ITAT Grants Section 12AB Registration as Missing PAN Details Cannot Make Small Donations Non-Genuine

Gajanan Maharaj Shikshan Sanstha Vs CIT (Exemptions) (ITAT Nagpur)

The ITAT Nagpur allowed the appeal filed by the assessee against the order passed by the Commissioner of Income Tax (Exemptions), Pune, rejecting registration under section 12AB of the Income Tax Act and cancelling provisional registration earlier granted to the assessee trust.

The assessee had applied for regular registration under section 12AB read with section 12A(1)(ac)(vi) by filing Form No. 10AB on 30.09.2023. During the proceedings, the CIT(E) sought details regarding genuineness of activities, compliance with applicable laws, and donation-related information. The CIT(E) observed certain deficiencies, including non-submission of authenticated trust deed, alleged non-compliance with section 36A of the Maharashtra Public Trusts Act regarding loans, and absence of full addresses and PAN details of donors. The assessee explained that the loans were temporary advances from employees and associates for contingencies and did not require prior permission under section 36A. It was also explained that the donations were small contributions collected from students and other persons.

The CIT(E), however, rejected the application and cancelled provisional registration on the grounds of non-compliance with section 36A of the Maharashtra Public Trusts Act, doubts regarding genuineness of donations, and failure to establish genuineness of activities.

Before the Tribunal, the assessee submitted that it had been operating three educational institutions, two of which were government-recognized schools and colleges. The institution had been established in 1996 and was registered under the Bombay Public Trust Act. It had been carrying out educational activities for more than a decade and regularly filing income tax returns. The assessee also pointed out that substantial government grants supported its activities. Financial statements showed gross receipts of ₹3.18 crore for the year ended 31.03.2022, out of which ₹3.11 crore represented government grants.

The assessee further submitted that detailed documentary evidence had been provided before the CIT(E), including financial statements, government grant details, loan details, and donation records. The list of donations showed that contributions ranged between ₹1,000 and ₹2,500, aggregating to ₹4,30,500 received from 236 persons. PAN details had been furnished for donations amounting to ₹1,50,000. According to the assessee, the donations were properly explained and there was no evidence to suggest that they were non-voluntary contributions.

Regarding loans and advances, the assessee submitted that the amounts involved were less than ₹10 lakh and represented temporary receipts from employees and associates to meet contingencies. It was argued that these were not loans or advances carrying interest as contemplated under section 36A of the Maharashtra Public Trusts Act.

The Departmental Representative supported the order of the CIT(E) and contended that rejection of registration and cancellation of provisional registration were justified.

After considering the submissions and material on record, the Tribunal observed that the assessee was operating educational institutions supported substantially by government grants. The Tribunal noted that out of total receipts exceeding ₹3 crore, the donations constituted only nominal amounts below ₹5,000 each, except for donations aggregating ₹1,50,000 where PAN details had been furnished.

The Tribunal held that, considering the scale of operations and gross receipts, the nominal donations could not be treated as non-voluntary contributions merely because PAN or complete address details were not available for every donor. It observed that the CIT(E) had not brought any adverse evidence on record to establish that the donations were not genuine. According to the Tribunal, this could not form a valid basis for denying registration under section 12A.

On the issue of loans and advances, the Tribunal accepted the explanation that the amounts were temporary receipts from employees and associates for meeting contingencies. It further observed that even otherwise, prior sanction of the Charity Commissioner under section 36A of the Maharashtra Public Trusts Act was not a material compliance requirement for achieving the charitable objects of the trust.

The Tribunal relied upon the decision of the Nagpur Bench in Shri Vyankanath Maharaj Shikshan Sanstha, Murtizapur vs. ITO, where it had been held that procedural breaches or non-material non-compliances under other laws cannot justify denial of registration under section 12AB. The Tribunal also noted that cancellation of provisional registration requires existence of specified violations under section 12AB(4), which were absent in the present case.

The Tribunal concluded that denial of registration under section 12A and cancellation of provisional registration were unjustified and unsustainable. It directed that the provisional registration granted earlier should be converted into final registration and accordingly directed the CIT(E) to grant registration under section 12A to the assessee. The appeal was allowed.

FULL TEXT OF THE ORDER OF ITAT NAGPUR

This appeal by assessee is directed against the order of Ld. Commissioner of Income Tax (Exemptions), Pune, dated 12/03/2024 passed under section 12AB of the Income Tax Act, 1961 (for short, “Act”); whereby application filed for regular registration u/s. 12AB r.w.s. 12A(1)(ac)(vi) was rejected.

2. The assessee has raised the following grounds of appeal:-

“1) The learned CIT (Exemption) erred in not granting registration u/s 12AB of I.T. Act 1961 as applied on 30/09/2023.

2) The order passed by CIT (Exemption), Pune not granting registration u/s 12AB of I.T. Act 1961 is illegal, invalid and bad in law.

3) The learned CIT (Exemption) ought to have granted registration u/s 12AB of I.T. Act 1961 as applied on 30/09/2023.

4) The findings recorded by CIT (Exemption) at para 4 are contrary to evidence on record and are unjustified. Registration as applied for ought to have been granted.”

3. In this case, assessee filed an application in Form No. 10AB on 30/09/2023 u/s. 12A(1)(ac)(ii) of the Act seeking registration u/s. 12AB. Ld. CIT(E) called for various details to verify genuineness of activities, compliance with other applicable laws and donation-related details. Ld. CIT(E) observed some deficiencies about non-submission of authenticated trust deed and permission for loans u/s. 36A of the Maharashtra Public Trusts Act (MPT). Assessee contended that loans were temporary and did not require prior permission and the donations were small contributions from students. Ld. CIT(E) did not find favour with the submissions made by the assessee and rejected the application and cancelled the provisional registration holding that (i) non­compliance with section 36A of MPT Act; (ii) Doubtful about genuineness of donations; and (iii) failure to establish genuineness of activities.

4. Aggrieved by the order of Ld. CIT(E) for non-grant of registration, assessee is in appeal before this Tribunal. Learned Counsel for the assessee has furnished gist of submissions, which is as under:

A) In the case of assessee registration u/s 12A of I.T. Act 1961 has not been granted by CIT(Exemption) Reasons for non-grant of exemptions are at para 4 of order. The provisional registration granted on 10/03/2022 has been cancelled. Reasons for rejection and cancellation are acceptance of loan contrary to provisions of section 36A of Maharashtra Public Trust Act and details of donation not containing full address and PAN of donors.

B) Assessee is operating 3 School – Colleges (P- 3) [Vol.- II]. 2 School/Colleges operated by assessee are granted by State Government. It is operating Education Institutions for more than decade.

C) Voluminous evidence is submitted before CIT (Exemption) giving all the details as were being called from assessee from time to time. (P- 1 to 94) [Vol. – I] and (P- 1 to 219) [Vol. – II].

D) Assessee charitable institution has been set-up in the year 1996 and was registered under Bombay Public Trust Act 1915. Certificate of registration placed (P-17) [Vol. –II]. Assessee is submitting regular return of income. Income as shown is eligible for exemption u/s 10(23C)(iiiab) of I.T. Act 1961.

E) Financial statements are submitted (P-47 – 51) [Vol. – I]. Page 48 is income and expenditure account which indicates that surplus in respect to activity for the year ending 31/03/2022 is Rs.1,16,249/-. Gross receipts as per income and expenditure are Rs.318.11 lacs (P – 48). Government grant received is Rs.311.95 lacs (P – 48). Government grants evidence (P- 43 – 67) fully substantiates genuineness of activities.

F) Activities of assessee trust is commenced in the year 1999. No specific activity carried out by assessee trust is demonstrated to be not genuine. Sweeping observation is without any evidence on record and is unjustified.

G) List of loans and advances are Rs.9,45,734/- as on 31/03/2022 and Rs.11,92,224/- as on 31/03/2021 (P – 49 – 54) [Vol. – I]. List of loans and advances (P- 55) [Vol. – I] indicate that they are from employees and associates for meeting contingencies and are not loans and advances taken on interest as envisaged in terms of provisions of section 36A of Maharashtra Public Trust Act.

H) Donation received for the year ending 31/03/2022 is Rs.4,30,500/- (P – 48). List of donation indicating name, address, date and amount submitted at page 39 to 45. Donations received are in between Rs.1000/- to Rs.2500/-. Aggregate donation of Rs.4,30,500/- is received from 236 persons. In our humble understanding assessee has reasonably explained the donation.

I) In the order passed u/s 12AA registration has been denied/cancelled only for two reasons which are explained hereunder:

a) The A.O. has faulted with the donation and observed that such amounts cannot be considered as voluntary contribution. Observation of Hon’ble PCIT is factually incorrect and contrary to evidence on record. Details submitted by assessee have not been verified before taking adverse view in the matter.

b) Amount of loans at less than Rs.10 lacs is not in the nature of loans and advances as envisaged in terms of provisions of section 36A of Maharashtra Public Trust Act. No independent verification is made before taking adverse view in the matter.

c) In view of above both the reasons for denial of registration as well as cancellation are unjustified and unsustainable.

J) der u/s 12AB has been passed. Both the objections of assessee are not matters of material compliance for the purpose of achieving its object. In view of above denial of grant of registration u/s 12A and cancellation of provisional registration is unjustified and unsustainable.

K) Order u/s12AB at para 5 notes that CIT is not satisfied with genuineness of activities. No whisper as to which activity of assessee trust is not genuine is in order. Other noting as to compliance of any other law being material for the purpose of achieving its objects is factually incorrect considering facts and evidence on record.

L) Provisional Registration cannot be cancelled without specifying specific specified violation. Cancellation is unjustified and arbitrary.

5. Per contra, Learned Departmental Representative (DR) has relied upon the order of Ld. CIT(E) and submitted that non-grant of registration u/s 12AB of the Act and cancellation of provisional registration are for valid reasons indicated in the order passed. He further submitted that there is no merit in the appeal filed by assessee and same is liable to be dismissed.

6. We have heard both the parties and perused the material available on record. In the present case, assessee held provisional registration u/s 12A of the Act dated 10/03/2022 in Form 10AC and same was valid for A.Ys. 2022-23 to 2024-25. Assessee is a charitable institution and operating three educational institutions, details of which were placed on record before Ld. CIT(E) in the reply submitted during the course of renewal of exemption applied by assessee-institution. Voluminous evidence as placed before the Ld. CIT(E) was submitted before us in two volumes comprising of 94 and 219 pages. The educational institutions operated by the assessee-institution is supported by receipt of grant from Government. Page No. 48 of Volume-I is income and expenditure account submitted for the year ending 31/03/2022 indicates that out of total receipt at Rs.3,18,11,298/-, a sum of Rs.3,11,95,908/- is Government grant. List of donations received is provided at pages No. 39 to 46. It indicates receipt of amount being nominal amounts of less than Rs.5,000/-. In respect to donation of Rs.1,50,000/-, PAN of donors have been provided.

7. The objection of Ld. CIT(E) for non-grant of registration is on twofold. One that donation amount cannot be considered as voluntary contribution and second loan & advances obtained are without prior sanction from Charity Commissioner which is non­compliance being material for the purpose of achieving its object. It is noted that assessee has failed to comply with these requirements. Facts as noted hereinabove indicates that considering the gross receipts of more than three crores, nominal amounts of donation received cannot be said to be not voluntary contribution as noted in the order of Ld. CIT(E). The observation of Ld. CIT(E) is based on no adverse evidence brought on record. In our opinion, it is no reason for denial of grant of registration u/s 12A of the Act.

8. We find that the amount of loans and advances of Rs.9,45,734/-and details of which are available in audited financial statements. It is explained that the aforesaid amount is receipt from the employees and associates for meeting contingencies and are not loans and advances taken on interest as envisaged in terms of provisions of section 36A of Maharashtra Public Trust Act. In any case, prior sanction of Charity Commissioner is not in the nature of material non-compliance for achieving object of trust.

9. The issue of loans accepted without compliance of section 36A of Maharashtra Public Trust Act has been considered by this Tribunal in the case of Shri Vyankanath Maharaj Shikshan Sanstha, Murtizapur vs. ITO in ITA No.398/Nag/2024 vide order dated 21/03/2025. The relevant extract of judgement is reproduced hereunder for ready reference:

“8. Let us examine the requirement of the phrase “the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects”

9. Whether trust or institution is required to comply with each an every requirement even if it is trivial or procedural, of such identified law or not? The expression is followed by the word ‘material for the purpose of achieving its object’. The material mean of such consequences, importance or significance as to be likely to influence the determination of a cause; to alter the character of an instrument, etc. (Legal Glossary 2015 by Govt. of India, Page No.258) The Hon’ble Finance Minister, in her budget speech of 2019, when the similar provision was introduced under the existing section, has said that “In order to ensure that trust or institution complies with local laws that are material for the purpose of achieving its objects…”. Hence view can be formed that the requirements have to be material and that also for achieving the objects are required to have complied.

10. The trust or institution is required to comply with any State or Central Law, Rules under a statute and Notifications issued under a Law e.g. Maharashtra Public Trust Act, 1950, Societies Registration Act, 1860, Foreign Contribution Regulation Act, 2010 etc. and Rules made under those Acts. The expression “any other laws” will not include Income-tax Act, 1961. In past it was held that compliance of Rights to Education Act, CIT(E) v/s Kids-R-Kids International Education & Social Welfare Trust [2018] 99 com 384 (P & H) (HC); Shri Gian Ganga Vocational & Educational Society v/s CIT [2013] 35 taxmann.com 17/143 ITD 297 (Delhi) (Trib.), Education institution run without obtaining requisite permission, Society is not registered under a particular State statute – Shri Krishna Education & Welfare Trust v/s CIT [2009] 27 SOT 331 (Delhi) (Trib.), charging excess fees in violation of fee prescribed by the Government – R. K. Educational Society v/s CIT [2015] 56 taxmann.com 154/68 SOT 113 (URO) (Visakha.) (Trib.), some part of the land on which a university setup was not owned as per certain Government notification – Indian Medical Trust v. PCIT [2018] 99 taxmann.com 273/173 ITD 508 (Jaipur) (Trib.), etc., are not relevant while the grant of registration, so long as objects are charitable. But post amendment registering authority is required to satisfy himself about the compliance with other statutes which are material to achieve its objects. Trust or institution may have multiple objects. Some of the objects may not be perused immediately. Non-compliance of certain laws relating to such objects may not be a hindrance to grant of registration. Especially when the Registering Authority has been granted with the power to cancel registration, when the trust or institution has not complied with the requirement of any other law. If Trust or Institution hasn’t started the activity then the requirement should be deemed to be complied with and the registering authority ought to be considered as satisfied with the genuineness of activities – Hardayal Charitable & Educational Trust v/s CIT [2013] 32 taxmann.com 341/214 Taxman 655 (All.) (HC), DIT v/s Foundation of Ophthalmic and Optometry Research Education Centre [2012] 25 taxmann.com 376/210 Taxman 36 (Delhi) (HC).

11. The Trust has subsequently applied for approval of Commissioner, Amravati Division, on 23/02/2024, vide Circular no.607, dated 29/04/2024, Charity Commissioner, State of Maharashtra, Mumbai, has directed to register cases under section 36A(3A) of Maharashtra Public Trusts Act, 1950, at the Divisional Level.

12. We have given our thoughtful submissions to the facts and have dispassionately heard all the arguments. The procedural breach is venial and not material for the purpose of achieving its objects. Moreover, the loan has not been taken by way of encumbrance of assets from any particular deficiency. The learned CIT(E) has been given onerous responsibility to grant registration under section 12AB of the Act and registration and cancellation can be proceeded with only after affording a reasonable opportunity of being heard. The reply of the Trust that loan has been subsequently repaid has been glossed over and a mere procedural irregularity, which is curable defect has been amplified to deny registration. Moreover, once provisional registration has been granted under section 12AA, under section 12AB(4) of the Act, the learned CIT(E) is perfectly empowered to cancel such registration, if specified violation has taken place. Clause (f) of Explanation clearly lays down the requirement of order; direction or decree, holding such non compliance has remained undisputed or has attained finality. Such circumstances are non existent in this case. Accordingly, the provisional registration needs to be converted to final registration. We direct accordingly. Consequent upon our directions based on the findings cited supra, we set aside the impugned order passed by the learned CIT(E) by allowing all the grounds raised by the assessee.”

10. Respectfully following the above referred to decision, the objection of Ld. CIT(E) with regard to loans taken without prior permission from Charity Commission is no reason for denial of registration u/s 12A of the Act. Respectfully following the decision of Co-ordinate Bench denial of registration u/s 12A of the Act is held to be unjustified and unsustainable, the order passed by the Ld. CIT(E) cancelling earlier registration held by the assessee without indicating any specified violation as mentioned in section 12AB(4) is also unsustainable.

11. Considering the facts and evidence on record, we direct that provisional registration needs to be converted into final registration. Therefore, the order of Ld. CIT(E) is set aside and Ld. CIT(E) is directed to grant registration u/s 12A of the Act to the assessee. Grounds of appeal raised by the assessee are allowed.

12. In the result, appeal filed by the assessee stands allowed.

Order pronounced on 09.04.2026 under Rule 34 of Income Tax (Appellate Tribunal) rules 1963