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Facts
The assessee, Dhanera Diamonds Ajbani Charitable Trust, was denied final registration under Section 12A of the Income Tax Act by the CIT(E) because it had not incurred any expenditure on its objects, leading to doubts about the genuineness of its activities. The trust cited insufficiency of funds and pending donations as reasons for not spending.
Held
The Tribunal held that carrying out actual charitable activities is not a prerequisite for granting registration under Section 12A. The genuineness of the trust's objects can be examined even in the absence of current activities. Therefore, the CIT(E)'s reasoning for denial was not in agreement with the established legal position.
Key Issues
Whether lack of expenditure on charitable objects, due to insufficient funds, is a valid ground for denying registration under Section 12A of the Income Tax Act.
Sections Cited
12A, 12AB, 11, 12AA, 12A(1)(ac)(iii)
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 710/Ahd/2025 (िनधा�रण वष� / Assessment Year : NA) बनाम/ Dhanera Diamonds Ajbani The Commissioner of Charitable Trust Income Tax (Exemption) Vs. 301 Satyam, Athwa Gate, 609, Floor-6, Aayakar Surat – 395001, Gujarat Bhavan (Vejalpur), Nr. Sachin Tower, 100 Foot Road, Anandnagar- Prahladnagar Road, Ahmedabad �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AABTD5769J (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri M. K. Patel, AR ��यथ� क� ओर से/Respondent by : Shri Rignesh Das, CIT.DR 02/06/2025 Date of Hearing Date of Pronouncement 20/08/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM:
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Exemption), (hereinafter referred to as “CIT(E)”), Ahmedabad dated 29.12.2024, denying grant of final registration under section 12A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).
[Dhanera Diamonds Ajbani Charitable Trust vs. CIT(E)] - 2 –
The orders of the authorities below reveal that the assessee had been granted provisional registration in Form 10AC on 25.10.2022 from A.Y. 2023-24 to A.Y. 2025-26. The assessee was an old trust incorporated on 14th October, 1996 registered with the Assistant Charity Commissioner, Surat. Subsequent to grant of provisional registration, the assessee filed an application in Form 10AB seeking final registration u/s.12A of the Act. However, the same was rejected by the Ld. CIT(E) noting that no expenditure had been incurred by the assessee trust on its objects and as a consequence, he concluded that the assessee trust was not carrying out any activities towards its charitable objects. The Ld. CIT(E) accordingly held that the genuineness of the activities of the assessee trust could not be established in terms of the provisions of Section 12AB of the Act and therefore rejected the application filed by the assessee in Form 10AB u/s.12A(1)(ac)(iii) of the Act. The provisional registration granted was also cancelled.
The contention raised by the Ld. Counsel for the assessee before us was that the reason for not spending any amount towards the objects of the trust was explained to the Ld. CIT(E), being insufficiency of funds. He pointed out that the Ld. CIT(E) was told that the trust had very small savings in the form of savings bank balance of Rs.55,597/- only as on 31.03.2023 and whenever the trust earned some interest on the same it would be spent on the objects of the Trust. The Ld. Counsel for the asessee pointed out [Dhanera Diamonds Ajbani Charitable Trust vs. CIT(E)] - 3 – that the assessee had stated to the Ld. CIT(E), that to fund its objects the assessee trust was looking for donations and, therefore, had filed the present application seeking registration u/s.12A of the Act. Our attention was drawn to the response filed by the assessee trust to the Ld. CIT(E) reproduced at para 4.3 of the order, making the above contentions, as under:
“4.3 In response to the above notice, the applicant has submitted its reply on 13.12.2024, the relevant potion of which is as under.- 1. Our trust is having very small savings in the form of Savings bank balance of Rs.55,597/- as on 31/03/2023. Whenever after 3 to 4 years, we get a reasonable amount from interest, we can spend amount on object of the Trust. This is small trust established for noble cause and we are in search for donation to our trust, so that expenditure can be incurred on the object of the Trust. Since there are very small income we could not spent amount on specific object of the Trust. We have not spent amount on the object of the trust due to non-availability of funds at the same time we have not violated provisions of Income Tax Act or Bombay Public Trust Act-1950.”
The Ld. Counsel for the assessee contended that the mere fact that no activities were carried out by the assessee trust could not be a reason for denial of grant of registration and in this regard he heavily relied on two decisions of the Hon’ble Apex Court laying down the proposition that even without any activity having been undertaken by the trust, it was possible to consider whether the trust can be registered u/s.12AA of the Act. Reference was made to the following decisions of the Hon’ble Apex Court, copies of which were filed before us:
[Dhanera Diamonds Ajbani Charitable Trust vs. CIT(E)] - 4 – i. Ananda Social & Educational Trust vs. CIT, (2020) 114 taxmann.com 693 (SC) ii. CIT(E) VS. International Health Care Education and Research Institute, [2025] 171 taxmann.com 579 (SC)
Ld. DR, however, vehemently opposed the contention of the Ld. Counsel for the assessee and supported the order of the ld. CIT(E) stating that in the absence of any activity carried out by the assessee trust, it was not possible to verify the genuineness of the activities carried out by the trust, which was essential pre- requisite for grant of registration u/s.12A of the Act.
We have heard both the parties and perused the orders of the authorities below. The dispute before us relates to denial of grant of registration u/s.12A of the Act, which was denied for the reason that the assessee trust was not carrying out any activities and, therefore, the genuineness of its activities could not be verified. Admittedly, the assessee had submitted the reasons for not carrying out any activities or for carrying out very little activities being the absence of sufficient funds and had corroborated the same with facts and evidences. This is not disputed by the authorities below. Further, we have noted that the Hon’ble Apex Court has in the case of International Health Care Education and Research Institute (supra)held that the carrying on activity by a trust is not pre-requisite for grant of approval of registration [Dhanera Diamonds Ajbani Charitable Trust vs. CIT(E)] - 5 – u/s.12A of the Act and if a trust is not carrying out any activity it would suffice if the objects of the trusts are examined to see whether they are charitable in nature as defined in law. The Hon’ble Apex Court noted that though the purpose of seeking registration u/s.12A of the Act is to claim exemption u/s.11 and, therefore, before seeking registration it is essential that the trust must adduce cogent material to the satisfaction of the Commissioner that its activities are genuinely charitable in nature, however, it also noted that mere registration u/s.12A of the Act does not entitle to a charitable trust to claim exemption u/s.11 of the Act and the AO is entitled to examine the claim made by the trust in its return of income and if not convinced, it is always open for him to decline grant of exemption. The Hon’ble Apex Court, therefore, noting the aforesaid position of law has held that it is not necessary for grant of registration u/s.12A of the Act for a trust to carry out charitable activities and in the absence of any activity being carried out the objects of the trust could very well be examined for grant of registration. This view was reiterated by the Hon’ble apex court in the case of Ananda Social & Education Trust (supra). In the light of the same, we are not in agreement with the reasoning of Ld. CIT(E) for denying grant of registration of assessee trust on account of no charitable activity being carried out by the assessee Trust.
[Dhanera Diamonds Ajbani Charitable Trust vs. CIT(E)] - 6 –
Moreover, since the Ld. CIT(E) has focused only on the activities carried out by the assessee and has not examined the objects of the assessee Trust for the purposes of grant of registration u/s 12A of the Act, we consider it fit to restore the matter back to the Ld. CIT(E) to examine the object of the assessee trust and, thereafter, decide the issue of approving the application filed by the assessee u/s.12AB of the Act.
In the result, appeal filed by the assessee is allowed for statistical purposes.
This Order pronounced on 20/08/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 20/08/2025 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,