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Facts
The assessee filed an application for registration under Section 12AB of the IT Act. The CIT, Exemption, Pune rejected the application, finding that the assessee's activities appeared to be commercial in nature rather than purely charitable. The CIT noted issues with the genuineness of activities, lack of evidence, and commercial charges.
Held
The Tribunal found that the assessee had complied with notices and had a history of registration since 1998, with recent registration granted for AY 2021-22 to 2025-26. Considering the facts, the Tribunal set aside the CIT's order and remanded the matter back for a fresh decision after providing a reasonable opportunity of hearing.
Key Issues
Whether the assessee's activities were genuinely charitable or commercial, and whether the CIT properly provided an opportunity to the assessee before rejecting the registration application.
Sections Cited
12AB, 12A, 194J
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 10.03.2025 passed by Ld. CIT, Exemption, Pune rejecting the application for registration u/s 12AB of the IT Act.
Facts of the case, in brief, are that the assessee filed application for registration in Form No.10AB under sub-clause (ii) of clause (ac) of sub-section (1) of section 12A IT Act on 14.09.2024. With a view to verify the genuineness of activities of the assessee and compliance to requirements of any other law for the time being in force by the trust/institution as are material for the purpose of achieving its objects, a notice was issued by Ld. CIT, Exemption, Pune through ITBA portal on 04.11.2024 requesting the assessee to upload certain information/clarification on or before 19.11.2024. The desired information was furnished by the assessee. On verification of said information, Ld. CIT, Exemption, Pune found certain discrepancies and issued another notice on 30.01.2025 requesting the assessee to furnish further details/information in this regard on or before 06.02.2025. Not being satisfied with the reply furnished by the assessee, Ld. CIT, Exemption, Pune issued another notice dated 13.02.2025 asked further details on or before 20.02.2025. Not being satisfied with the reply furnished by the assessee in response to notice dated 13.02.2025, Ld. CIT, Exemption, Pune rejected the application for registration by observing as under :- “8.1 The activity note furnished by the assessee is general in nature without details such as specific dates, locations, number of beneficiaries, and how they were selected. The trust mentions collaborations with different institutions and certain programs conducted, but it does not furnish concrete evidence that these activities are conducted for the public at large without discrimination. The assessee has stated that income from other sources primarily received from program charges received. A significant portion of the assessee's income is from Pragatipath Educational Foundation, which runs Millennium School. The fact that Pragatipath Educational Foundation deducted tax at source under Section 194J of the Income-tax Act, 1961, applicable to professional or technical services, indicates that the payments were for professional services rather than voluntary charitable activities. This contradicts the trust's claim that it is engaged in purely charitable work. The assessee has been charging participants for various activities, such as fees for workshops, ranging between 2,500 and 3,300 per student, charging at different rates for making lanterns based on size, instead of uniform charges which contradicts a charitable approach. Selling science-related project materials through a "Hobby Store," also amounts to a business model, even though the trust claims it serves the convenience of students. The assessee claimed that charging fees does not negate its charitable nature, but it has failed to establish that its programs are also accessible to underprivileged students or children at large free of charge. In contrast, most financial evidence points to structured charges and income generation. The assessee's statement that it charges slightly above material and honorarium costs to remain self-sufficient, indicate an element of revenue generation rather than pure charity. Considering this, the assessee's activities, appear to be a commercial charge-for- service activity rather than charity. The revenue from program fees, material sales, and professional services contradicts its claim of being a charitable entity. Also, the TDS deductions under Section 194J indicate that payments received were for technical or professional services, further supporting the conclusion that the trust is operating in a commercial manner. Further, the assessee trust was specifically requested to submit supporting evidences of activities. The bills / invoices submitted mostly consist of administrative / establishment / refreshments/ courier charges etc. In fact some of the bills / vouchers are un- dated, handwritten paper bills. As such authenticity of the said bills remained questionable.
Considering the above facts discussed in the show notice and discrepancies noticed, the undersigned is not satisfied about the charitable nature and the genuineness of activities of the assessee and compliance of requirements of any other law for the time being in force by the assessee as are material for the purpose of achieving its objects.
In view of the above, the application dated 14/09/2024 in Form 10AB filed by the assessee is hereby rejected.”
It is the above order against which the assessee is in appeal before this Tribunal.
4. Ld. AR appearing from the side of the assessee submitted before us that Ld. CIT, Exemption, Pune has not provided proper opportunity to the assessee. It was contended that each and every notice was duly complied and replied by the assessee and if Ld. CIT, Exemption, Pune was not satisfied with the replies, he ought to have provided one final opportunity to the assessee to make the compliance. Ld. AR submitted before the bench that the assessee is an old institution and even in the past was allowed registration u/s 12A of the IT Act and in support of this contention, copy of 12A registration certificate dated 24.08.1998 and copy of registration certificate dated 31.03.2023 issued u/s 12A(1)(ac)(iii) of the IT Act was produced before the Bench. Accordingly, Ld. AR submitted that the assessee was already registered u/s 12A(1)(ac)(iii) of the IT Act from assessment years 2021-22 to 2025-26 and since then there is no change in the objects of the assessee trust and therefore Ld. AR requested before the Bench to set-aside the impugned order passed by Ld. CIT, Exemption, Pune and further requested to remand the matter back to the file of Ld. CIT, Exemption, Pune with a direction to provide at least one more opportunity to furnish the requisite documents/information as desired by Ld. CIT, Exemption, Pune.
5. Ld. DR appearing from side of the assessee relied on the order of Ld. CIT, Exemption, Pune and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record. We find that admittedly the assessee made compliance to all the notices issued by the Ld. CIT, Exemption, Pune. We also find that the assessee trust was granted registration u/s 12A since 1998. We also find that even for assessment years 2021-22 to 2025-26 Ld. CIT, Exemption, Pune has granted registration u/s 12A(1)(ac)(iii) of the IT Act vide order dated 31.03.2023. It was the contention of Ld. AR of the assessee that there is no change in the objects of the assessee trust since its inception and even for the period under consideration the situation has not changed. Considering the totality of the facts of the case, we find force in the above arguments of Ld. Counsel of the assessee and accordingly we deem it appropriate to set-aside the order passed by Ld. CIT, Exemption, Pune and remand the matter back to him with a direction to decide the application afresh and as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to comply with the notices issued by Ld. CIT, Exemption, Pune and produce requisite documents/information/clarification desired by Ld. CIT, Exemption,