Okkaliga Gowda Seva Sangha Kadaba Vs CIT(Exemptions) (ITAT Bangalore)
Charitable Trust Needs a Base- Land & Building for Charity Still Charitable- CIT(E) Cannot Deny Registration Just Because Donations Spent on Infrastructure
Bangalore ITAT in the case of Okkaliga Gowda Seva Sangha, Kadaba, dealt with cancellation of registration u/s 12AB & approval u/s 80G. The Assessee, a trust registered on 05.04.2023, had received donations of ₹1.27 crore during FY 2023-24. Out of this, ₹23.34 lakh was spent on land purchase & ₹80.25 lakh on building construction, aggregating to ₹1.03 crore. CIT(E) concluded that since no direct charitable activity was carried out & donations were utilized only for land & construction, the activities were not charitable. Accordingly, registration u/s 12AB & approval u/s 80G were cancelled vide orders dated 27.12.2024.
Before Tribunal, Assessee argued that for charitable objects to be pursued, a proper establishment is necessary. Purchase of land & construction of building were preparatory steps to commence educational & social welfare activities, & such infrastructure spending cannot be treated as non-charitable. It was also submitted that CIT(E) had not brought any material on record to suggest that activities were ingenuine or diverted for non-charitable purposes.
Tribunal observed that at the stage of granting registration, the scope of inquiry by CIT(E) is limited to verifying genuineness of activities & compliance with law, not to assess the nature or quantum of expenditure. It held that land purchase & construction of a building intended to facilitate charitable activities squarely fall within charitable purposes. Tribunal criticised the approach of CIT(E) in stepping into the shoes of AO & rejecting registration merely because donations were utilized for capital assets. It further noted that the same reasoning was used to deny approval u/s 80G. In the interest of justice, Tribunal remitted the matter back to CIT(E) with directions to examine the object clause of the trust deed, verify utilization of funds, assess the present status of the building & other activities of the trust, & then decide afresh. It directed that a reasonable opportunity be given to the Assessee but cautioned that full details & documents must be furnished. Consequently, both appeals were partly allowed for statistical purposes.
