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Facts
The assessee, Aragen Foundation, appealed against the order cancelling its registration under Section 12AB and rejecting its application for registration under Section 80G. The competent authority had cited errors in application, receipt of foreign donations without FCRA registration, and CSR contributions as reasons for rejection.
Held
The Tribunal held that CSR expenses, while not allowable under Section 37, do not preclude 80G exemption. It also noted that technical mistakes in applications should not lead to dismissal without malice, and opportunity for rectification should be given. The competent authority's focus on the genuineness of funds rather than the activities for registration was found to be misplaced.
Key Issues
Whether CSR contributions are eligible for 80G exemption and whether rejection of registration based on technical errors and unrelated fund genuineness is justified.
Sections Cited
12AB, 12AA(1)(ac)(ii), 80G, 37
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Income Tax Appellate Tribunal, “A” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
These appeals are preferred by the Assessee against the different order dated 19.03.2025 & 20.03.2025 of the Commissioner of Income-tax, (Exemption) Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Notice Nos: ITBA/EXM/F/EXM45/2024- 25/(1074676330(1)/1074743375(1) against the cancellation of Registration under Section 12AB of the Act for AY: 2025-26.
On hearing both the appeals together we find that the competent authority i.e. Commissioner of Income Tax (Exemption), Delhi dismissed the claim of regular Registration under Section 12AA(1)(ac)(ii) of the Act and rejected application in Form 10B of the assessee and consequently application for Registration under Section 80G of the Ac was rejected leading to these appeals.
We find that the order of rejection application in Form 10AB has in its background the conclusion of competent authority that firstly, there was an error in selecting incorrect code application in seeking registration under & 2400/Del/2025 Aragen Foundation (AY; 2025-26) Section 12AB of the Act. Secondly, competent authority concluded that assessee had received donation from foreign country without their being registration under Foreign Contribution Regulation Act (FCRA) and lastly that assessee had issued Form 10BE to Aragen Life Sciences Limited for contributions made towards Corporate Social Responsibility (CSR).
The Ld. AR representing the assessee has vehemently argued that enquiries were conducted beyond the scope of u/s 12AB of the Act and it was further contended that in fact there is factual error in considering receipts from foreign country while receipts were from within India. It was also contended that CSR contributions are allowable for u/s 80G deduction.
Ld. DR has contended that there is no error in impugned orders and without the source of funds explained the genuineness of activity becomes suspicious. It was also contended by Ld. DR that CSR contribution cannot be considered as 80G donations as the CSR contribution lack voluntary nature.
We have given a thoughtful consideration to the material on record and we find that as a matter of fact what competent authority has alleged to be & 2400/Del/2025 Aragen Foundation (AY; 2025-26) received from foreign country without FCRA registration the assessee has submitted before the competent authority that one Suresh Sabapathy was member of Boehringer Ingelheim (BI) and Aragen Life Sciences Collaboration and BI team had high appreciation for excellent services provided by Mr. Suresh who had died and as a token of gratitude on behalf of BI its India managing director came forward and contributed a sum of Rs.4,00,000/- towards education of children of deceased Suresh and assessee coordinated this process by online transfer of the sum.
Then, as with regard to CSR expenses funds being eligible for 80G deductions is no more res-integra and Coordinate Bench in Agilent Technologies Vs. ACIT, (International) P. Ltd., Circle-1(1), vide order dated 26.03.25 has held that though CSR expenditure are not allowable expenditure under Section 37 of the Act, 80G exemption cannot be declined.
Then, technical mistakes in the applications for which there is no provision under law for revising or editing the application it is unjust to dismiss without attributing any malice and applicant should be given an & 2400/Del/2025 Aragen Foundation (AY; 2025-26) opportunity to rectify procedural laps. Similar was the view of Coordinate Benches in the cases below:
i. Vir Seva Mandir Vs. CIT (E), ii. Swaraj Foundation Vs. ITO, & 69/Viz/2025 iii. Aashritha the Dr. Sankaranarayan Raju Charitable Trust Vs.CIT(E), Hyderabad, & 209/Hyd/2025 iv. Aatman Foundation Vs. CIT(E), ITA No. 364/Ahd/2025 v. Abhinav Shikshan Sanstha Vs. CIT(E), ITA No. 459/Pun/2025
On appreciating the impugned order of rejection of form 10AB we find that the competent authority has examined the issue of genuineness of funds which in fact are not relevant at this stage except when the intention is to discredit the genuineness of the charitable activities applicant. However, the same is not the case here, ld. competent authority has not at all applied its mind to the genuineness of the activities of the assessee to examine the same for the purpose of Section 12AA(1)(ac)(ii) of the Act. It is settled proposition of law that at the stage of considering application for grant of registration there is limited scope to go beyond the examination of the genuineness of activities of the registration when otherwise the powers are vested for the cancellation of the registration, provisional or final, on establishment of specified violations. The scope of specified violations cannot be widened to & 2400/Del/2025 Aragen Foundation (AY; 2025-26) be considered at the stage of grant of registration itself. Thus, order of Ld. CIT(E), Delhi cannot be sustained.
The appeals are allowed. Both the applications are restored to the files of Ld. CIT(E) to decide afresh in the light of the aforesaid observation of this bench.
Order pronounced in the open court on 05.12.2025