Registration u/s 12AB cannot be denied when objects are charitable even if there is no commencement of activity by the assessee – ITAT
In a recent judgment, ITAT Hyderabad has held that even if there is no activity carried out by the assessee, the Registration under section 12A cannot be denied when the objects are considered as charitable in nature.
ABCAUS Case Law Citation:
4822 (2025) (11) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the Commissioner of Income Tax (Exemptions) rejecting the application in Form 10AB for registration u/s 12AB as well as approval u/s 80G(5) of the Income Tax Act, 1961 (the Act).
The CIT(E) had observed that as per the financials and particularly the income and expenditure details produced by the assessee, no expenditure had been incurred by the assessee on charitable activities. Therefore, CIT(E) opined that the activities of the assessee were not in commensurate with the objects of the assessee.
The CIT(E) had rejected the application submitted by the assessee trust on the ground that the activities are not commensurate with the activities as per the objects of the assessee trust.
Before the Tribunal, the assessee referring to the objects of the trust as per the Trust Deed submitted that the primary purpose of creating the trust was to render services for the cause of the society with added focus to create a fully equipped leadership institute for this purpose.
It was submitted that for achieving the primary object, the Trust was to establish a leadership institute, a learning academy and a training centre for the purpose of offering education and training in order to promote leadership development, skill development, awareness, career development and related activities.
The assessee also submitted it had produced the documents comprising of the photographs for holding the meetings which is a primary initiatives in the directions of establishing the institute, learning academy/training centres by involving the peoples as well as the institutions / universities.
It was pointed out that the Trust had initially started the activity with the internal source of the leadership modules and, therefore, there was no much expenditure was incurred at this stage of the activities of the assessee.
It was contended that non-incurrence of expenditure cannot be a reason to conclude that the activities of the assessee are not in commensurate with the objects of the assessee trust.
The Tribunal observed that the activities of the assessee trust were at the initial stage and not reached to the level of yielding any charitable results or creating any asset. If these activities as claimed by the assessee trust were not considered as commensurate of the activities or carried-out of the charitable activities, then, the same also cannot be considered as not commensurate with the activities as per the objects of the assessee trust. There was nothing on record to suggest that the assessee trust had carried-out any activity which is against the objects or irrelevant for achieving the objects.
The Tribunal observed that at the time of granting the Registration u/sec.12AB of the Act what is prima facie required to be verified and satisfied about is, whether the objects of the assessee trust/institution are charitable in nature and in case of commencement of the activities whether the activities are carried-out for achieving the objects of the Trust so as to conclude that the same are genuine activity of the assessee trust/institution.
The Tribunal noted that the CIT(E) had not discussed anything about the activities carried-out by the assessee and how those activities were not commensurate with the activity of the objects of the assessee trust.
The Tribunal opined that the objects of the assessee trust were not disputed by the CIT(E) being charitable in nature and, therefore, even if there was no activity carriedout by the assessee, the Registration cannot be denied when the objects are considered as charitable in nature.
Accordingly, the Tribunal opined that rejection of the application in a summary manner without considering the detailed reply on record filed by the assessee in support of the application was not justified.
The Tribunal held that the nature of the objects and the activities as carried-out by the assessee trust required a proper appreciation and an objective decision regarding genuineness of the activities of the assessee trust.
Hence, the impugned orders of the CIT(E) were set-aside and the matter was remanded to the record of the CIT(E) for re-consideration of the application of the assessee for Registration u/s 12AB and approval u/s 80G of the Act.
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