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Facts
The assessee, Mohan Rao Patil Praja Trust, sought regular registration under Section 80G(5) after obtaining provisional approval. The CIT (Exemptions) rejected the application, citing that the trust's activities were not commensurate with its objects, as no expenditures were recorded in its initial financial statements for a trust formed recently. The assessee had, however, received registration under Section 12AB shortly after this rejection.
Held
The Tribunal found the rejection by the CIT (Exemptions) arbitrary, noting that a newly formed trust would naturally not have commenced significant activities immediately. It also observed that the subsequent grant of Section 12AB registration by the same CIT (Exemptions) contradicted the rejection rationale. Consequently, the Tribunal set aside the impugned order and remanded the case back to the CIT (Exemptions) for fresh consideration after providing the assessee an opportunity of being heard.
Key Issues
Whether the rejection of a newly established trust's Section 80G(5) application, based on the non-commencement of activities, is valid when the trust subsequently received Section 12AB registration.
Sections Cited
80G, 80G(5), 12AB
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Income Tax Appellate Tribunal, Hyderabad ‘ DB-A ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha, G.
(िनधा�रण वष�/Assessment Year: 2025-26) Mohan Rao Patil Praja Trust Vs. Income Tax Officer ADILABAD Ward – 1 PAN:AAJTM1868K Adilabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri D. Anil Kumar, CA राज� व �ारा/Revenue by: Smt. U. Mini Chandran, CIT(DR) सुनवाई की तारीख/Date of hearing: 29/07/2025 घोषणा की तारीख/Pronouncement: 31/07/2025 आदेश/ORDER
Per Vijay Pal Rao, Vice President
This appeal filed by the assessee is directed against the order dated 13/02/2025 of the learned CIT (Exemptions) whereby the application of the assessee seeking approval u/s 80G of the I.T. Act was rejected.
The learned AR of the assessee has submitted that the assessee was granted provisional approval u/s 80G dated 14/03/2024 and thereafter, the assessee filed the application in Form 10AB for regular registration u/s 80G(5) of the Act. The Page 1 of 4 assessee has also submitted all the relevant documents including the Income Tax Return, financial statements for the financial year 2023-24 along with copy of the Trust Deed dated 10/02/2024. The CIT (Exemptions) has rejected the application on the ground that the activities are not commensurate with the objects of the assessee. He has pointed out that even after rejecting the application, the learned CIT (Exemptions) has granted registyration u/s 12AB of the Act vide order dated 18/02/2025, a copy of the said Form 10AB has been filed before us. He has further pointed out that the assessee Trust was created only on 10/02/2024 and therefore, in the financial statements as on 31/03/2024, the assessee has not shown any expenditure as the activities are yet to be commenced. Therefore, this finding of the CIT (Exemptions) and rejection of the application is highly arbitrary and unjustified. He has further pointed out that the learned CIT (Exemptions) has not given a show cause notice to the assessee on this point to explain the activities of the assessee. Thus, he has pleaded that the impugned order may be set aside and the learned CIT (Exemptions) may be directed to grant the approval u/s 80G of the Act.
On the other hand, the learned DR has relied upon the impugned order of the CIT (Exemptions) and submitted that the assessee has not carried out any charitable activities and therefore, the learned CIT (Exemptions) has rightly rejected the application of the assessee.
We have considered the rival submissions and carefully perused the impugned order of the learned CIT (Exemptions) along with the documents and record filed by the assessee. The CIT (Exemptions) has given the reasons for the rejection of the application in para 3 as under: “3. 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 as per the provisions of the section 80G of the IT Act, 1961. In view of the above, the present application in form 10AB for registration u/s 80G is herewith rejected”.
Thus, it is stated by the learned CIT (Exemptions) that the activities are not commensurate with the objects of the assessee Trust. It is pertinent to note that when the assessee Trust was created vide deed dated 10/02/2024, then at the time of filing the application and financial statement as on 31/03/2024 obviously would not show any activities of the assessee yet to be commenced. Therefore, this observation of the learned CIT (Exemptions) that the activities are not commensurate with the objects is contrary to the facts and record. Accordingly, in the facrts and circumstances of the case when the learned CIT (Exemptions) has granted the registration u/s 12AB of the Act vide order dated 18/02/2025 which is after 5 days from the date of the impugned order, then the impugned order of the learned CIT (Exemptions) is liable to be set aside. We order accordingly. The matter is remanded to the record of the learned CIT (Exemptions) for reconsideration of the application of the assessee after considering the relevant record and details to Page 3 of 4 be filed by the assessee as well as affording an opportunity of hearing to the assessee.
In the result, appeal filed by the assessee is allowed for statistical purposes.