Seva Sindhu Vishwastha Mandali Vs CIT (ITAT Bangalore)
A trust said it conducted free music classes and tuition for children, with teachers providing their services without charge. Its financial statements showed no expenditure or use of funds for these activities. The Commissioner of Income Tax (Exemptions) treated the absence of financial entries, coupled with insufficient supporting documents, as a reason to reject its application for renewal of registration under section 12AB.
The Bengaluru ITAT held that genuine charitable activity need not always involve spending money. It set aside the rejection and sent the application back for a proper inquiry. The Commissioner must examine the genuineness of the trust’s activities and relevant legal compliance, give it an opportunity of being heard, and decide registration in accordance with law. The Tribunal did not itself issue a renewed registration certificate.
A trust registered for many years
Seva Sindhu Vishwastha Mandali was constituted under a trust deed dated 23 April 1987, later amended on 20 November 2004. Its objects included promoting the study of Indian history, art, culture, literature and music; establishing or assisting schools, libraries and other service centres; and providing help during natural calamities.
The trust had been registered as a public charitable trust under section 12AA, effective from 1 April 2004. It subsequently obtained registration in Form 10AC, effective from AY 2022–23 to AY 2026–27. On 23 June 2025, it applied in Form 10AB for renewal.
The application drew scrutiny because the financial statements did not show expenditure, use of funds or transactions relating to the stated activities. The Commissioner issued a show cause notice on 27 October 2025, asking how the trust was pursuing its objects without any financial outgo and seeking evidence of genuine activity.
Why the Commissioner rejected the application
In response, the trust said it was conducting free classes and that this explained the absence of fees, expenditure and related entries in its books. The Commissioner was not satisfied. The trust had not then furnished attendance records, student or beneficiary lists, instructor details, class schedules, photographs or other documents showing that the classes were actually held.
The Commissioner’s concern was therefore not confined to the absence of expenditure. Even an activity run without charge could ordinarily leave some documentary or circumstantial record. Finding no such evidence in support of the claim, and no activity reflected in the accounts, the Commissioner rejected the renewal application by an order dated 30 December 2025.
The trust appealed to the ITAT. It maintained that its work was consistent with its charitable objects and that the lack of financial outgo did not mean nothing had been done.
What the trust produced before the ITAT
At the Tribunal, the trust explained that it had been conducting music classes without charging fees, as well as free tuition from LKG to Standard 7. It filed a paper book containing photographs of music classes and confirmation letters from teachers who stated that they had provided services free of charge.
The department supported the Commissioner’s order. Its position was that the trust had failed to substantiate the free classes before the Commissioner and that the financial statements showed no expenditure or utilisation of funds.
The new material before the ITAT was significant. The Tribunal considered the photographs and teacher confirmations inconsistent with the conclusion that the trust had undertaken no activity at all in furtherance of its objects. At the same time, the documents still required examination by the authority responsible for deciding the registration application.
The Tribunal’s view of section 12AB
The ITAT said the Commissioner’s inquiry must address the genuineness of the trust’s activities and compliance with requirements of other laws that are material to achieving its objects. The focus is whether the activities are real and connected with the trust’s objects. The amount spent, by itself, is not the test of genuineness.
The Bench accepted that a trust may pursue its objects through activities involving no financial transaction. Volunteer teachers may conduct free classes without fees being received or payments being made. In such a case, the absence of an expense entry cannot, standing alone, prove that the classes did not take place.
The Tribunal also held that the Commissioner should have made a fuller inquiry into the trust’s claim rather than rejecting it outright on the reasoning adopted. The photographs and confirmations placed before the ITAT provided material for that examination.
The outcome
The ITAT set aside the rejection order and restored the matter to the CIT (Exemptions). The Commissioner was directed to examine the genuineness of the trust’s activities and its compliance with relevant legal requirements, provide a reasonable opportunity of hearing, and decide registration under section 12AB in accordance with law. The appeal was partly allowed.
Author’s comment
This decision makes a useful distinction between “no expenditure” and “no activity.” A charity supported by volunteers may have little or no spending on a particular programme. Its accounts will not necessarily tell the whole story of what it has done.
That does not remove the need for evidence. Photographs, teacher confirmations, class schedules and student records can help establish that free classes were actually conducted and were connected with the trust’s objects. The trust’s case now returns to the Commissioner for that factual examination. The ITAT has removed the assumption that absence of spending settles the issue; registration will depend on the findings made after the directed inquiry.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal at the instance of the assessee is directed against the order of the Ld. CIT (Exemptions), Bengaluru dated 30.12.2025 vide DIN & Notice No. ITBA/EXM/F/EXM45/2025-26/1084234841 (1) rejecting the application filed for registration u/s 12AB of the Income Tax Act, 1961 (in short “the Act”).
2. The assessee has raised the following grounds of appeal:-
1. The learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in passing the impugned order rejecting the application for registration under section 12AB(1) of the Income Tax Act, 1961. The impugned order as passed is bad in law, and is liable to be quashed.
2. The learned Commissioner of Income tax (Exemptions) has erred in rejecting the application filed by the appellant for registration u/s 12AB of the Act on the ground that the appellant has not undertaken any activities towards objects of the appellant. On proper appreciation of facts and the law applicable, the appellant having done substantial activities towards objects and is entitled for registration u/s 12AB of the Act and same is to be granted to the appellant.
3. The learned CIT(Exemptions) has erred in holding that the appellant has not furnished any documentary evidences to establish that free classes are being conducted. The appellant having submitted all the details with respect to conducting free classes, the conclusion drawn is erroneous is to be rejected and the registration u/s 12AB is to be granted to the appellant.
4.1 The learned Commissioner of Income Tax (Exemptions) has failed to appreciate
a) that the appellant’s objectives are charitable in nature.
b) that the activities of the appellant are genuine and in line with its stated objects.
c) that the appellant has complied with all legal and regulatory requirements material to achieving its objectives.
4.2 On proper appreciation of facts and evidence available and the law applicable, the appellant having complied with all the legal conditions laid down under section 12AB(1) of the Act is entitled to registration under the Act and same is to be granted to the appellant.
5. In view of the above and on such other grounds to be urged at the time of hearing, it is requested that the impugned order be quashed or at least it be directed that the appellant is to be granted for registration u/s. 12AB(1) of the Act.
3. Brief facts of the case are that the assessee is a trust constituted by way of Deed of Trust dated 23.04.1987 as well as amended Deed of Trust dated 20.11.2004. The aims and objects of the Trust are:-
a) To promote or to assist in promoting or conducting activities in the study and research of Indian history, art, culture, literature and music.
b) To establish or run or assist in establishment of different types of Schools, Reading rooms, Libraries, Museums, Health centers and other Service centers.
c) To offer monetary assistance by way of donations to mitigate the hardship caused an account of floods, famine or other natural calamities.
d) To promote or patronize for better understanding and advancement of Bharatiya Samskruthi and Philosophy. Inculcate patriotism. Encourage all activities concerned with the above.
Initially, the assessee Trust was granted registration u/s 12AA(1)(b)(i) of the Act as public charitable Trust w.e.f from 01.04.2004 by the Director of Income Tax (Exemptions), Bengaluru vide order No. DIT(E)/12A/Vol.III/S-1493/W-2/2005-06 dated 27.05.2005. Subsequently, the assessee Trust was granted registration vide order in Form No.10AC dated 24.09.2021 under sub-clause (i) of clause (ac) of sub-section (1) of section 12A of the Act vide unique registration number (URN):- AAETS7123AE20042 effective from AY 2022-23 to AY 2026-27. Thereafter, the assessee Trust applied for renewal of registration in Form No.10AB on 23.06.2025. On receipt of the application in Form No.10AB vide section 12A(1)(ac)(ii) of the Act, the assessee was granted several opportunity of being heard. In pursuance to the notices, the assessee filed its submissions.
3.1 The Ld. CIT (Exemptions) upon verification of the submissions observed from the financials that the assessee Trust had not undertaken any activities till date and no utilization or expenditure was reflected in its statements. The Ld.CIT(Exemptions) thereafter issued show cause notice dated 27.10.2025 in which the assessee was specifically required to explain how its objects were being carried out in the absence of any financial outgo or activity related expenditure and to substantiate the genuineness of its activities with supporting material. In response to show cause notice, the assessee filed its submission dated 06.11.2025 stating that it has been conducting free classes and therefore no expenditure or financial entries are reflected in the books of account. The Ld.CIT (Exemptions) however observed that the assessee had not furnished any attendance records, beneficiary or student lists, details of instructors, schedules of classes, photographs or any documentary evidence to establish that such free classes were actually conducted. Further, even where the activities are claimed to be carried out without charging fees, some form of basic documentations is reasonably expected to exist to demonstrate that such activities are being undertaken. Thus, in the absence of any documentary or circumstantial evidence to substantiate the claim of conducting free classes, and considering that the financial statements do not reflect any expenditure, utilization of funds, or activity-related transactions, the Ld.CIT(Exemptions) did not accept that the assessee Trust had carried out any genuine activities in furtherance of its stated objects. Accordingly, the application filed in Form No.10AB dated 23.06.2025 for registration u/s 12AB of the Act was rejected by the Ld.CIT(Exemptions).
4. Aggrieved by the order of the Ld. CIT(Exemptions), Bengaluru dated 30.12.2025, the assessee has filed the present appeal before this Tribunal.
5. Before us, the Ld. AR of the assessee vehemently submitted that the Ld.CIT(Exemptions) rejected the application filed for registration u/s 12AB of the Act on the sole ground that the assessee has not undertaken any activity as there is no financial outgo. Further, the Ld.AR of the assessee submitted that in fact the assessee have been conducting music classes without charging any fees and also conducting free tuitions from LKG to standard-7 students. The Ld. AR of the assessee also drew our attention to Page Nos. 66 to 70 of the paper book filed before us in which the copy of the photographs evidencing running of music classes as well as conformation letters from the various teachers were submitted and accordingly prayed that the appeal of the assessee may be allowed as the assessee had already undertaken the activities in accordance with the objects of the trust.
6. The Ld. DR on the other hand heavily relied upon the order of the Ld. CIT(Exemptions) and vehemently submitted that the assessee miserably failed to substantiate the claim of conducting free classes. Further it is submitted by the Ld. DR that as the financial statements also does not reflect any expenditure or utilization of funds and accordingly prayed to dismiss the appeal of the assessee.
7. We have heard the rival submissions and perused the materials available on record. On perusal of the order of the Ld.CIT(Exemptions), we observed that Ld.CIT(Exemptions) has rejected the application filed in Form No.10AB for registration u/s 12AB of the Act solely on the ground that the assessee trust failed to submit any documentary or circumstantial evidence to substantiate the claim of conducting free classes and further the financial statements also do not reflect any expenditure or utilization of fund or activity related transactions. It is an undisputed fact that initially the assessee was registered u/s 12AA(1)(b)(i) of the Act as public charitable Trust w.e.f from 01.04.2004 by the Director of Income Tax(Exemptions), Bengaluru vide order No.DIT(E)/12A/Vol.III/S-1493/W-2/2005-06 dated 27.05.2005. Subsequently, the assessee Trust was also granted registration vide order in Form No.10AC dated 24.09.2021 under sub-clause (i) of clause (ac) of sub-section (1) of section 12A of the Act vide unique registration number (URN):- AAETS7123AE20042 effective from AY 2022-23 to AY 2026-27. Before us, the assessee filed a paper book comprising 73 pages containing therein the copy of photographs evidencing running of music classes as well as the conformation letters from the various teachers were submitted. Therefore, we do not agree with the contention of the Ld. CIT(Exemptions) that the assessee Trust had not carried out any activities in furtherance of its stated objects. We are of the considered opinion that for the purpose of granting registration, the Ld.CIT(Exemptions) shall call for such documents or information or make such enquiry as he thinks necessary in order to satisfy himself about the twin objects:-
a) The genuineness of the activity of the Trust and
b) The compliance of such requirements of any other law for the time being in force by the Trust of institution as are material for the purpose of achieving its object.
7.1 In the present case, although the Ld.CIT(Exemptions) had observed that in response to show cause notice dated 06.11.2025, the assessee Trust had stated to have been conducting free classes and therefore no expenditure or financial entries are reflected in the books of accounts, however in our considered opinion, the Ld.CIT(Exemptions) failed to make further inquiry as required under the Act before rejecting the application outrightly stating that no documentary or circumstantial evidence to substantiate the claim of conducting free classes were produced. We are also of the considered opinion that when the assessee Trust itself claimed to have been conducting the free classes in accordance with the object of the Trust, then the question of expenditures reflecting in the financial statements does not arise at all. The Ld. CIT (Exemptions) should not have rejected the application filed for registration solely on the ground that the financial statements do not reflect any expenditure, utilization of funds, or activity related transactions. In our view, the assessee trust can also pursue activities in accordance with the object of the Trust for which no financial transactions may involve. The Ld. CIT(Exemptions) after calling for documents or information or after making inquiries should satisfy himself about the genuineness of activities of the Trust and not the quantum of expenditure reflected in financial statement. The purpose of the section 12AB of the Act is to enable the registration only of such Trust or institutions whose object and activities are genuine. In other words, the Ld. CIT( Exemptions) is bound to satisfy himself that the object of Trust is genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. In our opinion, section 12AB of the Act pertains to the registrations of Trust and to assess of what a Trust has actually done. In the present case, the assessee before us, demonstrate that it had been conducting free classes in accordance with the object of the Trust by producing the copy of the photographs as well as conformation letters from the different teachers who stated to have been giving free service to the assessee Trust. In view of the above, we are of the considered opinion that the Ld. CIT(Exemptions) grossly erred in not granting the registration to the assessee Trust on the ground that the assessee trust had not undertaken any activities. Accordingly, we set-aside the order of the Ld. CIT(Exemptions) and remit the matter back to the file of Ld. CIT(Exemptions) with a direction to examine –
a) The genuineness of the activity of the Trust and
b) The compliance of such requirements of any other law for the time being in force by the Trust of institution as are material for the purpose of achieving its objects and grant the registration u/s 12AB of the Act in accordance with Law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. It is ordered accordingly.
8. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 24th Sept, 2026
