THAVAM RESEARCH FOUNDATION,,PUDUKKOTTAI vs. CIT, EXEMPTION,, CHENNAI

आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘C’ BENCH: CHENNAI
श्री जॉजज जॉजज के, उपाध्यक्ष एवं श्री अमिताभ शुक्ला, लेखा सदस्य के समक्ष
BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.1159/Chny/2025
Assessment Years: -

Thavam Research Foundation,
No.14, S P N Plaza, West Main Street,
Pudukkottai,
Tamil Nadu-622 001. [PAN: AADTT3610N]

The Commissioner of Income Tax,
(Exemption),
Chennai.

(अपीलार्थी/Appellant)

(प्रत्यर्थी/Respondent)
अपीलार्थी की ओर से/ Assessee by :
Shri P.M.Kathir, Advocate
प्रत्यर्थी की ओर से /Revenue by :
Shri Bipin C.N, CIT

सुनवाई की तारीख/Date of Hearing
:
07.08.2025
घोषणा की तारीख /Date of Pronouncement
:
21.10.2025

आदेश / O R D E R

PER AMITABH SHUKLA, A.M :

This appeal is filed by the assessee against the order bearing DIN
& Order No.ITBA / EXM / F / EXM45 / 2024-25 / 1075247955(1) dated
29.03.2025 of the Learned Principal Commissioner of Income Tax
(Exemption), [herein after “CIT(E), Chennai. The reference to the word
“Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time.
2.0
The only issue seminal to the case raised by the assessee through its seven grounds of appeal is regarding the rejection of appellant’s application for grant of registration u/s 12A(1)(ac)(ii) of the Page - 2 - of 16

Act. The Ld.Counsel for the assessee argued that the action of the Ld.CIT(E ) is not borne out of the correct understanding of the facts of the case. It was accordingly requested that the impugned order be set aside.
3.0
Per contra, the Ld.DR relied upon the orders of Ld.CIT(E).
4.0
We have heard the rival submissions in the light of material available on records. At the outset, we deem it necessary to examine the brief factual matrix of the case as discerned from the order dated
29.03.2025 of Ld.CIT(E ). The assessee trust has been formed, inter- alia, with the objective of promoting national integration, communal harmony, universal brotherhood and global peace, work for child and women welfare, to organize and take up health, educational and welfare programme for women and children, holding research and training courses etc in acupuncture, yoga, nature cure and alternative system of medicine. The assessee had applied for grant of registration through its application in Form-10AB dated 30.09.2024 u/s 12A(1)(ac)(ii) of the Act.
Upon consideration thereof the Ld.CIT(E) held that the declared object of the assessee trust of granting ‘relief to the poor’. The Ld.CIT(E) placed reliance on the fact that in its reply dated 20.02.2025 the appellant trust could only list few of its online and offline programmes conducted in health care and yoga etc and that it failed to describe as to what activities were taken in last three years to meet the avowed objective of granting
Page - 3 - of 16

‘relief to the poor’. The Ld.CIT(E) further examining the fund flow analysis, noted the appellant had shown fees receipts as its major source of income for last three years. It was noted that the appellant assessee had entered into a Memorandum of Understanding (MoU) with Bharathidasan University who conduct Diploma / Advance programme on acupuncture with fee sharing ratio of 30 : 70. The said MoU was for promoting entrepreneurship and carrier development under the institute for entrepreneurship and carrier development. The Ld.CIT(E) noted that in furtherance of the impugned MoU the appellant trust was collecting
Rs.25,000/- and Rs.35,000/- per student to conduct Diploma programme and Advance Diploma programme on acupuncture respectively. As agreed in the MoU, the appellant trust was conducting admission test and interviews etc and thereafter list was sent to Bharathidasan University for approval. On getting approval, assessee was collecting fees from students and issued certificates to the students printed by it carrying logo and seal of Bharathidasan University. The charge of above activities, the assessee was getting 30% of the fees collected. The Ld.CIT(E) concluded that in terms of the impugned MoU, the assessee trust was actually acting as an agent or franchise and was getting share in fees as per the agreed ratio of 30 : 70. The Ld.CIT(E) further concluded that the fees charged for the course was excessive and exorbitant. In support of its conclusions, he drew support from his online verification indicating that Page - 4 - of 16

Tamil Nadu Open University was offering the said course at a nominal fees of Rs.4200/- and the private institutions were charging only
Rs.13500/-. A presumption qua charging of excessive fees in conducting
Diploma and Advance Diploma course, as high as 525% of the normal market value was drawn. It was concluded that this was purely a commercial activity and cannot be compared with any charitable activity in the nature of relief to the poor. The Ld.CIT(E) further concluded that the activities of the trust were not in the category of any ‘education’ as the assessee did not have any valid approval from any recognized body to conduct any educational course. Consequently, relying upon decision of Hon’ble Apex Court in the case of Lokashikashan Trust 101 ITR 234 he rejected the application of assessee for grant of registration.
5.0
The Ld. Counsel for the assessee vehemently argued against the decision of the Ld.CIT(E). It has been submitted that the assessee has been carrying out charitable activities of providing relief to the poor and that it has been regularly conducting workshops and programmes teaching yoga, health camps etc. During the Covid-19 period, the assessee had extensively worked for benefit of common citizens. All these activities have been undertaken free of cost for the benefit of poor people of the society. It was argued that the Ld.CIT(E ) had obtained all the details of the activities of the trust and then thereafter ignoring the same proceeded to reject the application for exemption. The Page - 5 - of 16

Ld.Counsel submitted that the conclusions of the Ld.CIT(E) are wholly incorrect. It was argued that the Ld.CIT(E) had granted the appellant registration u/s.12A(1)(ac)(iii) of the Act vide his order dated 27.09.2022
by holding the very same activities to be charitable in nature. In the impugned order, the CIT(E) has omitted to discuss these charitable activities to come to an incorrect conclusion that the appellant is not carrying out any charitable activities. The Ld.Counsel vehemently argued that Ld.CIT(E)'s allegation that the activity of providing diploma courses are commercial in nature is wholly incorrect. It was stated that the appellant assessee is not acting in the capacity of agent/franchise of Bharathidasan University and is actively engaged in providing the diploma courses as it is responsible for framing syllabus, preparing classrooms and study materials, and appointing staff ( reference was invited to Clause 3 of the MoU placed at Pg.118 of PB). It was evident that these are not the activities that an agent carries out. The medical education is being granted by the appellant and the certification for the same is provided by the University. The students in the diploma courses are also provided internship training in the appellant's premises where it has been conducting the various yoga and health programs.
6.0
As regards the issue of charging of fees higher than the market rates, it was stated that incorrect comparisons have been made for drawing the impugned conclusions. The Ld. CIT(E) had erroneously
Page - 6 - of 16

compared the fees charged by the University (shared with the appellant) for acupuncture courses to the fees charged by Acupressure /
Acupuncture & Alternative Medicine Institute (Rs. 13,500/-) and the Tamil
Nadu Open University (Rs.4.200/-). This comparison was patently erroneous because the two comparable institutes are only providing diploma courses in Acupressure whereas the appellant is providing diploma in Acupuncture. The Ld.Counsel vehemently argued that there is fundamental difference between Acupressure and Acupuncture. Both though were related disciplines had basic differences to justify cost variations. It was argued that the Ld.CIT(E ) has failed to consider that the appellant is only entitled to 70% of the fees (i.e.) Rs. 17,500/- out of Rs. 25,000/- for diploma courses and Rs 24,500/-out of Rs. 35,000/- for advanced diploma courses. The Ld.Counsel placed reliance upon a decision of this Hon'ble Tribunal, reportedly on identical facts in the case of Soorya Educational Trust vs. ITO [2012] 22 taxmann.com 222
(Chennai) holding that the assessee providing diploma courses consequent to an MoU entered with Annamalai University cannot be called commercial even if the same resulted in a surplus.
7.0
The Ld.Counsel has further argued that whether or not the activity qua MoU with the Bharathidasan University is commercial or not would have no bearing on the registration application of the appellant. It was argued that even if this activity of providing diploma course is held to Page - 7 - of 16

be a commercial activity, per se charitable institutions are allowed to carry out business activities as per section 11(4A) of the Act. However, these are all aspects that come into consideration during the assessment proceedings while deciding whether exemption is to be granted u/s.11 of the Act. On the proposition reliance was placed on the following decision of Karnataka High Court in the case of DIT(E) vs. Karnataka Badminton
Association [2015] 378 ITR 700 (Karnataka), and of Hon’ble Madras High
Court in the of CIT vs. Sarvodaya Ilakkiya Pannai [2012] 20 taxmann.com
546 (Mad.). It was accordingly prayed to quash the impugned order and grant the appellant registration u/s 12A(1)(ac)(ii) of the Act.
8.0
We have noted that in the case of Karnataka Badminton
Association supra Hon’ble High Court as held as under:-

“….10.... If the case of the assessee falls in the first proviso to Section 2(15) of the Act, the benefit of registration which flow from Section 12A of the Act is not available.
Anyhow, that is a matter to be considered by the Assessing Authority But on that ground, the registration cannot be cancelled, which is precisely the Tribunal has held by allowing the appeal in the present impugned order….”
9.0
Further, in the case of CIT vs. Sarvodaya Ilakkiya Pannai supra it was held that:-
“….9.under section 12AA, the Commissioner is empowered to grant or refuse the registration and after granting registration, would be empowered to cancel and that too, only on two conditions laid down
Page - 8 - of 16

under section 12AA(3) of the Act. Whether the income derived from such transaction would be assessed for tax and also whether the trust would be entitled to exemption under section 11 are entirely the matters left to the assessing officer to decide as to whether it should be assessed or exempted….”