CSI Chennai Chapter Vs CIT (Exemption) (ITAT Chennai)
Summary: The Chennai Bench of the Income Tax Appellate Tribunal partly allowed, for statistical purposes, CSI Chennai Chapter’s appeal against the CIT(Exemption), Chennai’s order dated 30 March 2026 refusing registration under Section 12AB of the Income-tax Act, 1961. The society had applied in Form No. 10AB on 29 September 2025. Its stated objects included periodical meetings and conferences, clinical discourses, encouragement of research, public advanced education and circulation of medical records. The CIT(E) considered it a mutual-benefit association serving members rather than the public, treated its gross receipts as commercial, and found that it had not established voluntary receipts or application of funds towards relief of the poor, education and medical relief.
The society argued that its objects benefited the public, that the governing societies legislation prohibited distribution of dividends among members, and that the registration inquiry should focus on its objects. Regarding the connected Section 80G(5) approval issue, counsel referred to UFX Ventures (P.) Ltd. v. Asstt. CIT, IT Appeal Nos. 2272 and 2273/CHNY/2025, dated 11 March 2026, stating that the matter had been restored to the CIT(E). The Revenue defended the rejection as a reasoned decision based on the society’s objects.
The Tribunal rejected the reasoning that the society existed only for its members. Referring to its registration under the Societies Registration Act, 1860, it reasoned that public-benefit objects should be presumed while the society’s registration remained uncancelled. It also relied on Section 14, which prohibits distribution of surplus assets among members upon dissolution and requires their transfer to another society, subject to the statutory exception reproduced in the order. The Tribunal considered this restriction inconsistent with the CIT(E)’s mutual-benefit objection.
On the objection concerning commercial activity, the Tribunal distinguished registration scrutiny from assessment of exemption claims. It relied on Ananda Social & Educational Trust v. CIT, 426 ITR 340 (SC), which explains that “activities” includes proposed activities and requires examination of genuinely charitable objects and activities consistent with them. It also referred to CIT v. International Health Care Education and Research Institute, 482 ITR 287 (SC), explaining that registration does not automatically confer exemption under Sections 10 and 11; the Assessing Officer must examine the materials supporting an exemption claim. The Tribunal held that the same distinction applies under the Section 12AB regime effective from 1 April 2021.
The Tribunal further noted that the Section 80G(5) matter had already been restored for fresh disposal and held that the reasons given for rejecting Section 12AB registration could not stand. It set aside the impugned order and remanded the application for de novo disposal after an opportunity of hearing. Registration remained subject to verification of the charitable nature of the objects, genuineness of activities and absence of specified violations under the Explanation to Section 12AB(4). The decision therefore grants reconsideration subject to statutory verification, rather than unconditional registration. The order in ITA No. 2973/CHNY/2026 was pronounced on 29 September 2026.
Cases Discussed
- UFX Ventures (P.) Ltd. v. Asstt. CIT — IT Appeal Nos. 2272 & 2273/CHNY/2025, order dated 11 March 2026 (ITAT Chennai). Cited by counsel regarding restoration of the Section 80G(5) approval matter to the CIT(E).
- CIT v. International Health Care Education and Research Institute — [2025] 482 ITR 287 (Supreme Court). Relied upon to distinguish registration from entitlement to exemption at assessment.
- Ananda Social & Educational Trust v. CIT — [2020] 426 ITR 340 (Supreme Court). Relied upon regarding proposed activities and the scope of the registration inquiry.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the Assessee directed against the order passed by learned Commissioner of Income Tax(Exemption), Chennai dated 30.03.2026 denying grant of registration u/s.12AB of the Income Tax Act, 1961.
2. The Assessee raised the following grounds of appeal :
” 1.The Commissioner of Income Tax (Exemption) is not justified in rejecting the appellant’s application under item (ii) of clause (ac) of sub section (1) of section 12A seeking registration u/s 12AB of the IT Act 1961.
2.The CIT (Exemption) is not justified in coming to the conclusion that the applicant society.
* I s predominantly for the benefit of members. The society is for the benefit of particular section of the people and not for the general public, hence the society is evolved and exist on the principle of mutuality and not charity.
* Received “gross receipts” which is commercial in nature.
* Failed to prove that its income / receipts are voluntary in nature.
* Has not applied funds for amounts towards charitable purposes (“Relief of the Poor”, “Education” and “Medical Relief” as defined u/s 2(15) of the Act.
3. The CIT (Exemption) has erred in coming to the conclusion that the society is predominantly for the benefit of the members only and not a charitable organization.
4. The CIT (Exemption) is not justified in stating that applicant society activities cannot be held as “Education” “Medical Relief” and “Relief of the Poor”.
5. The CIT (Exemption) is not justified in coming to the conclusion that the applicant society runs on commercial lines with profit motive and not for charitable as envisage u/s 2(15) of the act.
6. The CIT (Exemption) is not justified in coming to the conclusion that the activities of the trust are not charitable in nature.
7. For these and other reasons that may be adduced at the time of hearing, it is prayed that Justice may be rendered to the appellant by directing the CIT (Exemption) to grant registration u/s 12AB of the IT act.”
5. Briefly, the facts of the case are that the assessee is a Society incorporated under the provisions of Societies Act. It was stated to have been formed with charitable objects. It is formed with following objects :
“1. Hold periodical meetings, conference….
2. Arrange clinical discourses,…
3. Actively encourage research,….
4. Engage in public advanced education..
5. Publish, distribute or otherwise circulate medical records…
6. Coordinate as necessary ….
7. Raise and borrow money.
8. Erect, maintain, improve or alter and keep in repair any building…
9. Do all such other things.”
6. The appellant-society filed an application in Form No.10AB seeking grant of Registration u/s.12AB of the Income Tax Act, 1961 on 29.09.2025. On receipt of the said application, the Learned CIT(E) sought information from the appellant-society, so as to satisfy himself about the charitable nature of the objects of the Society and genuineness of the activities of the Society and also required the appellant to file certain documents and the copy of the approval u/s.12A obtained in the old regime etc. The appellant-society has filed the required information, details on 31.03.2026. On perusal of the information filed by the appellantsociety, the Learned CIT(E) concluded that the appellant-society was formed with the object of benefiting the members of the appellant-society not for the public at large, therefore, concluded that it is a mutual benefit association and does not exist for the benefit of public at large. He further concluded that appellantsociety has received “Gross Receipts” which are commercial in nature, appellant-society had failed to prove that its income / receipts are voluntary in nature and had not applied funds/amounts towards charitable purposes (Relief of the Poor”, “Education” & “Medical Relief”. The application filed seeking grant of approval u/s.80G(5) of the Act was denied.
7. Being aggrieved by the above order, an appeal was filed before this Tribunal. The Learned Counsel submits that the Learned CIT(E) had failed to appreciate the objects of the society are for the benefit of public at large. He further submits that the Learned CIT(Exemption) had clearly fell in error in classifying the appellant-society as a mutual benefit association without appreciating that the provisions of Societies Act prohibits distribution of dividends amongst its members. Finally, it submits that at the time of grant of registration, he can only look into the objects of the appellant-society. As regards, the application filed seeking approval u/s.80G(5) of the Act, he submits that the Co-ordinate Bench of this Tribunal had restored the matter to file of Learned CIT(Exemption) vide order in UFX Ventures (P.) Ltd. v. Asstt. CIT [IT Appeal No. 2272 & 2273 (CHNY) of 2025, dated 11-3-2026].
8. On the other hand, the Learned CIT-DR opposed the above submissions and submits that the Learned CIT(Exemption) had passed a very-well reasoned order taking into consideration the objects of the appellant-society. Therefore, the order of the Learned CIT(Exemption) cannot be interfered by this Tribunal.
9. We heard the rival submissions and perused the material on record. The sole issue that arises for our consideration is whether the Learned CIT(Exemption) was justified in rejecting the grant of registration u/s.12AB of the Act. The Learned CIT(Exemption) had denied the grant of registration for the reason that it is a mutual benefit association and benefitting the members of the Society only, not for the public at large and engaged in the commercial activity and the application filed by the appellant-society seeking grant of approval u/s.80G(5) of the Act was rejected by the Learned CIT(Exemption).
10. We had carefully perused the reasoning of the Learned CIT(Exemption) that the appellant-society is engaged in the object of rendering services to its members but not the public at large. It is an undisputed fact that the appellant-society was formed under Societies Registration Act, 1860. The provisions of section 12D of the Societies Registration Act, 1860 empowers the Registrar of the Societies to cancel the registration of the any society on the ground that the activities or proposed activities of the society will be subversive of the objects of the society or opposed to public policy. A society can be registered under the provisions of Societies Registration Act, only if the objects of the Society benefit the public at large. Therefore, presumption has to be drawn that objects of the society are for the benefit of public at large so long as the registration of the society is not cancelled. Further, the provisions of Section 14 of the Societies Registration Act, 1860 expressly prohibits distribution of assets, money in the event of dissolution of the Society among its members. The relevant provisions are extracted below :
“14. Upon a dissolution no member to receive profit.
If upon the dissolution of any society registered under this Act there shall remain after the satisfaction of all its debts and liabilities any property whatsoever, the same shall not be paid to or distributed among the members of the said society or any of them, but shall be given to some other society, to be determined by the votes of not less than three-fifths of the members present personally or by proxy at the time of the dissolution, or, in default thereof, by such Court as aforesaid: Clause not to apply to Joint-stock Companies. Provided, however, that this clause shall not apply to any society which shall have been founded or established by the contributions of shareholders in the nature of a Joint-stock Company.”
11. Thus, it is clear that the provisions of section 14 of the Societies Registration Act, 1860 clearly negates the stand of the Learned CIT(Exemption).
12. Further, as regards, the reasoning of the Learned CIT(Exemption) that it is engaged in the commercial activity, we are of the considered opinion that at the time of grant of registration, the Learned CIT(Exemptions) can only look into the objects of the Society. The issues of the assessment cannot be looked into. In this connection, we place reliance on the decision of the Hon’ble Supreme Court in the case of Ananda Social & Educational Trust v. CIT 426 ITR 340 (SC). The relevant observations made vide para 12 of the judgment are extracted below :
“12. Since Section 12-AA pertains to the registration of the trust and not to assess of what a trust has actually done, we are of the view that the term “activities” in the provision includes “proposed activities”. That is to say, a Commissioner is bound to consider whether the objects of the trust are genuinely charitable in nature and whether the activities which the trust proposed to carry on are genuine in the sense that they are in line with the objects of the trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a trust under sub-section (3) of Section 12-AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the trust are not genuine being not in accordance with the objects of the trust. Similarly, the situation would be different where the trust has before applying for registration been found to have undertaken activities contrary to the objects of the trust.”
13. Recently, the Hon’ble Supreme Court in the case of CIT v. International Health Care Education and Research Institute [2025] 171 482 ITR 287 (SC) after making a reference to the earlier judgment in the case of Ananda Social and Educational Trust (supra) held that the mere registration u/s.12AA of the Act automatically does not entitle any charitable trust to claim exemption under Sections 10 and 11 respectively of the Act, 1961. When a return is filed by any trust claiming exemption, it is for the Assessing Officer to look into all the materials and satisfy itself whether the exemption had been claimed genuinely or not! If the assessing officer is not convinced, it is always open for him to decline grant of exemption.
14. We may also state here that the above position of law equally holds good even in the New Regime of Registration u/s.12AB of the Act inserted by Taxation and Others Laws (Relaxation and Amendment of certain Provisions) Act, 2020 with effect from 01.04.2021.
15. With regard to the reasoning of the Learned CIT(Exemption) that since the application for grant of approval u/s.80G(5) was rejected by the Learned CIT(Exemption), as noted by us(supra) that the matter was restored to the file of Learned CIT(Exemption) for fresh disposal of the application. So, none of the reasons assigned by the Learned CIT(Exemption) for rejection of the grant of registration u/s.12AB cannot be sustained in the eyes of law.
16. In view of the above discussion, the order of the Learned CIT(Exemption) is hereby set-aside and matter is restored to the file of Learned CIT(Exemption) for grant of registration u/s.12AB of the Act on being satisfied on due verification of the material on record that the objects of the appellant-society are charitable in nature and genuineness of its activities and there are no specified violations as mentioned in the Explanation inserted to sub-section (4) of section 12AB of the Act. Thus, the matter is restored to the file of Learned CIT(Exemption) on the above lines for de novo disposal of application in accordance with law after affording an opportunity of being heard to the appellant-society.
17. In the result, appeal filed by the assessee in ITA No.2973/CHNY/2026 is partly allowed for statistical purposes.
Order pronounced in the open Court on 29th September, 2026.
