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Facts
The assessee, a trust registered u/s. 12A, applied for approval under Section 80G(5) after being granted provisional registration. The CIT(E) rejected the application, holding that the trust's conferences were commercial in nature and exceeded the 20% threshold stipulated in Section 2(15) of the Act.
Held
The Tribunal held that the application of the 20% threshold under Section 2(15) is relevant for assessment of income under Section 11, not for the stage of approval under Section 80G. Organizing conferences does not inherently imply commercial intent.
Key Issues
Whether the CIT(E) erred in rejecting the Section 80G approval application based on the 20% threshold in Section 2(15) at the approval stage, rather than during the income assessment.
Sections Cited
80G(5), Income-tax Act, 1961, 2(15), 11, 12A, 11-13
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M Aforesaid appeal filed by the assessee arises out of the order of Learned Commissioner of Income Tax (Exemptions), Chennai [hereinafter “CIT(E)”] dated 19.11.2024.
The only effective ground of appeal in this appeal of assessee is against rejection of application seeking approval u/s 80G(5) of the Income-tax Act, 1961 (hereinafter “the Act”).
ITA No.160/Chny/2025 :- 2 -:
The assessee is a trust registered u/s. 12A of the Act and has made an application in Form-10AB seeking approval under clause (iv)
B of first proviso to sub section (5) of Section 80G of the Act. The Ld.
CIT(E) has rejected the application holding that the trust is primarily engaged in conduct of conference for medical fraternity, sponsored by various companies, who also nominates the participants i.e., doctors.
The Ld. CIT(E) held that the holding conference is not charitable activity in nature as the same was sponsored by the donors, which may be commercial pharmaceutical organization and does not under the heads of education or medical relief as claimed by the Trust. The Ld. CIT(E) also examined the financial of the trust and noted that trust’s only source of income was from medical conference income i.e 100% of its income earned was in the nature of commercial only and therefore even if trust is considered for advancement of general public utility, it exceeded the threshold of 20% laid down in proviso to section 2(15) of the Act. The Ld CIT(E) has further observed that surplus alone for the year ending 31.03.2023 was Rs. 45.8% which is more than 20% of the limit prescribed in Section 2(15) of the Act
ITA No.160/Chny/2025 :- 3 -:
The Ld Authorized Representative (AR) of the assessee vehemently contested these findings and submitted that the analysis of receipts by the CIT(E) was incorrect both in law and in fact. It was argued that the 20% threshold prescribed under the proviso to section 2(15) is relevant only for the purposes of assessing the income u/s. 11 and does not constitute a ground for rejecting approval under section 80G at the time of application. The AR placed reliance on the judgment of the Hon’ble Allahabad High Court in the case of Fifth Generation Education Society v. CIT 185 ITR 634 (All.) and ITAT decision in the case of Anugraha Education Trust vs. CIT(E) [2025] 173 taxmann.com 852 (Banglore-Trib)
On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of Ld CIT(E) and argued that application was correctly rejected.
We have heard the rival submissions and perused the material available on record. The assessee has been granted registration u/s. 12A of the Act on 30.01.2023 for the A.Y 2023-24 to 2025-26 and has also granted provisional registration u/s. 80G(5) of the Act on 28.02.2023. The primary basis for rejection appears to be the alleged :- 4 -: commercial nature of the conferences organized and the quantum of receipts from pharma companies and participating doctors. However, organizing academic or professional conferences per se does not ipso facto imply commercial intent. Whether the purpose and nature of such events align with charitable objectives particularly education or advancement of general public utility requires a detailed and holistic analysis. Moreover, the application of the 20% threshold under the proviso to section 2(15) has been a subject of judicial scrutiny, and we find force in the assessee’s contention that this aspect is better examined during the assessment of income under sections 11–13, rather than at the stage of approval under section 80G, more so when the trust has already been granted 12A registration. In light of the above and in the interest of justice, we are of the view that the matter requires reconsideration. We accordingly set aside the impugned order of the CIT(E) and restore the matter to his file with a direction to re- examine the application afresh in accordance with law. The CIT(E) shall consider the assessee’s submissions, financial statements, relevant judicial pronouncements, and provide a reasoned order after granting an opportunity of being heard.
ITA No.160/Chny/2025 :- 5 -:
In the result, the appeal filed by the assessee is allowed for statistical purposes only.
Order pronounced on 23rd May, 2025.