Loading judgment…
Facts
The assessee, Lions MD 320 Leadership Institute, filed applications for registration u/s 12AB and approval u/s 80G(5) of the Income Tax Act, 1961, which were rejected by the CIT(E). The rejection was primarily based on the grounds that the assessee's activities were not commensurate with its stated objects and that no expenditure had been incurred on charitable activities, implying a lack of genuineness.
Held
The Tribunal held that the CIT(E) had not disputed the charitable nature of the assessee's objects and that rejection in a summary manner without properly appreciating the activities or the detailed reply filed by the assessee was unjustified. The Tribunal noted that non-incurrence of expenditure at an initial stage cannot be the sole reason to deny registration and that the prima facie verification should focus on the charitable nature of objects and whether activities are aligned with them. The impugned orders were set aside, and the matter was remanded to the CIT(E) for re-consideration after a physical hearing.
Key Issues
Whether the CIT(E) was justified in rejecting the applications for registration u/s 12AB and approval u/s 80G based on non-commensurate activities or lack of expenditure, particularly when the objects were charitable and the rejection was summary without proper consideration of the assessee's submissions.
Sections Cited
12AB, 80G, 80G(5), 12A(1)(ac)(ii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
ORDER
PER VIJAY PAL RAO, VICE PRESIDENT :
These two appeals by the assessee are directed against the two separate orders of the learned Commissioner of Income Tax (Exemptions), Hyderabad, both dated 19.02.2025 whereby the application for registration
2 ITA.Nos.853 & 852/Hyd./2025 u/sec.12AB as well as approval u/sec.80G(5) of the Income Tax Act, 1961 [in short "the Act"] were rejected.
ITA.No.853/Hyd./2025 :
2. The assessee has raised the following grounds in the instant appeal : 1. “The order of the CIT, (Exemption). Hyderabad is contrary to law, facts and circumstances of the case
2. The CIT, (Exemption), Hyderabad, erred in not granting the registration uls. 12AB
3. Any other grounds which the assessee may urge either before or at the time during the hearing.” ITA.No.852/Hyd./2025 :
The assessee has raised the following grounds in the instant appeal : 1. “The order of the CIT. (Exemption), Hyderabad is contrary to law, facts and circumstances of the case.
2. The CIT. (Exemption), Hyderabad, erred in not granting the registration u/s.80G.
3. Any other grounds which the assessee may urge either before or at the time during the hearing.”
4. The learned Authorised Representative of the Assessee has submitted that the learned CIT(E) has rejected the application submitted by the assessee trust on the 3 ITA.Nos.853 & 852/Hyd./2025 ground that the activities are not commensurate with the activities as per the objects of the assessee trust. He has referred to the objects of the assessee trust as per the Trust Deed dated 17.02.2022 placed at Page nos.28 to 48 of the paper book and submitted that the primary purpose of creating this trust is to render services for the cause of the society and the motto of organisation is “WE SERVE” with added focus to create a fully equipped leadership institute for this purpose and the activities to achieve it’s primary object are set-out in sub-clause nos.(a) to (o) of clause no.4 of the Deed. The learned Authorised Representative of the Assessee has submitted that for achieving the primary object, the Trust was to establish a leadership institute, a learning academy and a training centre for the purpose of offering education and training in order to promote leadership development, skill development, awareness, career development and related activities. This process requires a consorted efforts of establishing and setting-up of the learning academy and training centres by engaging and roping with the eminent personalities in the field as well as 4 ITA.Nos.853 & 852/Hyd./2025 universities including the deemed universities and institutions in the same field. Thus, the learned Authorised Representative has submitted that the assessee produced the documents comprising of the photographs for holding the meetings which is a primary initiatives in the directions of establishing the institute, learning academy/training centres by involving the peoples as well as the institutions / universities. He has pointed-out that the Trust has initially started the activity with the internal source of the leadership modules and, therefore, there was no much expenditure was incurred at this stage of the activities of the assessee. He has thus contended that non-incurrence of expenditure cannot be a reason to conclude that the activities of the assessee are not in commensurate with the objects of the assessee trust. Thus, he has contended that the impugned orders passed by the learned CIT(E) may be set-aside and the Registration u/sec.12AB as well as approval u/sec.80G may be granted to the assessee trust.
On the other hand, learned CIT-DR for the Revenue submitted that as per the financials and 5 ITA.Nos.853 & 852/Hyd./2025 particularly the income and expenditure details produced by the assessee placed at page nos.24 and 25 of the paper book, it reveals that no expenditure has been incurred by the assessee on charitable activities and, therefore, the learned CIT(E) has rightly observed that the activities of the assessee are not in commensurate with the objects of the assessee. He has relied upon the orders of the learned CIT(E).
We have heard the rival submissions as well as the relevant material on record. The learned CIT(E) has rejected the application of the assessee by giving the reasons in annexure as under :
“The assessee has filed an e-application in Form No. 10AB seeking registration u/s 12AB of the Income-Tax act, 1961.
Notices were issued in respect of proceedings u/s 12A(1)(ac)(ii) to the address mentioned in the Form 10AB to produce the copy of Memorandum of Association/Trust deed for verification and to furnish a detailed reply on the specific information called for in the said notice. In response to the same, the assessee has submitted partial information only. In this regard, another notice dated 24.12.2024 as a final opportunity was issued to the assessee to submit the other information also along with the reply to the above notices including relevant documentary evidences.
On perusal of the submissions made by the assessee, it is observed that activities are not commensurate with the activities as per objectives of the registered Deed/MOA/AOA, which is not 6 ITA.Nos.853 & 852/Hyd./2025 as per the provisions of the section 12AB of the IT Act, 1961. In view of the above, the present application in form 10AB for registration u/s 12AB is herewith rejected.”
Identical reasons are given for rejecting both the applications. It is pertinent to note that the assessee has filed it’s reply in response to the notice issued by the learned CIT(E) which is placed at page nos. 1 to 10 of the paper book along with annexures placed at page nos.11 to 52 of the paper book. The assessee has explained the primary objects of the assessee trust and the related activities for achieving the objects. Thus, the objects of the assessee is basically providing the facility for making the people educated and trained and to promote the leadership development, skill development, community awareness, career development and related activities. This exercise of providing the services requires establishment of an institute / learning academy and training centre as well as Faculty Members to provide the training and education in order to promote this leadership development, skill development etc. The assessee has filed the proof of various meetings / seminars conducted by it on the issue of creating awareness
7 ITA.Nos.853 & 852/Hyd./2025 on the subject as well as on the issue of cyber security. Thus, it appears that the activities of the assessee trust are at the initial stage and not reached to the level of yielding any charitable results or creating any asset. If these activities as claimed by the assessee trust are not considered as commensurate of the activities or carried-out of the charitable activities, then, the same also cannot be considered as not commensurate with the activities as per the objects of the assessee trust. There is nothing on record to suggest that the assessee trust has carried-out any activity which is against the objects or irrelevant for achieving the objects. Therefore, at the time of granting the Registration u/sec.12AB of the Act what is prima facie required to be verified and satisfied about is, whether the objects of the assessee trust/institution are charitable in nature and in case of commencement of the activities whether the activities are carried-out for achieving the objects of the Trust so as to conclude that the same are genuine activity of the assessee trust/institution. The learned CIT(E) has not discussed anything about the 8 ITA.Nos.853 & 852/Hyd./2025 activities carried-out by the assessee and how those activities are not commensurate with the activity of the objects of the assessee trust. The objects of the assessee trust are not disputed by the learned CIT(E) being charitable in nature and, therefore, even if there is no activity carried- out by the assessee, the Registration cannot be denied when the objects are considered as charitable in nature. Accordingly, we are of the considered opinion that rejection of the application in a summary manner without considering the detailed reply on record filed by the assessee in support of the application is not justified. Accordingly, in the facts and circumstances of the case, we are of the considered view that the nature of the objects and the activities as carried-out by the assessee trust requires a proper appreciation and an objective decision regarding genuineness of the activities of the assessee trust. Hence, the impugned orders of the learned CIT(E) are set-aside and the matter is remanded to the record of the learned CIT(E) for re-consideration of the application of the assessee for Registration u/sec.12AB of the Act as well as approval
9 ITA.Nos.853 & 852/Hyd./2025 u/sec.80G of the Act, after giving an appropriate physical hearing to the assessee.
In the result, both the appeals of the Assessee are allowed for statistical purposes. A copy of this common order be placed in the respective case files.