MICRO FINANCE INDUSTRY NETWORK,GURGAON vs. CIT(E), CHANDIGARH
Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: MS. MADHUMITA ROY & SHRI NAVEEN CHANDRA
PER MADHUMITA ROY, JM:
The instant appeals filed by the Assessee are directed against both the orders dated 18.08.2025 passed by the Ld. Commissioner of Income-tax
(Exemptions), Chandigarh [hereinafter referred to as the Ld. CIT(E)] whereby and whereunder the application filed by the assessee in Form No.10AB under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) has been rejected. The Registration granted u/s 12AB of the Act also 2
stood cancelled and the grant of approval under Section 80G of the Act was also rejected.
2. The assessee is having its registered office at Hyderabad and the head office and the operation office is at Gurgaon. The activities of the assessee is to coordinate with members, advocacy, assistance to members by way of monitoring major part of finance, coordinate with Reserve Bank of India in their policy formation and variety of activities which are within the objectives of the society and are charitable in nature. The assessee got the provisional registration for AY 2021-22, 2022-23 and 2023-24 under Section 12AB, the copy whereof in Form No.10AC is attached as page 1 to 3 of the paper book filed before us. The activities of the Society towards charitable purpose were existing at the time of making application under Section 12AB. Neither the assessee is infringing upon the objectives stated in the Memorandum of Association or in the bylaws. The application in Form No.10AB was filed within six months from the commencement of the activities within the extended period of time limit as provided by the CBDT. Further, that no part of the income of the assessee trust ensures directly or indirectly for the benefit of a person specified under Section 13(3) of the Act.
The assessee claims to be a premier institution network coordinating with the Reserve Bank of India and assisting them in the policy formulation after educating and implementing the RBI’s direction with various stakeholders in the 3
area of micro finance. In fact various task force and committees have been formed for fulfilling the objectives of the assessee Trust. The assessee claims to help in educating various institutes in this behalf and facilitates poors of the country by making them understand their rights, facilities and advise them on reasonableness/discounting of lending rate by various institutions. The people who are suffering from natural calamities are also extended help by the society.
It also has a potential in contributing to the Indian economy as reflecting from different workshops held by the assessee evidenced in the paper book filed before us.
In fact, it is a society registered under Telengana Societies Registration Act, 2001, recognized as a self regulatory organization for NBFC-MFIN (non- banking finance companies operating in the micro finance sector) by the Reserve Bank of India. It is claimed to be a representative industry body engaged in the development and promotion of best practices in the micro finance sector with the additional functions for liaisoning with regulatory authorities, conducting research and capacity building for its members and publishing data and policy inputs relevant to micro-finance institutions. According to the Ld. CIT(E), the structure of the assessee is nothing, but, commercial establishment and the data from MFIN website and other sources were fetched wherefrom the structure, role and operation could be gathered and wherefrom the Ld.CIT(E) concluded that MFIN operates as an apex level industry platform not for general public, but 4
exclusively for its members most of whom are NBFC engaged in generating profits in micro finance lending. As MFIN is recognized as a self regulatory organization for NBFC-MFIN by the Reserve Bank of India since June 16, 2014. This single lines undoes the entire premise of charitable intent. Further, all its activities include sector coordination, training, compliance audits, grievance redressal among members and policy engagement with regulators. According to the CIT(E), none of these activities are directed towards public at large. The role of the assessee is a statutory function under the delegated regulatory guidelines meant to oversee and discipline a specific class of for-profit micro finance companies. Even if it is done efficiently, the same is not charitable rather it is a regulatory duty undertaken under the RBI supervision. The claim of advancement of general public utility is, therefore, absent in the case of the assessee, it operates solely through its membership base which comprises non- banking finance companies, micro finance institutions, most of which are for- profit entities. There is no mechanism, structure or even stated object could have been found which could suggest over reach to the general public, let alone the under privileged which is sine qua non for general public utility clause under Section 2(15) of the Act as also observed by the Ld. CIT(A). The submission of the appellant was found to be devoid of charitable content, where the legal line between service to members and service to public are quite blurred. The applicant society does not satisfy the conditions envisaged u/s 12AB of the Act
5
and, thus, the application filed by the assessee in Form No.10AB u/s 12AB(1)(ac)(ii) of the Act was rejected. Hence, the instant appeal before us.
We find the following activities done by the assessee on the basis of which the claim of registration was sought for. In fact, such details were also made known to the order issuing authority on 28.09.2022 by the assessee appearing tt pages 6-9 of the paper book filed before us, the relevant contents whereof is as follows:- a. To act as a self-regulatory organisation for the microfinance sector and to regulate the business of microfinance as carried on by its members b. To liaise and work in unison with the relevant regulatory authorities regulating the business of microfinance, and other networks and coalitions involved in microfinance, and to make representations before all regulatory, government and policymaking authorities in India including, without limitation, the government of India, the Reserve Bank of India and the Securities and Exchange Board of India, and to promote microfinance and to help create a favourable policy environment for the microfinance sector. 6
c.
To provide a forum for persons engaged in the field of microfinance to meet, share and exchange their view, expertise, experience and resources.
d.
To create, develop, distribute and publicize, sound development, operational, and financial practices, and minimum thresholds of performance for its members, and to encourage other persons engaged in the microfinance sector to adhere to, and comply with, such practices and thresholds e.
To conduct research, consultancy and training in different aspects of microfinance so as to strengthen the capacity of persons engaged in microfinance f.
To establish linkages between members and resource institutions, such as funding agencies, financial institutions, rating agencies and training, consultancy and research institutions.
g.
To provide services to members, inter alia, training and capacity building; helping in achieving thresholds of performance; providing information related to legal and regulatory issues; providing availability of funding and employment opportunities; and advisory services for performance enhancement and transformation of legal forms, h.
To establish other bodies to support and represent microfinance
7
The assessee was further asked to furnish an undertaking that there is no infringement to the first proviso to Section 2(15) of the Act. In response thereto the undertaking was duly given which is part of the paper book.
In fact, the assessee has further filed the following details in regard to the expenses incurred by the Assessee (‘MFIN’) towards activities involving public outreach along with the Annual report of FY 2024-25 to correlate expenses with the activities referred herein. The annual accounts for FY 2022-23 (PB-178) and FY 2023-24 (PB-260) are already part of the Paper Book as filed as further considered by us:
Customer Grievance System (Toll Free No.)
1. MFIN operates a customer grievance system in all major (12) vernacular languages. The free service works 24*7 and receives nearly 2 lakh queries/complaints in a year. MFIN has spent the following amounts on these activities, leading to direct benefit of 4,72,119 borrowers of microfinance sector during the captioned periods.
Financial
Year
Amount
(INR)
Incoming
Calls
Unique
Caller
Complaints filed
Complaints
Resolved
2025-26 (till
31.12.25)
32,07,895
2,10,786
96,236
1.590
1,517
2024-25
39,37,126
2,84,631
1,29,036
1,947
1,947
2023-24
33,28,305
2,11,405
1,03,661
2,045
2,045
The expenditure as tabulated above, excludes salary of senior technical staff who are employed exclusively to supervise this activity. That amount is approximately Rs. 45 lakh per year.Refer expenditure given in Note 10, 11 8
on page No. 64 of Annual Report 2023-24 and Note 14, 15 on page No. 84
of Annual Report 2024-25. Expenditure on Consumer Awareness and Capacity Building Projects.
3. MFIN has conducted various initiatives in this regard, details whereof are listed herein below:
a. Depositor Education and Awareness (DEA) Workshops – On behalf of Reserve Bank of India (RBI), MFIN is undertaking a project to conduct
2,131 workshops, with a view to educate low-income persons about financial literacy. The budget allocated towards these workshops is Rs.12,98,25,000 for 3 years.
b. MFIN has already conducted 723 workshops and 39,884 people have participated in these workshops till July 2025, spending Rs.
4,03,67,461/- in the first 2 phases spread over 2024-25 and 2025-
26.The balance amount of Rs.8,94,57,539/- is to be spent till April
2028. These expenditures are disclosed at Note 13 on page No. 84 of Annual Report 2024-25. c. Building Digital Capacity of Rural Population -This project seeks to educate and familiarize rural population with digital payments, and efficient and safe usage thereof. It is in line with the Digital India
Mission. The project involved survey of population to understand their preferences and problems faced with digital transactions, development of training modules in vernacular, training to develop confidence and also development of suitable apps. It runs across ten states and wants to raise awareness of 3.38 lakh people and 1.5 lakh low-income people using digitaltransactions. While the CXO level vertical head overseas the project, a Senior VP works full time on the project and external specialized agencies are also hired. During FY 2024-25, MFIN has 9
spent a sum of Rs.2,30,15,823/- on this project, which is disclosed at Note 13 on page No. 84 of Annual Report 2024-25. d. Microfinance Awareness Program (MFAP)– Microfinance as a sector works at providing responsible lending facility largely to a population that cannot raise bank loans. As explained at Page 46 of the Paper
Book, a microfinance loan is a collateral-free loan given to a household having annual income of less than Rs.3 lakhs. This chunk of India’s population is largely prey to local moneylenders. Awareness programmes are run with the objective of educating low-income segments about benefits of formal finance, regulatory architecture for customer protection, and ill-effects of taking money from moneylenders. An NCAER study in 2025 shows that share of moneylenders has declined heavily to only 1% in areas where microfinance is available, while government data states that money- lenders account for 23% of loan funds in other places.
e. In the current financial year, till December 2025,MFIN hasconducted
128 MFAP’s, handled by 7 technical regional heads,all of whom are senior management professionals (MBA)with 10 plus years of experience. Total expenses on these activities in FY 2024-25 by way of staff allocation, was Rs.95 lakhs, as may be referred from note 14 on page No. 84 of Annual Report 2024-25. Outlay on this count in the current financial year is projected at Rs.1.20 crore on 2025-26. This excludes travel expenses of approximately 7 experts and coordinators, who have conducted these programmes in 18 states of India.
f. Climate Change Adaptation Project – This project is aimed at equipping poor people to mitigate income-loss due to climate events by developing an appropriate insurance product as also building awareness and capacity. MFIN has spent Rs.81,35,596/- towards this initiative
10
during FY 2024-25, as given in Note 14 on page No. 84 of Annual
Report 2024-25. g. Consumer Awareness Campaigns – MFIN has incurred substantial expenses in mass media campaigns – Ad films, Audio-visuals, newspaper advertisements, PR, posters, etc., seeking to build awareness of consumer rights, safe use of phones and digital payments, etc. Expenditure on such activities Rs.1,37, 68,554 in FY 2024-25, as may be referred from Note 14, 18 on page No. 84 of Annual Report
2024-25. The CIT(E)’s comments at Page 17 of the impugned order are factually rebutted in this manner.
Consumer Research & Data Analysis on RBI’s Behalf.
4. MFIN has conducted several research initiatives as to income, social, and welfare indicators of poor people, so as to inform RBI on government policy. RBI’s guidelines for SROs specify “Collect and share relevant sectoral information to the Reserve Bank to aid in policymaking. The SRO should also use the information to foster innovation, and coordinate on the introduction of new products within the broader regulatory framework set by the Reserve Bank. And Encourage a culture of research and development within the sector to encourage innovation while ensuring highest standards of compliance and self-governance”. This makes periodic research into the livelihood and other aspects of low income people a priority area for MFIN.
In 2024, MFIN engaged NCAER to conduct a study on “Assessment of impact of small borrowings in India”,wherein 10,432 borrowers across 100
districts in 10 states were surveyed. Themain findings were shared with the Governor during Pre-Monetary Policy Committee meeting on 20 January
2026 and the full report will be released in February-March 2026. Total cost towards this exercise was budgeted at Rs.1,20,47,208/-, of which 11
Rs.60,23,603/-was spent during FY 2024-25, as may be referred from Note
15 on page No. 84 of Annual Report 2024-25. The remaining sum is being spent in the current financial year.
5. MFIN also obtains monthly and quarterly data from credit information companies, to ensure that microfinance companies are functioning in compliance with RBI regulations, and in line with policy intent. Every month detailed district wise reports are taken from two bureaus and in addition every quarter compliance report is taken from one bureau. These reports form a crucial consumer protection tool. Against this activity, MFIN has spent sums of Rs.65,52,918/- during FY 2024-25, as may be gleaned from Note 15 on page No. 84 of Annual Report 2024-25, while a sum of Rs.40,08,982/- stands spent thus far during the current financial year.
Regulatory Function as per RBI Mandate.
6. MFIN has been authorised by Reserve Bank of India to regulate the microfinance industry in India, as of 2014 onwards, with a view to overseeing protection of low-income borrowers, with the duty to submit periodic reports to RBI. While this activity is not in the nature of direct public outreach, it is undertaken for the benefit of the public – borrowers –
only. MFIN’s expenditure as to its regulatory activity during the past five years, is as under. This expense does not include salary & emoluments of senior management & executives:
Financial Year
Amount (INR)
2025-26 (till 31.12.25)
3,07,33,355
2024-25
3,22,41,017
2023-24
3,73,33,715
2022-23
2,17,85,804
2021-22
2,06,13,389
12
Summary Table
Clause
No.
Particulars
Amount (Rs. Crore)
F.Y 2024-
25
F.Y 2025-26
(upto Dec 2025)
2, 3
Customer Grievance System (Toll Free No.)
0.85
0.68
4 (a)
&(b)
Depositor Education and Awareness (DEA) Workshop
1.26
2.16
4(c)
Building Digital Capacity of rural population
2.30
-
4(f)
Climate change adaption project
0.81
0.60
4 (d) &
(e)
Microfinance Awareness Program (MFAP)
0.95
1.20
4(g)
Other Activities
1.37
1.89
5
Conduct of Pan India research studies
0.60
0.60
6
Data cost for ensuring regulatory compliance and fair treatment
0.65
0.40
7
MFIN as SRO (Net of Point 1)
2.37
2.39
TOTAL
11.16
9.92
This excludes senior management cost and overheads
The assessee was further asked as to whether it provides all the services free of cost or charges any amount by whatever name called for its activities from beneficiaries at cost or nominal margin whereupon justification of service fee charged in the light of the provision of section 2(15) of the Act was duly furnished by the assessee before the said authority. The assessee, in response to the query as to whether any part of the income of the assessee ensures directly or indirectly for the benefit of a person specified under Section 13(3) of the Act categorically submitted that no part of the income of the institution ensures the same supported by an undertaking to that effect.
Apart from that the assessee is not carrying out any incidental activity in the nature of trade, commerce or business as also clarified in response to the 13
query No.11 as made by the CIT(E) dated 25.03.2025. The assessee repeated and reiterated the following objectives in support of the claim of exemption made by it as a charitable society appearing at page 21-22 of the paper book filed before us, the contents whereof is as follows:-
“The Society is established to pursue the following objectives:
1 To facilitate the evolution of a conducive ecosystem and standards for the sustainable development of a customer-centric microfinance sector.
To act as a Self Regulatory Organisation (SRO) for NBFC- MFIs and adoption/implementation of best practices and Code of Conduct by all members.
To liaise and work in unison with the relevant regulatory authorities regulating the business of microfinance, and other networks and coalitions involved in microfinance, and to make representations before all regulatory, government and policymaking authorities in India including, without limitation, the government of India, the Reserve Bank of India and the Securities and Exchange Board of India, and to promote microfinance and to help create a favourable policy environment for the microfinance sector.
To create, develop, distribute and publicize, sound development, operational, and financial practices, and minimum thresholds of performance for its members, and to encourage other persons engaged in the microfinance sector to adhere to, and comply with, such practices and thresholds.
To provide a forum for persons engaged in the field of microfinance to meet, share and exchange their view, expertise, experience and resources.
To conduct research, consultancy and training in different aspects of microfinance so as to strengthen the capacity of persons engaged in microfinance. 14
To establish linkages between members and resource institutions, such as funding agencies, financial institutions, rating agencies and training, consultancy and research institutions.
To provide services to members, inter alia, training and capacity building; helping in achieving thresholds of performance; providing information related to legal and regulatory issues; providing availability of funding and employment opportunities; and advisory services for performance enhancement and transformation of legal forms.
To establish other bodies to support and represent micro finance. Your Honour, the applicant is a premier network coordinating with Reserve Bank of India and assisting them in policy formation and educating and implementing RBI's direction with various stake holders in the area of microfinance. Various taskforce and committees have been created for fulfilling the objectives. As an Industry Association and SRO, MFIN's primary objective is to work towards the robust development of the microfinance sector. The Society helps in educating various institutes and facilitates poor's of the country by making them understand their rights & duties and try to resolve their issues with lending institutions.
MFIN strives to create a favorable environment for the industry to deliver microfinance services with ease. To do this, MFIN invests in building strong relationships with all its stakeholders to ensure that the contribution of microfinance in the national agenda of financial inclusion is well established.
MFIN has established Task Forces for focused action on specific areas of activities that, from an overall industry standpoint, are deemed critical. The Task Forces comprise of representatives of member institutions who help drive specific initiatives with the support of the MFIN Secretariat. The Advocacy & PR Task Force is responsible for steering and guiding the advocacy agenda within
MFIN. The Task Force engages with key policy makers and sector participants to create a conducive policy and business environment for the industry. MFIN engages with the key stakeholders of the microfinance Industry including Reserve Bank of India (RBI),
National Bank for Agriculture and Rural Development (NABARD),
Ministry of Finance (MoF). Small Industries Development Bank of India (SIDBI), Insurance Regulatory and Development Authority
(IRDA), Insolvency and Bankruptcy Board of India (IBBI) and Unique
15
Identification Authority of India (UIDAI). MFIN is also a part of various think tanks and discussion forums including the RBI's
Financial Inclusion Advisory Committee, PSIG Think Tank, and the Access Assist Advisory Group.
Your Honour we assure you, MICRO FINANCE INDUSTRY
NETWORK("applicant") is working towards betterment of the society and betterment of India's economy and there is no infringement of objectives of the society. We plead before you to kindly approve the renewal application under section 12AB and oblige.
We shall be pleased to assist you, in case if any clarification/further information is required and we request you to issue show cause notice in case any adverse conclusion is being drawn and provide the assessee sufficient opportunity to clarify.
We hope you will find all the details in order, if any further information or documents as may be desired by you, we shall be obliged to submit.
Power of attorney in favor of ourselves is enclosed (Page no. 2031-
2032)”
At the time of hearing of the instant appeal, the Ld. Counsel Mr. S. Krishnan vehemently argued in support of the case made out by the assessee as above and he has drawn our attention to page 58 of the paper book in order to justify that the society is giving educational, social, economic background of micro finance customers, the details whereof is as follows:- 16 17 18
He has further drawn our attention to different workshops organized by the assessee in District Forum level including medical camps in 22 flood affected districts in Bihar and Assam, micro finance radar application which is an inhouse application developed to ensure granular field level information available to member institutions in a secured and systematic form. Launched in July, 2021, Radar digitally captures four crucial parameters, repayment challenges, loan pipelining, ring leaders and disturbance created by external inciters. Both qualitatively and quantitatively, this micro level information plays a significant role in flagging ‘early warning symptoms’ to enable microfinance institutions to take timely measures to avert crisis. Skilling and financial literacy workshop has also been done in Punjab as stated by the Ld. counsel appearing for the assessee in support of which he has drawn our attention to pages 66-67 of the paper book. With their guidance, women who did exceptionally across the length and breadth of our country who made a small start and today inspiring others as also evident from different articles, annexed to the paper book from pages 68 to 74 therein. Their contribution to the Indian economy as appreciated by different government authorities are also part of the documents annexed to the paper book particularly, from pages 72 to 80 therein. We have also further considered the auditor’s report of the assessee as formed part of the paper book. Under these facts and circumstances of the matter the activities are found for the welfare of public interest at large. 19
The ld. DR, on the other hand, relied upon the order passed by the authorities below.
Upon perusal of the order passed by the Ld.CIT(E), it appears that the Ld. CIT(E) mainly on the following counts rejected the application made by the assessee u/s 12A of the Act:
The assessee’s eligibility for registration has never been scrutinized in the past and the assessee was enjoying the registration on the basis of the CPC’s proforma approval after 01.04.2021 as alleged by the Ld. CIT(A) as it appears from the order impugned. However, from the records, it appears that the provisional registration was granted by and under the order dated 27.01.2021 issued by the CPC appearing at page 1 of the paper book. However, notice dated 20.09.2022 was thereafter issued by the CIT(E), Chandigarh under Section 12A of the Act with the following queries:-
“1. Whether the trust/society/company has been granted provisional registration u/s 12AB? If yes, please furnish the self-certified copy of the Form 10AC issued by CPC, Bangalore.
2. Please specify the date of commencement of activities and furnish documentary evidence(s) to prove beyond doubt that the activities as mentioned in the MoA/trust deed/registration certificate under Societies Registration Act had actually commenced on the above
20
mentioned date along- with the bank(s) statements to substantiate your claim.
3. Whether the application in Form 10AB has filed within six months from the commencement of activities or within the extended time limit provided vide CBDT instruction/circular/notification, if any?
4. Please furnish the self-certified copy of MoA/Trust Deed i.e.
document creating or establishing the applicant. Also furnish the proofs of the identities of the main / managing trustees/ directors/
president/ secretary of the institution.
5. Please furnish a self-certified copy of registration with