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Facts
The assessee, Jagruti Public Charitable Trust, applied for registration u/s 12A and approval u/s 80G. The CIT(E) rejected the application citing discrepancies including a loan taken without prior permission from the Charity Commissioner and claiming deduction u/s 11 while seeking 12A registration. The assessee argued the loan was for charitable activities, obtained ex-post facto permission, and had filed an updated return.
Held
The Tribunal noted that the CIT(E) rejected the application primarily on two grounds: inapplicability of section 12A(1)(ac)(vi)(b) due to previous AY exemption claims and violation of Section 36A of the Maharashtra Public Trust Act regarding the loan. The Tribunal referred to earlier decisions where non-obtaining prior permission was considered a procedural lapse.
Key Issues
Whether the rejection of 12A registration and 80G approval by the CIT(E) was justified based on the procedural lapse of not obtaining prior permission for a loan and claiming deduction u/s 11.
Sections Cited
12A, 80G, 12A(1)(ac)(vi)(B), 36A, 11
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
& 1695/PUN/2025 Jagruti Public Charitable Trust, ITO, Exemption, Omkar Park, Manjari Famr, Ward-1(1), Pune Manjari BK B.O. Manjari BK, Vs. Pune-412307 PAN : AACTJ1902G अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Paras Munot Department by : Shri H. Ananda Date of hearing : 01-04-2026 Date of 10-04-2026 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The above two appeals filed by the assessee are directed against the separate orders both dated 20.06.2025 of the Ld. Commissioner of Income Tax (Exemption), Pune (“CIT(E)”) rejecting the application(s) for grant of registration u/s 12A and approval u/s 80G of the Income Tax Act, 1961 (the “Act”). For the sake of convenience, both these appeals were heard together and are being disposed of by this common order.
Facts of the case in brief, are that the assessee filed an application in Form No.10AB on 18.12.2024 for registration of the trust u/s 12A(1)(ac)(vi)- ITEM(B) of the Act. With a view to verify the genuineness of the 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 and duly served upon the assessee through ITBA portal on 28.01.2025 requesting the assessee to upload certain information/clarification contained therein by 12.02.2025. The Ld. CIT(E) while going through these details submitted by the assessee in response to the said notice and documents filed along with the application, found various discrepancies for which he issued another notice/show cause notice on 07.04.2025 asking the assessee for necessary compliance by 15.04.2025. The said discrepancies recorded by the Ld. CIT(E) is reproduced below: "(i) It is seen from your note on activity that you have conducted several mental health awareness programs. In respect to those, kindly furnish complete details about those programs viz. date and place of beach programs, experts who rendered services, their qualification, details of beneficiaries, how they were identified etc. (ii) From the financial statements, it is observed that the trust has taken a loan. Please provide a copy of the permission under Section 36A of the Maharashtra Public Trust Act, 1950, from the Charity Commissioner, relating to this loan. (iii) Submit detailed information regarding the donations received, including the names of donors, their addresses, PAN numbers, amounts donated, dates of donations, modes of donations, and receipt numbers issued to donors. (iv) As per financial statements furnished by you, it is seen that the trust has claimed deduction u/s 11. Therefore, said provisions of sec. 12A(1)(ac)(vi) (B) of the Act are not applicable to your case. Please clarify with supporting documents. Also furnish ITRs of the FYs for the relevant years. (v) Details of actual free services/ concessional services provided to patients from financially weaker sections of the society with evidence and State Government norms followed, with evidence in respect of Charitable Hospitals."
2.1 The assessee filed its response to the above show cause notice on 21.04.2025. As regards the query of the Ld. CIT(E) pertaining to deduction claimed u/s 11 of the Act, the assessee contended that exemption has been claimed while filing ITR as the assessee was provisionally registered. However, the contention of the assessee was not found to be acceptable by the Ld. CIT(E).
2.2 The Ld. CIT(E) further observed that the assessee has taken loan without obtaining permission from Charity Commissioner u/s 36A of the Maharashtra Public Trust Act, 1950. The assessee contended that the trust has taken loan for charitable activities and the entire amount received was exclusively utilized for charitable purposes, primarily focused on the care, rehabilitation, and welfare of mental health patients. No part of the funds was used for non- charitable or personal purposes. However, the assessee admitted that no prior approval has been taken from the Charity Commissioner for raising the loan which occurred due to unawareness of the procedural requirement and was thus unintentional lapse on the part of the assessee trust. However, the Ld. CIT(E) rejected the assessee’s contention observing that the assessee has failed to comply with the statutory requirement under the Maharashtra Public Trust Act, 1950. The Ld. CIT(E), therefore, rejected the assessee’s application having been dissatisfied about the genuineness of the activities of the assessee trust and compliance of the requirements of any other law for the time being in force by the assessee.
Dissatisfied, the assessee is in appeal before the Tribunal raising the following grounds of appeal :
1. The Ld. Assessing Officer has erred in law and in fact in rejecting the application filed under section 12A(1)(ac)(iv)-ITEM(B) of the Income Tax Act 1961.
2. The appellant craves leaves to add or amend any ground of appeal.”
The Ld. AR submitted that the assessee has taken loan from the trustees to run the daily operations of the trust and the said loan has also already been repaid by the assessee. He, further submitted that the assessee has also obtained ex-post facto permission of Charity Commissioner for the impugned loan. He submitted that the assessee runs its operations from the Government funds as the release of the Government funds were delayed the assessee had to take loan from the trustees to carry out its operations. Relying on the decision of the Co-ordinate Bench of the Tribunal in the case of Shri Gurumauli Sevabhavi Sanstha Vs. CIT (Exemption), Pune in & 1142/PUN/2025 and Arham Foundation Vs. CIT, Exemption, Pune in & 1585/PUN/2025, the Ld. AR submitted that non-obtaining prior permission from the Charity Commissioner u/s 36A of the Maharashtra Public Trust Act, 1950 is only a procedural lapse and hence the Ld. CIT(E) should not have rejected the assessee’s application on this ground.
The Ld. DR supported the order of the Ld. CIT(E). He submitted that in the case of Shri Gurumauli Sevabhavi Sanstha (supra) is distinguishable on facts as in that case the genuineness of the charitable activities were not doubted and therefore the Ld. CIT(E) is justified in rejecting the application of the assessee.
We have heard Ld. Representatives of the parties and perused the material available on record, paper book filed by the Ld. AR on behalf of the assessee and also the judicial precedent relied upon by the Ld. AR. We find that the Ld. CIT(E) has rejected the assessee’s application mainly for the two reasons i.e. (i) inapplicability of section 12A(1)(ac)(vi)(b) due to exemption claimed u/s 11 in previous AY 2024-25 resulting in exclusion of income from total income after commencement of activity and (ii) violation of section 36A of the Maharashtra Public Trust Act, 1950 in respect of loan taken from the trustees without prior sanction from the Charity Commissioner. The Ld. AR has contended that the assessee has filed an updated return in the status of an AOP and has duly discharged the tax loan along with applicable interest. A copy of updated return is placed on record at page 6 of the paper book. So far concerned the Ld. AR has submitted that the assessee has obtained ex-post facto approval from the Charity Commissioner and the copy of the order of the Charity Commissioner is placed at pages 7 to 28 of the paper book.
We find that the Co-ordinate Bench of the Tribunal in the case of Shri Gurumauli Sevabhavi Sanstha (supra) has held that obtaining permission from the Charity Commissioner is a procedural lapse and cannot be termed as violation of law. Similar view has been taken by the Co-ordinate Bench of the Tribunal in the case of Arham Foundation (supra) which has in turn been relied by the Tribunal in the case of Shri Gurumauli Sevabhavi Sanstha (supra). The relevant observation and findings of the Tribunal in the case of Shri Gurumauli Sevabhavi Sanstha (supra) is as under : “9. In light of the above decision and also considering the facts of the case that only short term loans have been obtained and there is no encumbrance on the property of the assessee trust and obtaining permission from the Charity Commissioner is a procedural lapse and cannot be termed as violation of law as envisaged u/s.12AB(1)(b) of the Act. Now since the assessee has successfully demonstrated that assessee trust has been formed for the purpose of carrying out the charitable activities as provided u/s.2(15) of the Act and duly supported by the documents exhibiting such activities, we hold that the assessee deserves to be granted registration u/s.12A r.w.s.12AB of the Act. Further, since assessee has inadvertently applied for the registration u/s.12A on 20.08.2021 and ld.CIT(Exemption) has granted regular registration on 24.09.2021, we therefore deem it appropriate to hold that the said regular registration u/s.12A of the Act granted on 24.09.2021 should remain effective till A.Y. 2026- 27. Since granting approval u/s. 80G(5) of the Act is consequential, the same should also remain effective till A.Y. 2026-27. Grounds of appeal raised by the assessee in both the appeals are allowed.”
8. In the case of Arham Foundation (supra) the Tribunal held as under : “5. We have heard both the parties and perused the record. Assessee has filed copy of e-proceeding acknowledgment at page no.67, 68, 69 and 70 of the paper book, which gives list of documents filed by Assessee before the ld.CIT(E). 5.1 On perusal of the paper book filed by the Assessee, it is observed that Assessee is running following educational institutes : Arham School and Junior College Arham College of Arts and Commerce Arham International Institute of Information Security Arham Law College 5.2 All the above educational institutes are duly approved by the Competent Authority. Copies of the approval have also been filed by the Assessee in the paper book. These facts have not been challenged by ld.CIT(E) or ld.DR for the Revenue. 5.3 Thus, it is an admitted fact that Assessee Trust is running duly approved Educational Institutes. It is also an admitted fact that Assessee is registered with the Charity Commissioner and has submitted Audited Financials before the Charity Commissioner as per Maharashtra Public Trust Act. 5.4 As per Section 2(15) of the Act, Charitable Purpose includes Education. Thus, Assessee‟s activities are as per the definition of Section 2(15) of the Act. This fact has not been doubted by ld.CIT(E). 5.5 On perusal of the order of ld.CIT(E), it is noted that ld.CIT(E) has rejected Assessee‟s application for grant of registration u/s.12A r.w.s 12AB of the Act, only on one ground that Assessee had taken certain loans/advances without obtaining prior permission of Charity Commissioner. Therefore, ld.CIT(E) held that Assessee has violated provisions of Section 36A of Maharashtra Public Trust Act. 5.6 It is the submission of Ld.AR that the Trustees have provided certain advances to the Trust as and when required, which were utilized by the Trust for the purpose of the objects of the Trust.”
It is the submission of the Ld. AR that the assessee had duly demonstrated the charitable activities carried out by the assessee by filing the requisite details/documentary evidence before the Ld. CIT(E), which is evident from the facts on record. It is also matter of fact that the assessee has already obtained ex-post facto permission from the Charity Commissioner in respect of loan taken from the trustees. Before the Ld. CIT(E), the assessee submitted that the said loan has been applied towards the charitable activities/charitable objects of the trust which has not been questioned by the Ld. CIT(E). The assessee has also submitted that it has filed an updated return in the status of an AOP and has already discharged its due tax liability along with applicable interest. Thus, in our view, the rejection of the assessee’s application by doubting the genuineness of the activities is without any basis.
Considering the totality of the facts and the legal position set out above, we deem it fit to set aside the impugned order of the Ld. CIT(E) and restore the matter back to his file to decide the application for registration afresh in light of the fact that the assessee has already obtained the sanction from the Charity Commissioner and the decision(s) of the Tribunal (supra), as per fact and law after affording reasonable opportunity of hearing to the assessee. Needless to say, the assessee shall provide the requisite support in terms of submitting the relevant documents/evidence as may be required/called upon on the appointed date without seeking any adjournment under any pretext, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order in accordance with law. We direct and order accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
After hearing both the sides, we find that the Ld. CIT(E) has rejected the assessee’s application for approval u/s 80G of the Act for the reason that the assessee is not having registration u/s 12A of the Act. In the preceding paragraphs, we have already restored the matter of registration u/s 12A of the Act back to the file of the Ld. CIT(E) for fresh adjudication and therefore the issue of approval u/s 80 of the Act is also restored to the file of the Ld. CIT(E) to re-adjudicate the same. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
In the result, both the appeals in & 1695/PUN/2025 filed by the assessee are allowed for statistical purposes.