Jain Social Group Hyderabad Charitable Foundation Trust Vs CIT (ITAT Hyderabad)
12A Registration Cannot Be Denied on Low Application of Funds — ITAT Hyderabad Sets Aside CIT(E) Order
The Hyderabad Bench of the ITAT allowed the appeal of Jain Social Group Hyderabad Charitable Foundation Trust for AY 2026-27 and set aside the order of the CIT (Exemptions) rejecting registration under section 12A/12AB, holding that quantum or percentage of expenditure is not a valid ground for rejection at the registration stage.
Key findings of the Tribunal:
- Objects are undeniably charitable: The Trust’s objects clearly fall under relief of the poor, education and medical relief, with advancement of general public utility being only a residual clause. The CIT(E) erred in characterising the Trust primarily as a GPU entity.
- Registration stage vs assessment stage: The Tribunal reiterated that at the stage of grant of registration u/s 12A, the authority is required to examine only the objects and genuineness of activities, not the extent or percentage of application of income, which is a matter to be examined during assessment u/s 11.
- Event expenses not per se non-charitable: Expenditure incurred on a fund-raising programme (including sponsorship of a TV event) cannot be straightaway treated as non-charitable, especially when such activities are undertaken to mobilise donations for charitable objects.
- Arbitrary percentage-based approach rejected: The CIT(E)’s conclusion that spending “less than 20%” on charitable activities renders the trust non-charitable was held to be unauthorised in law and unsupported by the statute.
- Violation of natural justice: The CIT(E) raised issues regarding the nature of activities and classification under section 2(15) without issuing a proper show-cause notice or granting effective opportunity, violating principles of natural justice.
- Reliance on binding precedents: The Tribunal relied on Adarsha Vidyanidhi Trust (Kerala HC) and other decisions holding that registration cannot be denied based on application of funds or assumptions on activities, unless objects themselves are non-charitable or activities are found to be bogus.
Accordingly, the ITAT set aside the impugned order and remanded the matter to the CIT(E) with a direction to reconsider the application for registration afresh after granting due opportunity of hearing. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Jain Social Group Hyderabad Charitable Foundation Trust Vs CIT (ITAT Hyderabad)
This appeal by the Assessee is directed against the Order dated 27.06.2025 of the learned Commissioner of Income Tax-(Exemptions), Hyderabad, whereby the application of the assessee for registration u/sec.12A was rejected.
