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Facts
The assessee, a public charitable trust formed in December 2020 with objects of relief to poor, education, and medical relief, applied for registration u/s. 12AB. The CIT(E) rejected the application, holding that the trust had not substantiated its activities with documentary evidence and had merely accumulated funds.
Held
The Tribunal held that the purpose of Section 12AB is to register trusts with genuine objects and activities, including proposed activities. Accumulating funds for land and building development is considered a proposed activity aligned with the trust's objects.
Key Issues
Whether the CIT(E) erred in rejecting the registration u/s. 12AB solely based on the lack of 'carried out' activities, when proposed activities (accumulation of funds for land/building) were in line with the objects?
Sections Cited
12AB, 12A(1)(ac)(ii), 2(15), 11(2), 11, 12AA
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S. S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
This appeal at the instance of the assessee trust is directed against the Commissioner of Income Tax (Exemptions), Chennai order dated 21.03.2025, rejecting assessee’s application seeking registration u/s.12AB of the Income Tax Act, 1961 (hereinafter called ‘the Act’).
The grounds raised by the assessee are as follows: 1. The order of CIT(E) is erroneous and bad in law, as the same is opposed to the provisions of law and facts of the case.
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2. The CIT(E) erred in rejecting the application filed by the appellant for registration u/s.12A(1)(ac)(ii) of the Act without properly considering the facts and circumstances of the case and on the basis of surmises and baseless assumptions.
3. The CIT(E) erred in dismissing the application on incorrect reasoning that the appellant is not carrying out charitable activities. 13. The CIT(E) ought to have seen the main objective of the Appellant is to provide medical relief, which is a charitable purpose u/s.2(15) of the Act.
4. The CIT(E) grossly erred in rejecting the application by stating that the genuineness of the activities of the appellant trust is questionable. 5. The CIT(E) having not found the appellant to be engaged in activities which are not genuine or not in accordance with the conditions subject to which it was registered, the CIT(E) erred in rejecting the application. 6. The CIT(E) having granted the appellant registration u/s. 12A(1) (ac)(iii) of the Act after scrutinizing the activities of the trust and necessary details, the CIT(E) erred in rejecting the application when the appellant had not changed its objects. 7. The CIT(E) ought to have provided the registration u/s.12A(1)(ac)(ii) of the Act as the appellant has indeed been carrying out charitable activities as per its objects. 8. Any other grounds that may be raised at the time of hearing.
Brief facts of the case are that the assessee is a public charitable trust and has been formed on 14.12.2020. The main objects of the assessee trust are that to provide Relief to the poor, Education and Medical relief. Assessee trust was registered u/s.12A for 5 Years in Form 10AD dated 27.09.2022 from AY 2021-22 to AY 2025-26. As per the provisions of section 12A(1)(ac)(ii) of the Act, for continuation of the assessee Trust registration, the assessee filed its application in Form 10AB on 24.09.2024. The ld.CIT(E) issued notice dated 05.02.2025 for seeking clarification and documents. The assessee filed detailed submission called for on 20.02.2025. In the said submission, the assessee submitted relevant documents and details in support of the clarification sought. In addition to the submissions made, Shri. Dr.S.V.Chandrakumar, Trustee of the Trust appeared before the ld.CIT(E) and explained about the source of income and the activities carried on by the trust. The trustee submitted that the Trust has not been doing charitable activities on its own and merely joins with other charitable associations whenever camps :-3-: ITA. No:1068/Chny/2025 are conducted by them. Further, the trustee submitted that the Trust has been accumulating an amount every year in order to purchase land and building for the development of the Trust.
The ld.CIT(E) however rejected the application for renewal of registration u/s.12AB of the Act. The ld.CIT(E) held that the Trust has not substantiated the activities with documentary evidence and concluded that the Trust has not been doing charitable activities. Further, the ld.CIT(E) observed that since the inception of the Trust on 14.12.2020, the assessee Trust has not incurred any expenditure either towards the fulfillment of its stated objects or for any activity qualifying as charitable within the meaning of section 2(15) of the Act. The assessee, though in receipt of funds from donors and trustees, has merely accumulated and has set apart its income during the past three years and hence the genuineness of the activities of the trust has been doubted and found to be questionable and rejected the application in form 10AB dated 24.09.2024 filed for registration u/s.12AB of the Act.
Aggrieved by the order of the ld.CIT(E) rejecting the application for registration u/s.12AB of the Act, the assessee has filed the present appeal before us.
Before us, the ld.AR of the assessee submitted that the ld.CIT(E) erred in observing that the assessee has not commenced its charitable activities towards the attainment of the objects. Further, ld. AR of the assessee vehemently submitted that assessee had produced all the necessary documents/details and as required for registration of the assessee Trust. Lastly, ld.AR submitted that it is only the genuineness of the activity which are relevant for granting registration u/s.12AB of the Act. The assessee Trust u/s.11(2) of the Act, has been accumulating income for purchasing land and building. The ld.AR furnished Form 10 filed for accumulation of income for the financial years 2021-22 to 2023-24. Further, reliance was placed upon the decision of the Hon’ble Apex Court in the case of Ananda Social & Educational Trust v Commissioner of Income Tax (2020) 426 ITR 340 (SC).
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Per contra, the ld.DR on the other hand, strongly supported the order of ld.CIT(E).
We have heard the rival submissions and perused the materials available on record. On going through the order of ld.CIT(E), we find that the assessee trust has been formed on 14.12.2020. The assessee Trust obtained registration u/s.12A of the Act for 5 years in Form 10AD dated 27.09.2022 from A.Y.2021-22 to A.Y.2025-26. We find that in Form 10AB, the assessee has stated that its objects are relief of the poor, education, and medical relief. We also find that the assessee has accumulated and set apart surplus funds for the financial years 2021-22 to 2023-24, as per Form-10 filed with the AO, for the specific purpose acquiring ‘Land and Building’ for Trust Development. The ld.CIT(E) has alleged that the assessee has not undertaken any charitable activities since its inception and has merely accumulated surplus funds, thereby rendering the genuineness of the Trust’s activities questionable. In the present case, it is an undisputed fact that the assessee Trust had already commenced its proposed activity towards the attainment of the object of the assessee Trust by accumulating and setting apart to be utilized for the purpose of which it is so accumulated or set apart during the period referred to in clause (a) of sub section 2 of section 11 of the Act. Admittedly, the period of accumulation or setting apart, as contemplated under clause (a) of sub-section (2) of section 11, falls within the prescribed limit of five years for the said amount accumulated or set apart to be utilized.
We also find it relevant here to mention the observations of the Apex Court in the case of Ananda Social & Educational Trust v. Commissioner of Income tax reported in (2020) 426 ITR 340 as under:
“We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant - Director of Income-tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine.
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Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.”
Therefore, in the present facts and circumstances of the case, by respectfully following the ratio laid down in the aforesaid judgment, we are of the considered opinion that the very purpose of Section 12AB of the Act is to provide for registration only to such trusts or institutions whose objects and activities are genuine. In these circumstances, it is incumbent upon the ld.CIT(E) to satisfy himself that not only the objects of the trust genuine but also that the activities carried on, or proposed to be carried on, are in furtherance of such objects and are equally genuine. It is pertinent to note that Section 12AB of the Act deals with the stage of registration of the trust and not with the stage of actual assessment of its income. Consequently, the expression “activities” used therein cannot be restricted only to past or ongoing activities but must also be construed to include the proposed activities of the trust, as such interpretation alone would give full effect to the legislative intent. In the present case, the assessee Trust has filed Form 10 by seeking accumulation for financial years 2021-22 to 2023-24 for the purpose of “Land & Building for Trust Development”. We find that such accumulation represents a proposed activity which is squarely in line with the stated objects of the trust and, therefore, satisfies the requirements of law. The ld.CIT(E) in our view has not brought any material on record to show that the assessee trust’s activities are not-genuine, since the amount accumulated to be spent is having further two years of time to apply for the proposed projects as shown in Form 10.
:-6-: ITA. No:1068/Chny/2025 11. Therefore, we are of the considered view that the ld.CIT(E) has erred in rejecting the registration to the assessee Trust by holding that the assessee has not carried out any charitable activities since inception and has merely accumulated surplus funds and accordingly, we allow the appeal of the assessee and direct the ld.CIT(E) to grant registration u/s.12AB of the Act as applied by the assessee trust on 24.09.2024 in form No.10AB.
In the result, the appeal of the assessee is allowed.
Order pronounced in the court on 10th September, 2025 at Chennai.