Case Law Details
Ashoka University Vs CIT (ITAT Chandigarh)
The appeals were filed by the assessee against separate orders dated 24.03.2026 passed by the Commissioner of Income Tax (Exemptions), Chandigarh, rejecting its application for registration under Section 12AB and its application for approval under Section 80G(5) of the Income-tax Act, 1961. The Tribunal disposed of both appeals through a consolidated order.
The assessee, a university established under the Haryana Private Universities Act, 2006 and engaged in imparting higher education, had already been granted registration under Section 12AB and had applied in Form No. 10AB for renewal/continuation of registration. During the proceedings, the CIT(E) sought details regarding the University’s activities, financial statements, donations received through its sponsoring body, International Foundation for Research and Education (IFRE), foreign contributions, and compliance with the Haryana Private Universities Act, 2006 and the Foreign Contribution (Regulation) Act, 2010 (FCRA).
The CIT(E) rejected the application principally on the grounds of alleged violations of the Haryana Private Universities Act arising from collection and retention of donations by IFRE, alleged loss of the University’s independent financial and operational character due to IFRE’s control, alleged FCRA violations concerning foreign contributions received by IFRE for the “Ashoka University Project,” discrepancies in financial statements and fund flows between the University and IFRE, and alleged incorrect recognition of income and lack of transparency in financial affairs. The CIT(E) also made observations that the earlier registration stood cancelled or superseded.
The assessee challenged these findings, contending that its educational activities were genuine and that the enquiry under Section 12AB was confined to examining the charitable objects, genuineness of activities, and compliance with laws material to achieving those objects. It argued that the Haryana Private Universities Act itself envisaged an extensive statutory role for the sponsoring body in the University’s governance, that no competent authority under that Act had alleged any violation, that foreign contributions were received by IFRE in its own capacity without any adverse finding by authorities administering the FCRA, that accounting treatments had been properly explained, and that any accounting issues were matters for assessment proceedings rather than registration. The assessee further submitted that the CIT(E) had no jurisdiction to treat the earlier registration as cancelled without following the procedure prescribed under Section 12AB(4), including identifying a specified violation and granting an opportunity of hearing.
The Revenue supported the CIT(E)’s order, submitting that the enquiry under Section 12AB extended to compliance with other laws material to the institution’s objects. It argued that substantial funds intended for the University were received and controlled by IFRE, raising concerns regarding the University’s autonomy, that foreign contributions were routed through IFRE for projects described as the “Ashoka University Project,” and that documentary evidence regarding donors, scholarships, beneficiaries, and fund utilisation remained inadequate. The Revenue also relied upon correspondence concerning scholarship funding, CSR contributions, and other donations to contend that the distinction between IFRE and the University had become blurred and that discrepancies in accounts remained unresolved.
The Tribunal observed that, while considering registration under Section 12AB, the competent authority is required to examine the institution’s objects, the genuineness of its activities, and compliance with laws material to achieving its stated objects, but the enquiry cannot become a roving investigation into every aspect of administration, accounting, or governance unless such matters directly affect the charitable character or genuineness of activities. It noted that there was no finding that the University’s educational activities were sham, fictitious, non-genuine, or contrary to its stated objects.
Regarding the alleged violations of the Haryana Private Universities Act, the Tribunal found that the conclusions of the CIT(E) were based upon the tax authority’s own interpretation without any finding by the competent authority administering that Act. Similarly, concerning the alleged FCRA violations, the Tribunal noted that no adjudication, proceeding, or adverse finding by the competent authority administering the FCRA had been brought on record and held that rejection could not be sustained solely on presumptive allegations. It also held that observations regarding accounting discrepancies and reconciliation issues could be examined in appropriate proceedings under the Act but could not by themselves justify denial of registration unless they established that the institution’s activities were not genuine or that it existed for purposes other than its stated charitable objects.
The Tribunal further held that the CIT(E) exceeded jurisdiction by observing that rejection of the renewal application had the effect of superseding or nullifying the existing registration. It observed that cancellation of registration is governed by the separate statutory mechanism under Section 12AB(4), requiring specified violations and compliance with the prescribed procedure. Since no such proceedings had been initiated, observations having the effect of cancelling the existing registration were held to be beyond the scope of the proceedings. As the matter was being remanded, the issue concerning cancellation of registration was also remanded to the CIT(E) with directions to proceed in accordance with Section 12AB(4) and the Explanation thereto.
At the same time, the Tribunal observed that the concerns raised by the Revenue required a deeper factual examination. It directed the CIT(E) to comprehensively examine the nature and legal character of receipts collected by IFRE, whether donations were intended for IFRE or for the University, the ownership and control of such funds, the University’s financial and operational autonomy, retention of funds by IFRE, scholarship and student sponsorship arrangements, donor identities, beneficiaries, fundraising communications, project documents, the flow of domestic and foreign contributions, and compliance implications under the relevant statutory framework. The Tribunal authorised the CIT(E) to obtain information from competent authorities administering the Haryana Private Universities Act, the FCRA, the Ministry of Home Affairs, the University Grants Commission, the State Government, or any other relevant authority, while directing that any material collected must be confronted to the assessee and adequate opportunity be afforded before passing a comprehensive, reasoned order based on objective evidence rather than assumptions or presumptions. The Tribunal clarified that all its observations were only prima facie and that all issues remained open for fresh adjudication. Accordingly, it set aside the impugned order and restored the matter to the CIT(E) for fresh adjudication.
With respect to the connected appeal concerning approval under Section 80G(5), the Tribunal held that the facts and grounds were identical and, following its decision in the Section 12AB appeal, also remanded that matter to the CIT(E). Both appeals were allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
Both the above appeals have been filed by the Assessee against the respective orders of Ld. CIT(Exemptions) Chandigarh each dt. 24/03/2026.
2. Since both the above appeals were heard together therefore they are being disposed of by this consolidated order.
3. We shall first deal with the appeal in ITA No. 895/Chd/2026. wherein Assessee has raised the following grounds:
Re: Jurisdictional grounds/ issues
1. That on the facts and circumstances of the case and in law, order dated 24.03.2026 in Form No.10AD passed by Commissioner of Income Tax (Exemption), Chandigarh VCIT(E)’] under section 12AB(1)(b)(ii)(B) rejecting/ dismissing application for registration under section 12A(1)(ac)(ii) of the Income tax Act, 1961 (‘the Act’) is illegal and bad in law.
1.1 That on the facts and circumstances of the case and in law, rejection of application for registration by the CIT(E) is beyond the scope of section 12AB of the Act inasmuch as the – (i) activities carried on by the assessee are genuine; and (ii) the assessee has duly complied with all other laws which are material for achieving the objects.
1.2 That the CIT(E) erred on facts and in law in passing the impugned order rejecting the registration without issuance of any prior show cause notice confronting the appellant with reasons for proposed rejection of registration and without affording a reasonable opportunity of being heard, which is not only violative of the statutory provisions but also the principles of natural justice.
1.3 That the CIT(E) erred on facts and in law in rejecting the application for registration based on various factually incorrect, bald and/ or irrelevant allegations, without judiciously considering the replies/ details filed by the appellant.
Re: Allegations/ observations in the impugned order
2. That on facts and circumstances of the case and in law, the CIT(E) erred in holding that the appellant has violated provisions of Haryana Private Universities Act, 2006 (‘HPU Act’) due to alleged collection and retention of donations by the sponsoring body, e., International Foundation for Research and Education (“IFRE”).
2.1 That the CIT(E) erred on facts and in law in not appreciating that – (i) the modus/ arrangement qua donations is not restricted under nor violative of HPU Act; (ii) provisions of section 8 and 12 of the said statute are misinterpreted; and (iii) there exists no allegation of violation by the competent authority under HPU Act.
3. That on facts and circumstances of the case and in law, the CIT(E) erred in holding that the applicant has lost independent character due to alleged excessive control over finances and interference in day-to-day management by the sponsoring body, without bringing on record any cogent or credible evidence/ reason to substantiate such
4. That on facts and circumstances of the case and in law, the CIT(E) erred in holding that the appellant has violated the provisions of the Foreign Contribution Regulation Act, 2010 (“FCRA”) due to some alleged defaults in the foreign contributions received by IFRE.
4.1 That the CIT(E) erred on facts and in law in not appreciating that – (i) foreign contributions were received by IFRE in its own name for implementation of scholarship programme; (ii) disclosure as “Ashoka University Project” made by IFRE in FC 4 return was merely to indicate the context and beneficiary institution; (iii) there exists no allegation of violation by the competent authority under FCRA; and (iv) without prejudice, any violation of IFRE cannot be relevant for appellant’s registration.
5. That on facts and circumstances of the case and in law, the CIT(E) erred in holding that there is a discrepancy between the amounts reflected in the books of IFRE and the appellant, without appreciating the correct factual
5.1 The CITE) erred on facts and in law in vaguely alleging that the books of accounts of the appellant do not reflect correct and true picture of financial affairs.
6. That on facts and circumstances of the case and in law, the CITE) erred in holding that donations and other receipts are not recognized as income on receipt either by 1FRE or by the appellant, without appreciating that donations received by 1FRE are treated as income for computing total income in the hands of
7. That the CITE) erred on facts and in law in levelling the aforesaid allegations qua transactions/ arrangements between the appellant and 1FRE (sponsoring body) without appreciating that transactions/ arrangements have been accepted as genuine and in compliance with the laws in the hands of sponsoring body inasmuch as similar registration under section 12AB of the Act of the sponsoring body stands renewed.
Re: Incorrect cancellation of existing/ earlier registration
8. That on the facts and circumstances of the case and in law, the CITE) exceeded jurisdiction in holding that the registration earlier granted under section 12AB (for AYs 2022-23 to 2026-27) stands cancelled/ superseded by the impugned rejection.
8.1 That the CITE) erred in law in cancelling the earlier registration granted under section 12AB without appreciating that the said action is beyond the scope/ powers vested in the authority as per section 12AB(1)(b) (ii) (B) of the Act.
8.2 That the CITE) erred in law in cancelling the earlier registration without initiating any proceedings under section 12AB(4) of the Act, without issuing any notice affording opportunity to the appellant and without specifying any ‘specified violation’ as mandated in law.
That the appellant respectfully craves leave to add, amend, alter and /or forego any ground(s) at or before the time of hearing.
4. Briefly, the facts of the case are that the assessee is a University established under the provisions of the Haryana Private Universities Act, 2006 and is engaged in imparting higher education. The assessee was already enjoying registration under section 12AB of the Act and had filed Form No.10AB seeking renewal/continuation of registration. During the course of proceedings, the Ld. CIT(E) issued various notices calling for details relating to the activities of the University, financial statements, donations received through the sponsoring body namely International Foundation for Research and Education (IFRE), details relating to foreign contributions and compliance with the Haryana Private Universities Act, 2006 and the Foreign Contribution Regulation Act, 2010.
5. After considering the replies furnished by the assessee, the Ld. CIT(E) rejected the application primarily on the following grounds:
i. alleged violation of the provisions of the Haryana Private Universities Act, 2006 on account of collection and retention of donations by the sponsoring body IFRE;
ii. lack of independent financial and operational character of the assessee due to alleged pervasive control of IFRE over the finances of the University;
iii. alleged violation of the provisions of the Foreign Contribution Regulation Act, 2010 inasmuch as foreign contributions were received by IFRE for the “Ashoka University Project” although the assessee itself was not registered under FCRA;
iv. discrepancies in the financial statements and fund flow between the assessee and IFRE;
v. alleged incorrect recognition of income and lack of transparency in financial affairs.
6. Aggrieved by the aforesaid findings, the assessee is in appeal before the Tribunal and has raised various grounds challenging both the rejection of registration as well as the consequential observations relating to cancellation of earlier registration.
7. The Ld. AR submitted that the impugned order has been passed beyond the scope of enquiry permissible under section 12AB of the Act. It was contended that the twin conditions required to be examined at the stage of registration are the charitable nature of the objects and the genuineness of activities. According to the Ld. AR, there is no dispute whatsoever that the assessee is engaged exclusively in imparting education and that its activities are genuine.
8. It was further submitted by the learned Senior Advocate that the findings recorded by the learned CIT(E) alleging violation of the provisions of the Haryana Private Universities Act, 2006 are founded merely on assumptions and conjectures and are not borne out from a proper appreciation of the statutory framework governing the University. In support of the said contention, our attention was drawn to the Haryana Private Universities Act, 2006 placed at page 54 of the paper book. Particular reference was made to the definition of “Sponsoring Body” contained in section 2(v) of the Act. The learned Senior Advocate thereafter took us through the provisions of sections 3, 4, 5, 6, 7, 8, 11, 12, 13, 16, 17, 22 and 23 of the said Act.
9. On the basis of the aforesaid provisions, it was submitted that the assessee University is a statutory institution established under the Haryana Private Universities Act, 2006 and that the role of the Sponsoring Body is statutorily recognised and embedded in the governance structure of the University. It was pointed out that under the scheme of the Act, the Chancellor is appointed by the Sponsoring Body with the approval of the Visitor. The Chancellor, in turn, is vested with significant powers, including the appointment and removal of the Vice-Chancellor and the discharge of various other functions relating to the administration of the University.
10. The learned Senior Advocate further submitted that the affairs of the University are governed by the Governing Body constituted under section 22 of the Act. The said Governing Body comprises the Chancellor, the Vice-Chancellor, five nominees of the Sponsoring Body, experts in technology and educational finance, and the Secretary to the Government of Haryana. It was emphasized that the statute itself declares the Governing Body to be the supreme authority of the University. According to the learned Senior Advocate, the composition of the Governing Body clearly demonstrates that the Sponsoring Body enjoys a substantial and decisive role in the governance and management of the University, inasmuch as the Chancellor and five nominees appointed by the Sponsoring Body, together with the Vice-Chancellor appointed under the authority of the Chancellor, constitute a dominant segment of the Governing Body and possess effective control over its decision-making process.
11. Reference was also made to the constitution of the Board of Management. It was submitted that the Board consists of the Vice-Chancellor, two members of the Governing Body nominated by the Sponsoring Body, three members other than members of the Governing Body appointed by the Sponsoring Body, three teachers nominated by the Sponsoring Body and two teachers nominated by the Vice-Chancellor. It was argued that the overwhelming majority of the members constituting the Board of Management are either directly nominated by the Sponsoring Body or derive their appointment through authorities whose appointments themselves emanate from the Sponsoring Body. Consequently, the Sponsoring Body exercises pervasive influence over the management and administration of the University.
12. On the strength of the aforesaid statutory provisions, it was contended that although the Sponsoring Body and the assessee University may be distinct entities in nomenclature and legal form, the legislative scheme itself contemplates a close functional and administrative relationship between them. It was therefore argued that the assessee University cannot be viewed in isolation from the Sponsoring Body and, in substance, functions through a governance structure in which the Sponsoring Body has a predominant and effective role. Accordingly, the adverse conclusions drawn by the learned CIT(E) merely on account of the involvement of the Sponsoring Body in the affairs of the University are contrary to the statutory framework envisaged under the Haryana Private Universities Act, 2006. The Ld. Sr. Advocate further contended that neither the Haryana Government nor any competent authority administering the Haryana Private Universities Act has ever alleged any violation against the assessee.
13. The learned Authorised Representative further submitted that the finding of the learned CIT(E) that the assessee University had lost its independent character is wholly misconceived and unsupported by the factual as well as the legal position. It was contended that the University is a distinct legal entity established under the provisions of the Haryana Private Universities Act, 2006 and derives its existence, powers and functions from the statutory framework governing private universities in the State. The affairs of the University are administered through duly constituted statutory authorities and bodies envisaged under the Act, each of which discharges its functions in accordance with the powers conferred by the statute.
14. It was further argued that the mere fact that the Sponsoring Body assists in the mobilization of resources or facilitates the receipt of donations for the purposes of promoting the objects of the University cannot, by itself, lead to the inference that the University has surrendered its autonomy or ceased to function as an independent institution. Such assistance, according to the learned Authorised Representative, is in consonance with the role envisaged for the Sponsoring Body under the governing statute and does not detract from the University’s separate legal identity. It was therefore submitted that the conclusion drawn by the learned CIT(E) that the University had lost its independent character is based on conjectures and presumptions rather than on any tangible material demonstrating interference with, or usurpation of, the statutory powers and functions of the University by the Sponsoring Body.
15. With regard to FCRA,
16. At the outset, the Ld. Sr. Advocate invited our attention to the audited financial statements of the assessee. Reference was made to page 276 of the paper book, wherein the value of Property, Plant and Equipment as on 31.03.2025 was disclosed at Rs.5,624 lakhs. Thereafter, our attention was drawn to page 277 of the paper book, which reflected revenue from operations amounting to Rs.42,422 lakhs for the year ended 31.03.2025. The Ld. Sr. Advocate then referred to Note 14 appearing at page 296 of the paper book, wherein the break-up of the aforesaid revenue from operations amounting to Rs.42,422 lakhs has been furnished. It was pointed out that the said figure, inter alia, included amounts received through the sponsoring body.
17. The Ld. Sr. Advocate further invited our attention to page 291 of the paper book, wherein under the head “Funds received by International Foundation for Research and Education (IFRE) on behalf of the University”, an amount of Rs.14,162 lakhs was reflected. It was submitted that out of the aforesaid amount, donations aggregating to Rs.11,911 lakhs had been received. As per the notes forming part of the financial statements, an amount of Rs.135 lakhs represented donations received towards acquisition of specific depreciable assets, whereas the balance amount of Rs.11,776 lakhs pertained to donations received for meeting operating expenditure. It was contended that the entire amount had been duly accounted for in the books of account of the assessee in accordance with the applicable accounting standards.
18. The Ld. Sr. Advocate also referred to page 296 of the paper book and submitted that scholarships amounting to Rs.5,528 lakhs received through the International Foundation for Research and Education were specifically disclosed in the financial statements and duly incorporated in the books of account of the assessee. It was argued that the donations received by the University had been utilized for the development and upgradation of educational infrastructure, and in support thereof, reliance was placed upon the documentary evidence placed on record at pages 634 to 934 of the paper book.
19. Proceeding further, the Ld. Sr. Advocate submitted that neither the Ministry of Home Affairs nor any other competent authority had initiated proceedings against either the assessee or IFRE alleging any violation of the provisions of the Foreign Contribution (Regulation) Act, 2010. It was argued that the foreign contributions in question had been received by IFRE in its own capacity and not by the assessee-University. According to the Ld. Sr. Advocate, the reference to “Ashoka University Project” in the FC-4 returns merely described the educational project for which the funds were intended and could not, by itself, lead to an inference that the foreign contributions were received by the assessee. It was thus contended that, in the absence of any adjudication or finding by the authorities empowered under the FCRA, the Ld. CIT(E) lacked jurisdiction to assume or record a violation of the provisions of the FCRA while adjudicating the assessee’s claim under the Income-tax Act.
20. The Ld. AR further submitted that the observations of the Ld. CIT(E) regarding alleged discrepancies in the accounts were founded upon a misconception of the accounting treatment adopted by the assessee-University and IFRE. It was argued that the figures sought to be compared in the impugned order related to distinct accounting heads and transactions and, therefore, were not comparable. The Ld. AR submitted that detailed reconciliations explaining the accounting treatment and corresponding entries had been furnished during the course of proceedings; however, the same were not properly appreciated while passing the impugned order.
21. The Ld. AR further contended that even assuming there were accounting or interpretational issues, such matters may be relevant in assessment proceedings but cannot form the sole basis for denying registration when the charitable objects and educational activities of the institution remain undisputed.
22. It was further submitted that the Ld. CIT(E) has travelled far beyond the scope of his jurisdiction in observing that the registration earlier granted to the assessee under section 12AB stood cancelled, superseded, or otherwise rendered non-operative. The Ld. Sr. Advocate contended that the registration granted under section 12AB was admittedly valid up to 31.03.2026, and in this regard our attention was invited to page 24 of the paper book, wherein the period of validity of the registration has been specifically recorded. Further reference was made to page 40 of the paper book containing Form No. 10AC issued in favour of the assessee, evidencing grant of registration for a period of five years, i.e., from Assessment Year 202223 to Assessment Year 2026-27. The Ld. Sr. Advocate submitted that once a valid registration has been granted under section 12AB, the same can be withdrawn or cancelled only in accordance with the procedure prescribed under section 12AB(4) of the Act. It was argued that the statute confers power of cancellation only upon the recording of a “specified violation” as defined in the Explanation to section 12AB(4), and that such cancellation can be effected only after affording the assessee a reasonable opportunity of being heard. According to the Ld. Sr. Advocate, the impugned order does not identify, much less establish, the existence of any specified violation within the meaning of the aforesaid provision. There is not even a reference in the impugned order to any of the contingencies enumerated in the Explanation to section 12AB (4) which could justify initiation of cancellation proceedings. It was further submitted that no independent proceedings for cancellation of registration were ever initiated by the Ld. CIT(E) in the manner contemplated by law, nor was any show-cause notice issued proposing cancellation of the registration already granted. In the absence of compliance with the mandatory statutory procedure, it was argued that the Ld. CIT(E) could not have, while deciding the present proceedings, recorded observations having the effect of retrospectively nullifying or extinguishing a registration which continued to remain valid and operative. The Ld. Sr. Advocate, therefore, submitted that the observations contained in the impugned order regarding cancellation or supersession of the existing registration are ex facie without jurisdiction, contrary to the scheme of section 12AB, and consequently liable to be ignored and set aside.
23. The Ld. DR strongly supported the order of the Ld. CIT(E). Written submissions were also filed on behalf of the Revenue.
24. It was submitted that the scope of enquiry under section 12AB(1)(b) is much wider than what is canvassed by the assessee. According to the Ld. DR, the Commissioner is required not only to examine the genuineness of activities but also to ensure compliance with laws that are material to achieving the objects of the institution. Therefore, the Ld. CIT(E) was fully justified in examining compliance with the Haryana Private Universities Act and FCRA.
25. The Ld. DR, supporting the order of the Ld. CIT(E), submitted that the material available on record unmistakably demonstrated that substantial amounts were received by the International Foundation for Research and Education (IFRE) purportedly on behalf of the assessee-University and that a significant portion of such funds continued to remain under the control and administration of IFRE. According to the Revenue, the very fact that funds intended for the University were received, held, and administered by the sponsoring body raised serious concerns regarding the independent character and autonomy of the University as envisaged under the Haryana Private Universities Act. It was contended that a University claiming separate legal existence and autonomous status cannot simultaneously permit its sponsoring body to receive and manage funds in its name without blurring the distinction between the two entities.
26. The Ld. DR further submitted that the record revealed receipt of foreign contributions by IFRE for projects specifically described as “Ashoka University Project”. It was argued that the assessee had failed to furnish any cogent material demonstrating that such receipts fell outside the ambit of “foreign contribution” as defined under the Foreign Contribution (Regulation) Act, 2010, or that they represented mere fee-related receipts exempt from the statutory definition. According to the Revenue, the overall arrangement indicated an indirect routing of foreign contributions for the benefit of the assessee-University despite the admitted position that the assessee itself did not possess registration or permission under the FCRA.
27. The Ld. DR invited our attention to page 515 of the paper book containing a letter dated 09.10.2024 issued by IFRE, wherein details of twenty-three students to whom scholarship assistance aggregating to USD 57,500 had been granted were furnished. Referring to the said document, the Ld. DR submitted that the assessee had failed to provide complete particulars regarding the instructions, conditions, or donor-specific directions on the basis of which the funds were received and disbursed, as well as the underlying records identifying the ultimate beneficiaries. According to the Revenue, in the absence of such supporting documentation, the true character and purpose of the receipts could not be satisfactorily verified.
28. The Ld. DR thereafter referred to page 520 of the paper book and submitted that a sum of Rs.3 crores had allegedly been received from ISAAC Enterprises Ltd. It was contended that the said entity was primarily engaged in investment-related activities and maintained its office at Bengaluru. However, no substantive evidence was produced before the Ld. CIT(E) to establish the philanthropic or charitable intent underlying the contribution, nor was any documentary material furnished to demonstrate that the amount received by IFRE constituted a genuine donation earmarked for educational purposes. According to the Revenue, the absence of supporting documentation regarding the donor, the purpose of the contribution, and its ultimate utilization left significant gaps in the assessee’s explanation.
29. The Ld. DR further drew our attention to page 522 of the paper book containing the communication relating to the CSR contribution of Rs.11 crores proposed to be made by Axis Bank through IFRE. It was pointed out that the communication was addressed to “Mr. Sachin Sharma, Registrar, Ashoka University, International Foundation for Research & Education (Sponsoring Body of Ashoka University)” and was accepted on behalf of IFRE by Ms. Sarla Yaday. Referring to pages 516 and 523 of the paper book, the Ld. DR submitted that the signatures and correspondence on record revealed that Ms. Sarla Yadav was acting interchangeably on behalf of IFRE and the assessee-University. According to the Revenue, such interchangeable use of identities demonstrated that the distinction between the sponsoring body and the University was being blurred at convenience, thereby lending support to the findings recorded by the Ld. CIT(E) regarding the lack of operational independence of the assessee.
30. The Ld. DR further submitted that the correspondence placed on record unequivocally established that the sum of Rs.11 crores was sanctioned by Axis Bank as a Corporate Social Responsibility (CSR) contribution for the benefit of the assessee-University. According to the Revenue, once the ultimate beneficiary of the CSR grant was admittedly the assessee-University, there existed no plausible justification for routing the funds through the bank account of IFRE or for permitting the sponsoring body to retain custody and control over such funds. It was argued that if the contribution was genuinely intended for the University and for carrying out its educational activities, the amount ought to have been transferred directly to the assessee or, at the very least, promptly remitted to the University without being retained by the sponsoring body. The Ld. DR contended that the interposition of IFRE in the receipt and administration of the CSR contribution raised serious questions regarding the transparency of the transaction and the actual control over the funds. It was further submitted that such an arrangement was not only inconsistent with the claim of institutional autonomy advanced by the assessee but also prima facie defeated the very object and mandate of CSR funding, which requires that the contribution be deployed for the intended beneficiary and approved project. According to the Revenue, the continued holding or administration of the CSR funds by IFRE, despite the assessee being the acknowledged beneficiary, constituted a significant irregularity which remained unexplained by the assessee throughout the proceedings.
31. The Ld. DR also relied upon paragraph 4.4.3 of the impugned order, wherein the Ld. CIT(E) had recorded as under:
“In response, the applicant submitted that amount reflected in Note 6 to the financial statements represents all receipts on behalf of the University and is not restricted to donations. However, no supporting documents were furnished. The response of the applicant shows that IFRE receives other funds as well on behalf of the applicant apart from donations. However, the nature and source of such funds have not been disclosed. In the absence of documentary evidence, the discrepancies in the accounts remain unresolved.”
32. Placing strong reliance on the aforesaid findings, the Ld. DR submitted that the assessee itself had admitted that the receipts reflected in the accounts were not confined to donations alone and included other categories of funds received by IFRE on behalf of the University. However, despite repeated opportunities, the assessee failed to disclose the precise nature, source, and purpose of such receipts. It was argued that this fundamental deficiency remained unaddressed even during the course of hearing before us.
33. The Ld. DR accordingly submitted that the Ld. Sr. Advocate, despite elaborate arguments, was unable to effectively rebut the factual findings recorded by the Ld. CIT(E) or point out any contemporaneous documentary evidence demonstrating the exact nature and purpose of the receipts in question. It was contended that no material was produced to establish that the receipts were confined only to genuine donations or to explain the circumstances in which substantial sums were received and administered by IFRE on behalf of the assessee. In these circumstances, the Revenue submitted that the conclusions drawn by the Ld. CIT(E) regarding unresolved discrepancies, lack of transparency in fund flows, and the role played by IFRE in receiving and administering funds on behalf of the assessee were fully justified on the basis of the material available on record.
34. The Ld. DR submitted that the material available on record clearly established that donations aggregating to substantial amounts were received by IFRE on behalf of the assessee and a significant portion thereof continued to remain under the control of IFRE. According to the Revenue, this arrangement fundamentally undermined the autonomy and independent character contemplated under the Haryana Private Universities Act.
35. It was further submitted that foreign contributions were received by IFRE for projects described as “Ashoka University Project” and the assessee failed to furnish any evidence showing that such receipts were merely fee-related receipts excluded from the definition of foreign contribution. According to the Ld. DR, the overall arrangement indicated indirect routing of foreign contributions for the benefit of the assessee despite the assessee itself not being registered under FCRA.
36. We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material placed on record. The principal issue arising for our consideration is whether, on the facts and circumstances of the case, the Ld. CIT(E) was justified in rejecting the assessee’s application for registration under section 12AB of the Income-tax Act, 1961.
37. It is a settled proposition of law that while considering an application for registration under section 12AB, the competent authority is required to satisfy itself regarding the objects of the institution, the genuineness of its activities and compliance with such other laws as are material for achieving its stated objects. At the same time, the scope of enquiry under the said provision cannot be expanded into a roving and fishing investigation into every aspect of administration, accounting or governance unless such issues have a direct bearing upon the charitable character of the institution or the genuineness of its activities.
38. In the present case, there is no dispute that the assessee is a University engaged in imparting education. There is also no categorical finding recorded by the Ld. CIT(E) that the educational activities carried on by the assessee are sham, fictitious, non-genuine or contrary to its stated objects. The rejection has essentially proceeded on the basis of alleged violations of the Haryana Private Universities Act, 2006, alleged contraventions of the Foreign Contribution Regulation Act, 2010, and certain financial arrangements existing between the assessee-University and its sponsoring agency, namely IFRE.
39. We find that the conclusions drawn by the Ld. CIT(E) regarding alleged violations of the Haryana Private Universities Act are primarily founded upon her own interpretation of the provisions of the said enactment. However, no material has been brought on record demonstrating that any authority competent to administer or enforce the provisions of the Haryana Private Universities Act has recorded a finding holding the assessee to be in violation thereof. In our considered opinion, registration under section 12AB cannot ordinarily be denied merely on the basis of an alternative interpretation adopted by the tax authorities in the absence of any cogent material evidencing a clear and established breach of law.
40. Likewise, insofar as the alleged violation of the Foreign Contribution Regulation Act is concerned, we find that no order, adjudication, proceeding or adverse finding of the competent authority administering the said enactment has been brought on record. The conclusions reached by the Ld. CIT(E) appear to be based upon certain inferences drawn from the movement of funds between the sponsoring agency and the assessee-University. Whether any particular transaction constitutes a violation of FCRA is primarily a matter falling within the jurisdiction of the authorities administering that enactment. In the absence of any determination under the said law, we are unable to sustain the rejection solely on the basis of presumptive allegations.
41. Similarly, the observations relating to discrepancies in financial statements, accounting treatment of receipts and reconciliation of accounts are matters which may be relevant for examination in appropriate proceedings under the Act. However, unless such discrepancies are shown to establish that the activities of the institution are not genuine or that the institution exists for purposes other than its stated charitable objects, they cannot, by themselves, constitute a valid basis for denial of registration.
42. We also find merit in the contention of the assessee that the Ld. CIT(E) exceeded the jurisdiction vested in him while observing that rejection of the present application would have the effect of superseding or nullifying the registration already granted to the assessee. The Act contains a separate statutory mechanism under section 12AB(4) for cancellation of registration upon occurrence of specified violations and after following the procedure prescribed therein. Admittedly, no such proceedings were initiated in the present case. Consequently, any observation having the effect of cancelling or rendering ineffective an existing registration falls beyond the scope of the proceedings under consideration and therefore is unsustainable, and bad in law. As we are remanding back the other issues to the file of CIT(E), therefore this issue of cancellation of registration is also remanded back to the file of CIT(E) with the direction to proceed in accordance with law after following the procedure as provided under section 12AB (4) read with explanation thereto.
43. Having said so, we are equally conscious of the fact that the concerns raised by the Revenue cannot be brushed aside as being wholly devoid of substance. The material presently available on record discloses a complex financial and operational relationship between the assessee-University and its sponsoring agency, namely IFRE, which requires a deeper and more comprehensive examination than what has been undertaken in the impugned proceedings.
44. Upon a careful consideration of the material available on record, we find that the controversy involved in the present appeal travels beyond a mere examination of accounting entries or isolated financial transactions. The issues emerging from the impugned order touch upon the very nature and character of the relationship between the assessee-University and its sponsoring agency, the manner in which funds have been mobilised, received and deployed, the extent of financial and administrative autonomy enjoyed by the University, and the legal implications arising from the fundraising and funding arrangements adopted by the parties. These questions cannot be satisfactorily adjudicated either on assumptions or on incomplete factual verification.
45. The record prima facie indicates that substantial donations and contributions, including contributions received from foreign sources, were mobilised by IFRE in connection with the establishment, development and functioning of Ashoka University. The financial statements further indicate that significant amounts were transferred to the assessee-University, while substantial funds continued to remain under the custody, management and control of the sponsoring agency. The legality, necessity and implications of such an arrangement have not been comprehensively examined.
46. In our considered opinion, the foundational issue requiring determination is the true nature and legal character of the receipts collected by IFRE. It requires examination whether such receipts represented independent donations made to IFRE for its own charitable purposes, whether they were donations specifically intended for the benefit of the assessee-University, whether they were earmarked grants for identified educational projects or scholarship programmes, or whether they were, in substance, contributions made to the University through the medium of the sponsoring agency. The answers to these questions would have a direct bearing on the ownership, control, and permissible utilisation of the funds in question.
47. The issue assumes particular significance because the assessee-University is an independently established and fully functional University under the Haryana Private Universities Act, 2006. Once an educational institution acquires a distinct legal identity, administrative framework, academic structure, and public recognition, an important question arises regarding the legal basis for donations and contributions connected with its educational activities continuing to be received and administered by its sponsoring body. The material on record prima facie suggests that donors were approached by reference to the University’s name, reputation, educational activities, developmental objectives, and public standing, whereas the corresponding receipts were accounted for in the books of IFRE.
48. The fundraising material referred to in the impugned order further indicates that communications seeking donations were issued on letterheads prominently displaying the name and identity of Ashoka University and were signed by individuals who appear to have simultaneously occupied positions in both the University and IFRE. The same individuals appear to have represented themselves interchangeably as functionaries of the University and office bearers of the sponsoring agency. While such overlap may not, by itself, establish any impropriety, it nevertheless raises legitimate questions about the true recipient of the funds and the extent to which the distinction between the University and the sponsoring agency existed in substance rather than merely in legal form.
49. Prima facie, therefore, a situation emerges where the goodwill, academic standing and educational reputation of the University may have been utilised for mobilising contributions, whereas the receipt, custody and control of the corresponding funds remained with the sponsoring agency. If such facts are ultimately established, they may have a direct bearing on the issue of institutional autonomy. Institutional autonomy cannot be examined solely in terms of legal incorporation or statutory recognition. True autonomy necessarily encompasses financial autonomy. An institution cannot ordinarily be regarded as enjoying complete financial independence if substantial resources raised in its name and for its development continue to remain under the effective control of another entity.
50. Another aspect requiring examination is the retention of funds by IFRE. The Revenue has pointed out that substantial donations of Rs. 55.59 crore out of the Rs. 80.06 crore received, ostensibly for the benefit of the University, were not transferred in their entirety to the assessee and continued to remain with the sponsoring agency. The Ld. CIT(E) shall examine the legal authority under which such funds were retained, the purpose sought to be achieved thereby, the duration of such retention, the manner of utilisation of such funds and whether such arrangements constitute bona fide funding mechanisms or effectively dilute the financial independence of the University.
51. We further find that the issue relating to scholarships and student sponsorships also warrants a detailed enquiry. The assessee has sought to explain a substantial part of the fund flow by contending that the amounts were utilised towards scholarships and educational assistance granted to students. However, the record presently available does not conclusively establish the complete particulars of beneficiaries, the criteria adopted for selection, the linkage between donations received and scholarships granted, the identity of students allegedly benefitted, and the supporting documentation evidencing such utilisation. These aspects require independent verification ( paragraph 4.4.3 of the CIT(E) order).
52. It is necessary to bear in mind the settled legal principle that what cannot be done directly cannot ordinarily be permitted to be achieved indirectly. It hardly needs emphasis that under the existing statutory framework governing admissions to educational institutions and universities, the collection of a capitation fee or the receipt of any consideration, whether direct or indirect, linked to the grant of admission is impermissible in law. Such a prohibition cannot be circumvented or rendered otiose merely by routing the transaction through a sponsoring body, intermediary organisation, trust, society, or any other connected entity. The legality of a transaction cannot be determined solely by the form in which it is structured or the entity through which it is channelled. In matters of this nature, the principle that substance must prevail over form assumes paramount importance, and the true character of the transaction is required to be ascertained by examining the entirety of the surrounding facts, attendant circumstances, conduct of the parties, flow of funds, and the real purpose and effect of the arrangement. If, upon such examination, a transaction is found to be intrinsically connected with the process of admission, its character would not stand altered merely because it has been routed through an intermediary or a related entity. We clarify that we are not recording any finding that the contributions in question constitute a capitation fee or any prohibited consideration. However, in the absence of complete disclosure regarding donors, beneficiaries, conditions attached to contributions and utilisation of funds, the possibility of examining the receipts from such perspective cannot be summarily excluded. Accordingly, the Ld. CIT(E) shall examine whether any contribution received by IFRE or any connected entity had any direct or indirect nexus with admissions granted by the assessee-University. Such examination shall extend to donor identities, the timing of contributions, the relationship of donors with students, scholarship arrangements, fundraising communications, project documents, and all other relevant material bearing upon the true nature of the receipts.
53. The Ld. CIT(E) shall further undertake an independent examination regarding the actual extent of autonomy enjoyed by the assessee-University vis-à-vis its sponsoring agency. The enquiry shall not be confined merely to the formal legal structure of the entities but shall extend to their actual functioning, including financial, managerial, administrative and operational aspects, so as to determine whether the two entities functioned as genuinely independent institutions or whether the sponsoring agency exercised direct or indirect influence, supervision, control or pervasive involvement in the affairs of the University.
54. The Ld. CIT(E) shall also examine the entire flow of domestic and foreign contributions received by IFRE in connection with the University, the legal authority under which such receipts were collected and administered, the compliance implications arising therefrom under the relevant statutory framework, and the actual deployment of such funds. For this purpose, the Ld. CIT(E) shall be at liberty to obtain information from the competent authorities administering the Haryana Private Universities Act, 2006, the Foreign Contribution (Regulation) Act, 2010, the Ministry of Home Affairs, the University Grants Commission, the State Government or any other authority having jurisdiction over the relevant issues.
55. Any material so collected shall be duly confronted to the assessee and adequate opportunity shall be afforded to rebut the same in conformity with the principles of natural justice. Thereafter, the Ld. CIT(E) shall pass a comprehensive, reasoned and speaking order dealing with all issues arising in the matter. The conclusions ultimately reached shall be founded upon objective evidence, proper verification and application of law and not upon assumptions, presumptions or conjectures.
56. Before parting, we deem it appropriate to clarify that the observations contained hereinabove have been made only because the matter could not have been effectively restored without identifying the issues requiring examination. The observations are purely prima facie in nature and are confined to facilitating a meaningful adjudication by the Ld. CIT(E). Nothing stated herein shall be construed as an expression of any final opinion on the merits of the controversy. We have neither affirmed nor rejected the allegations raised by the Revenue nor accepted or rejected the explanations furnished by the assessee. All issues, including the nature of contributions, fundraising arrangements, role of IFRE, autonomy of the University, applicability of the Haryana Private Universities Act, 2006, applicability of the Foreign Contribution (Regulation) Act, 2010 and the assessee’s eligibility for registration under section 12AB, are left entirely open for fresh adjudication in accordance with law.
57. In the result, subject to the observation and finding given hereinabove in paragraph no. 42 the impugned order is set aside, and the matter is restored to the file of the Ld. CIT(E) for fresh adjudication in accordance with law and in the light of the observations and directions contained hereinabove.
58. Now we shall deal with the appeal in ITA No. 871/Chd/2026 wherein Assessee has raised following grounds:
1. That on the facts and circumstances of the case and in law, order dated 24.03.2026 in Form No.10AD passed by Commissioner of Income Tax (Exemption), Chandigarh (‘CIT(E)’] under section 80G(5) of the Income tax Act, 1961 (‘the Act’) rejecting/ dismissing application for registration is illegal and bad in law.
1.1 That the CIT(E) erred on facts and in law in denying registration under section 80G(5) on the ground that in absence of registration under section 12AB (being rejected vide separate order dated 24.03.2026), the appellant does not meet the requirement for approval, without appreciating that denial of registration under section 12AB of the Act is per-se incorrect and bad in law.
59. Since we have adjudicated the issues involved in the lead appeal in ITA No 895/Chd/2026 in the foregoing paragraphs, and the facts and grounds in the connected appeals are identical and arise out of the same set of circumstances, respectfully following our decision and the reasoning recorded therein, we apply the same mutatis mutandis to the present connected appeal and remand back this appeal also to the file of Ld. CIT(E).
60. In the result, both the above appeals are allowed for statistical purposes.
Order pronounced on 29.06.2026
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