with the established legal principles governing eligibility under section 80G of the Act.
9.3 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 fall within the . purview of charitable purposes as defined under section 2(15) of the Act. Running a school for the advancement of 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.
9.4 We also note 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.
9.5 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 of appeal raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in court on 24th day of April, 2025