Case Law Details
Shraddha Eyecare Trust Vs CIT (ITAT Bangalore)
Bengaluru ITAT: Absence of Fire and Structural Safety Certificates Justified Rejection of Section 12AB Registration; Matter Remanded After Subsequent Compliance
The Bengaluru Bench of the ITAT held that where compliance with other laws is material to achieving the objects of a trust, the Commissioner (Exemptions) is justified in examining such compliance while considering registration under section 12AB. In the case of a trust running a hospital, the Tribunal observed that fire safety, structural stability, building safety and other statutory approvals are fundamental requirements directly linked to the lawful and safe conduct of its charitable activities, and their absence before the CIT(E) justified rejection of the registration application.
However, before the Tribunal, the assessee produced subsequently obtained fire safety and structural stability certificates issued by the competent authorities. Considering these fresh documents, the Tribunal held that they were material for determining compliance with section 12AB(1)(b)(i)(B) and therefore deserved examination by the CIT(E). Accordingly, the Tribunal restored the application for registration under section 12AB to the file of the CIT(E) for fresh consideration after verifying the newly produced certificates and other statutory compliances.
The Tribunal further held that recognition under section 80G is consequential upon registration under section 12AB. Since the application for registration had been restored, the rejection of section 80G approval was also set aside and remanded to the CIT(E) for fresh adjudication in accordance with the outcome of the section 12AB proceedings. Both appeals were allowed for statistical purposes.
Author’s Comments:
This decision is noteworthy because the Tribunal has held that, in the case of a hospital, building safety, structural stability and fire safety approvals constitute compliance with “other laws” that is material for achieving the objects of the trust within the meaning of section 12AB(1)(b)(i)(B). Consequently, the absence of such approvals at the time of consideration was held to justify rejection of the application, subject to restoration once the approvals were subsequently obtained.
Interestingly, this reasoning appears to depart from the approach adopted in certain earlier Bangalore Tribunal decisions, where the Tribunal had taken the view that registration proceedings under section 12AB are not intended to adjudicate compliance with every regulatory requirement and that the CIT(E) should primarily examine the charitable objects, genuineness of activities and only such statutory compliances as are demonstrably material to the attainment of those objects. Those decisions did not treat the absence of building or fire safety approvals, by itself, as a sufficient ground for refusing registration.
The present ruling may therefore indicate a stricter interpretation of section 12AB(1)(b)(i)(B), particularly in cases involving hospitals and institutions where public safety is inseparably connected with the charitable activity. Whether this approach will be consistently followed, or whether it will be distinguished on the peculiar facts of healthcare institutions, remains to be seen.
This decision is therefore likely to become an important precedent in determining the extent to which the CIT(E) can rely upon non-compliance with other regulatory laws while considering applications under section 12AB.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Shraddha Eye Care Trust has filed these appeals against the order passed by the Commissioner of Income Tax (Exemption), Bengaluru [CIT(E)], under section 12AB of the Income Tax Act, 1961, dated 31 December 2025, whereby the assessee’s application for registration was rejected. The rejection was based on the assessee’s failure to submit the sanctioned building plan, structural stability certificate, building safety certificate, and fire safety certificate for the preceding three years. Consequently, registration under section 12AB read with section 12A (1) (ac)(ii) of the Act was not granted. Similarly, by second appeal assessee challenges rejection of application for recognitions u/s 80G (5) of the Act.
2. The assessee is aggrieved by the rejection and is in appeal before us. The principal grievance is that the CIT(E) rejected the application for alleged non-compliance with other laws. The assessee contends that it had submitted a fire advisory certificate dated 25 November 2025, evidencing its ongoing compliance efforts and bona fide intention to regularise all statutory approvals. It is therefore submitted that the application could not have been rejected merely because certain approvals were in the process of being obtained, particularly when no prohibition order, adverse finding, or coercive action had been issued by any local or statutory authority against the assessee.
3. The facts show that the assessee filed Form No. 10AB on 19 May 2025 seeking registration under section 12AB of the Income Tax Act. The CIT(E) provided an opportunity of hearing and called for various details. The assessee was required to submit documents establishing the genuineness of its activities and compliance with any other law material to achieving its objects. A hearing was fixed for 21 October 2025 pursuant to notice dated 5 October 2025. On 17 October 2025, the assessee sought an adjournment. The CIT(E) declined a long adjournment but granted time until 4 November 2025. On that date, the assessee furnished certain information, which was examined by the CIT(E). The CIT(E) noted that some information remained pending, and the assessee again submitted certain details on 26 November 2025.
4. After considering the assessee’s explanation, the CIT(E) observed that the assessee had not submitted the sanctioned building plan, structural stability certificate, building safety certificate, or fire safety certificate for the last three years. The assessee had filed only a fire advisory certificate dated 25 November 2025, advising it to complete the required firefighting installations and thereafter obtain a fire advisory compliance certificate from the fire department.
5. The CIT(E) further noted that the assessee was running a healthcare institution, where the safety and security of patients, doctors, staff, and others are significant responsibilities. Compliance with municipal laws and safety regulations was considered essential for carrying out healthcare activities in a safe environment. These requirements were held to be fundamental to the continuous, genuine, and lawful conduct of the assessee’s activities, not merely procedural. Accordingly, the assessee was again asked on 1 December 2025 to submit the approvals. Since no response was filed, the CIT(E) rejected the application for registration under section 12AB by order dated 31 December 2025.
6. Aggrieved, the assessee is in appeal before us. Its main contention is that the CIT(E) could not have rejected the application when the objects of the trust were genuine and its activities were ongoing. It further submits that building safety approvals, fire safety clearances, and municipal permissions fall exclusively within the jurisdiction of the respective local and statutory authorities and cannot be conclusively adjudicated in proceedings under section 12AB of the Act. The assessee also relies on the fire advisory certificate dated 25 November 2025 and submits that its application ought not to have been rejected.
7. The learned authorised representative also filed a certificate dated 6 April 2026 issued by the Office of the Regional Fire Officer, Bengaluru South Range, Bengaluru, showing that the assessee had been granted a fire safety certificate. It was therefore submitted that the assessee should now be granted registration under section 12AB of the Act.
8. The learned Departmental Representatives, Shri N. S. Sasidhara CIT DR and Shri Nishant Agarwal, Joint Commissioners of Income Tax, strongly submitted that, since the assessee runs an eye care hospital, the safety of patients, doctors, staff, and nurses is of paramount importance. In the absence of the structural design and fire safety certificate before the CIT(E), registration could not have been granted. They submitted that the CIT(E) had merely followed the statutory requirement and rightly rejected the application after granting the assessee adequate opportunity to furnish the relevant documents. Accordingly, they contended that the order of the CIT(E) deserves to be upheld.
9. The learned CIT-DR further submitted that, if the assessee now possesses the requisite certificates, it may either file a fresh application before the CIT(E) or seek restoration of this appeal to the file of the CIT(E).
10. We have carefully considered the rival contentions and perused the order of the CIT(E). We have also examined the paper book filed by the learned authorised representative, comprising 164 pages, wherein the assessee has relied on the trust deed, permission certificate at page 15 issued by the Government Department of Health and Family Welfare Services, and the registration granted to the trust under the Karnataka Private Medical Establishments (Amendment) Act, 2018, for providing medical services as a Level-2 hospital under the allopathy system of medicine. The assessee also submits that it was granted registration under section 12A(a) of the Income Tax Act, 1961, by the Directorate of Income Tax (Exemption) on 10 February 2003 and held provisional registration. It further claims to have complied with all conditions and submitted its registration certificate under the Foreign Contribution (Regulation) Act, 2010. The assessee therefore contends that registration should not have been denied merely because it could not furnish complete details relating to the fire safety certificate and structural plan of the building. On perusal of the order, we find that the assessee was granted an opportunity of personal hearing on 21 October 2025. The assessee sought adjournment until the second week of November, which was refused by the CIT(E), evidently because of the statutory time limit for disposing of the application. Time was, however, granted until 4 November 2025. On that date, the assessee produced certain details, based on which a show-cause notice dated 15 November 2025 was issued calling for the remaining documents. On 24 November 2025, the assessee submitted some of the details sought. Since it did not furnish the land/building NOC, sanctioned plan, building safety and structural stability certificate, and fire safety certificate, registration was not granted.
11. Section 12AB(1)(b)(i)(B) requires the CIT(E) to verify compliance with any other law for the time being in force by the trust or institution, where such compliance is material for achieving its objects. Since the assessee runs a hospital and the life and safety of persons entering and working there are involved, these requirements are mandatory. In the absence of these documents before the CIT(E), the application was rightly liable to be rejected.
12. However, the assessee has now produced before us a certificate issued by the Fire Officer dated 6 April 2026. The certificate records that, based on Annexure C submitted by the assessee for hospitals and sanatoria falling under Group C institutional buildings, the premises were inspected by the concerned officer. Based on such inspection, the Karnataka State Fire and Emergency Services Department issued fire safety recommendations for the hospital building constructed and occupied by the assessee. The assessee has also produced a certificate dated 15 May 2026 from the competent government authority stating that its building is structurally stable. No doubt, these documents are material for achieving the objects of the trust. Since those could not be produced before the CIT(E), we direct the assessee to furnish all such documents before the ld. CIT(E), who shall examine them and, if found compliant with law after inquiry or further verification as considered necessary, may grant registration to the assessee trust in accordance with law.
13. In view of the above facts, ITA No. 299/Bang/2026 filed by the assessee is restored to the file of the CIT(E) for reconsideration of the application in the manner indicated above.
14. ITA No. 298/Bang/2026 has also been filed by the assessee against rejection of its application for recognition under section 80G of the Income Tax Act. Since recognition under section 80G depends on the assessee that has registration under section 12AB, the assessee is not entitled to such recognition unless registration under section 12AB is granted. Therefore, the order of the CIT(E), Bengaluru, dated 31 December 2025 in Form No. 10AD, rejecting the application for recognition under section 80G (5), cannot be faulted.
15. However, since we have restored the assessee’s application for registration under section 12AB to the file of the CIT(E), this appeal is also restored to the CIT(E) with a direction to the assessee to demonstrate that it satisfies all conditions required for recognition under section 80G (5) of the Act.
16. Accordingly, ITA No. 298/Bang/2026 filed by the assessee is also restored to the file of the CIT(E), as it is consequential to ITA No. 299/Bang/2026.
17. In the result, both appeals are restored to the file of the CIT(E) with the respective directions to the assessee and are allowed for statistical purposes.
Order pronounced in the open court on 22nd July, 2026.
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