Case Law Details
Tusli Eye Hospital Vs Exem Ward 2(4) (ITAT Mumbai)
ITAT Mumbai Sets Aside Rejection of Section 12AB and Consequential Section 80G Renewal Based Solely on FCRA Renewal Rejection
The Mumbai ITAT disposed of two appeals challenging orders dated 26.03.2026 by the Commissioner of Income Tax (Exemptions) rejecting the assessee’s application for renewal of registration under Section 12AB and the consequential renewal of approval under Section 80G of the Income-tax Act.
The CIT(E) had rejected the Section 12AB application after noting that the assessee’s application for renewal of registration under the Foreign Contribution (Regulation) Act, 2010 (FCRA) had been rejected by the competent authority, and treated this as non-compliance with a law material for achieving the trust’s objects. The Section 80G application was rejected consequentially.
The assessee submitted that the FCRA authority had granted liberty to file a fresh application after satisfying the prescribed conditions, that no foreign contribution had been received for several years, and that rejection of FCRA renewal had no bearing on the genuineness of its charitable activities or entitlement to renewal under the Income-tax Act. The Revenue supported the impugned orders.
The Tribunal observed that although the CIT(E) identified the statutory requirements relating to the trust’s objects, genuineness of activities and compliance with other material laws, the impugned order contained no independent examination of the trust’s objects or the genuineness of its activities. It further noted that the CIT(E) had not examined whether the alleged FCRA non-compliance materially affected the assessee’s ability to achieve its charitable objects. The Tribunal also observed that the order did not distinguish between cancellation of FCRA registration and rejection of an application for its renewal, nor examine the significance of the liberty granted to submit a fresh FCRA application or the assessee’s contention that it had not received foreign contributions for several years.
Holding that these aspects required fresh examination, the Tribunal set aside the orders under Sections 12AB and 80G and restored both matters to the CIT(E) for fresh adjudication after providing adequate opportunity of hearing. The CIT(E) was directed to independently examine the relevant factual and legal issues, including the effect of FCRA renewal rejection, and record satisfaction regarding the trust’s objects and genuineness of its activities. Both appeals were allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These two appeals filed by the assessee are directed against two separate orders both dated 26.03.2026 passed by the learned Commissioner of Income Tax (Exemptions), Mumbai [“CIT(E)”], in the case of the assessee for Assessment Year 2026-27. Since the issues involved in both the appeals arise out of a common set of facts and were heard together, they are disposed of by this consolidated order for the sake of convenience and brevity. ITA No. 3768/Mum/2026 is directed against the order passed by the learned CIT(E) under section 12AB of the Income-tax Act, 1961 (“the Act”), whereby the assessee’s application for renewal of registration filed in Form No. 10AB under section 12A(1)(ac)(ii) of the Act came to be rejected. ITA No. 3769/Mum/2026 is directed against the order passed by the learned CIT(E) under section 80G(5) of the Act rejecting the assessee’s application for renewal of approval under section 80G filed in Form No. 10AB.
2. The facts leading to the present appeals, as borne out from the impugned order passed by the learned CIT(E), are that the assessee filed an application in Form No. 10AB on 20.09.2025 under section 12A(1)(ac)(ii) seeking renewal of registration under section 12AB of the Act. The learned CIT(E) observed that the application was governed by Rule 17A of the Income-tax Rules, 1962, which prescribes the documents required to accompany an application in Form No. 10AB. Upon verification, it was noticed that the application was incomplete and all the prescribed documents had not been furnished. Accordingly, a notice dated 13.11.2025 was issued calling upon the assessee to furnish the requisite documents prescribed under Rule 17A(2). The assessee thereafter furnished its submissions and the material placed on record was examined by the learned CIT(E).
3. During the course of examination of the application, the learned CIT(E) noticed that the assessee’s renewal of registration under the Foreign Contribution (Regulation) Act, 2010 (“FCRA”) had been rejected by the competent authority vide order dated 28.10.2024. The impugned order reproduces the findings recorded by the FCRA authority, wherein it was stated that during the renewal proceedings an enquiry conducted through the Central Security Agency revealed that the address furnished by the assessee corresponded to another NGO, namely Mission for Vision, and that both entities had common trustees. Though the association explained that the premises had been voluntarily provided by one of its trustees for functioning as its head office and for conducting outreach activities including free eye checkup camps and surgeries for rural beneficiaries, the competent authority observed that the registered address of the association did not correspond with the address disclosed in Form FC-3C, indicating inconsistency and suppression of material facts. Consequently, the renewal application under the FCRA was rejected under section 16(2) read with section 12(4)(f)(iii) of the Foreign Contribution (Regulation) Act, 2010.
4. The learned CIT(E) further recorded that the revision application preferred by the assessee against the aforesaid order before the competent authority was also rejected vide order dated 10.09.2025. According to the learned CIT(E), violation of the provisions of the Foreign Contribution (Regulation) Act, 2010 constituted violation of a law material for achieving the objects of the trust and attracted the provisions relating to “specified violation” under section 12AB(4) of the Act. The learned CIT(E) observed that grant or renewal of registration under sections 12A/12AB is contingent upon satisfaction regarding the objects of the trust, genuineness of its activities and compliance with other laws which are material for achieving its objects. Holding that the assessee had failed to satisfy the requirement relating to compliance with such material laws, the learned CIT(E) rejected the application for renewal of registration under section 12AB vide order dated 26.03.2026 on the ground of violation of a law material for achieving the objects of the trust under section 12AB(1)(b) of the Act.
5. Consequent to the rejection of the application under section 12AB, the learned CIT(E) also rejected the assessee’s application for renewal of approval under section 80G. The learned CIT(E) observed that the assessee had filed Form No. 10AB on 22.09.2025 seeking renewal of approval under section 80G(5) of the Act. It was noted that since the assessee’s application for renewal of registration under section 12AB had been rejected, the condition prescribed under section 80G(5)(i) of the Act stood unfulfilled and, therefore, the application for renewal of approval under section 80G was also rejected vide separate order dated 26.03.2026.
6. Aggrieved by the aforesaid orders, the assessee has preferred the present appeals before us by raising the following grounds:
ITA No. 3768/Mum/2026
1. The order passed by the Learned Commissioner of Income Tax (Exemptions) [Ld. CIT(E)] rejecting the application for renewal of registration u/s 12AB of the Income-tax Act, 1961 (Act) is bad in law, arbitrary, and liable to be quashed.
2. The Ld. CIT (E) erred in law and on facts in rejecting the application without issuing any show-cause notice (SCN) or granting an opportunity of being heard specifically on the alleged violation of the Foreign Contribution (Regulation) Act, 2010 (FCRA).
3. The action of the Ld. CIT (E) is in gross violation of principles of natural justice, as no adverse material relating to FCRA cancellation was confronted to the Appellant before passing the impugned order.
4. The Ld. CIT(E) erred in rejecting registration outright, which is disproportionate to the alleged procedural issue under FCRA.
5. The Ld. CIT (E) erred in treating cancellation of FCRA registration as conclusive proof of violation of “other laws” within the meaning of section 12AB(1)(b), without establishing any nexus with the charitable activities or recording independent satisfaction.
6. The Ld. CIT (E) failed to appreciate that FCRA proceedings and Income-tax proceedings operate in different domains, and findings under FCRA cannot be mechanically applied.
7. The Ld. CIT(E) erred in concluding that there was suppression of material facts regarding address, without appreciating that the premises was used for outreach activities and there was no intention to conceal or mislead. The said finding is factually incorrect in addition to being the registered office, unjustified, and unsupported by any proper inquiry or evidence.
8. The Ld. CIT(E) erred in drawing an adverse inference merely on account of common trustees between entities, without appreciating that there is no prohibition in law on having common trustees, and without establishing any misuse of funds, conflict of interest, or non-genuine activity. The finding is arbitrary, unjustified, and not supported by any material on record.
9. The Ld. CIT (E) failed to establish that there was any actual misuse of funds or deviation from charitable objects.
The Appellant craves leave to add, alter, modify or amend any ground(s) of appeal.
ITA No. 3769/Mum/2026
1. The order passed by the Learned Commissioner of Income Tax (Exemptions) [Ld. CIT(E)] rejecting the application for renewal of registration u/s 80G of the Income-tax Act, 1961 (Act) is bad in law, arbitrary, and liable to be quashed.
2. The Ld. CIT (E) erred in law and on facts in rejecting the application without issuing any show-cause notice (SCN) or granting an opportunity of being heard.
3. The Ld. CIT(E) erred in rejecting the application for 80G approval solely on the ground of non-renewal of registration u/s 12AB, while the appellant is simultaneously filing an appeal against the 12AB rejection before your Honours.
The Appellant craves leave to add, alter, modify or amend any ground(s) of appeal.
7. During the course of hearing, the learned Authorised Representative (“AR”) for the assessee submitted that the learned CIT(E) rejected the application solely on the ground that the assessee’s application for renewal of registration under the Foreign Contribution (Regulation) Act, 2010 had been rejected by the competent authority. It was submitted that while rejecting the application, the competent authority under the FCRA had granted liberty to the assessee to submit a fresh application upon fulfilling the prescribed eligibility conditions. According to the learned AR, the learned CIT(E) was not empowered to step into the shoes of the competent authority under the FCRA and independently conclude that the assessee had violated the provisions of the FCRA. It was further submitted that the assessee had not received or accepted any foreign contribution governed by the FCRA for the last several years and, therefore, the rejection of renewal of FCRA registration had no bearing upon the genuineness of the assessee’s charitable activities or its entitlement to renewal of registration under the Act.
8. Per contra, the learned Departmental Representative (“DR”) strongly supported the impugned orders passed by the learned CIT(E). It was submitted that the Joint Director, FCRA, being the competent authority under the Foreign Contribution (Regulation) Act, 2010, had rejected the assessee’s application for renewal of FCRA registration after recording findings regarding noncompliance with the provisions of the said Act. According to the learned DR, the learned CIT(E) was justified in relying upon the findings recorded by the competent authority under the FCRA and in concluding that the assessee had failed to comply with a law material for achieving its charitable objects. The learned DR accordingly submitted that the rejection of renewal of registration under section 12AB and the consequential rejection of approval under section 80G were fully justified.
9. We have carefully considered the rival submissions and perused the material available on record, including the impugned orders passed by the learned CIT(E). The controversy involved in the present appeals lies in a narrow compass. The application of the assessee seeking renewal of registration under section 12AB of the Act has been rejected primarily on the ground that the competent authority under the FCRA had rejected the assessee’s application for renewal of FCRA registration. The rejection of approval under section 80G is purely consequential upon such rejection under section 12AB.
10. Before proceeding further, it would be relevant to refer to the findings recorded by the learned CIT(E) in paragraph 4 of the impugned order, which read as under:
“It is pertinent to note that grant or renewal of registration under section 12A/12AB of the Act is contingent upon the satisfaction of the competent authority regarding (i) the objects of the trust or institution, (ii) the genuineness of its activities, and (iii) compliance with other laws which are material for achieving its objects. The applicant has failed on all these counts. In view of the above mentioned violations by the applicant, the undersigned is left with no other option but to reject the application seeking registration under section 12AB of the Act. However, the applicant is at liberty to pursue the remedies available in Statute, without any prejudice.”
11. A plain reading of the above findings shows that while the learned CIT(E) has correctly identified the three parameters which are required to be examined while considering an application for registration under section 12AB of the Act, namely, (i) the objects of the trust or institution, (ii) the genuineness of its activities, and (iii) compliance with other laws which are material for achieving its objects, the impugned order does not contain any independent examination or finding on the first two requirements. More importantly, even while dealing with the third requirement, the learned CIT(E) has not recorded any finding as to how the alleged non-renewal of FCRA registration had materially affected the assessee’s ability to carry out or achieve its charitable objects.
12 .The expression employed by the Legislature is not mere noncompliance with any other law. The statute specifically requires compliance with other laws which are material for achieving the objects of the trust or institution. Therefore, before invoking the provisions of section 12AB on this ground, it was incumbent upon the learned CIT(E) to examine whether the alleged violation had any material bearing on the attainment of the charitable objects of the assessee. Such an exercise is conspicuously absent from the impugned order.
13. It is also noticed that the learned CIT(E) has proceeded on the footing that rejection of renewal of FCRA registration itself constitutes a conclusive violation disentitling the assessee from renewal under section 12AB. In our considered opinion, the impugned order does not distinguish between cancellation of registration under the FCRA and rejection of an application for renewal of FCRA registration. The distinction assumes significance in the facts of the present case.
14. The learned AR has specifically submitted before us that the competent authority under the FCRA, while rejecting the application for renewal, has granted liberty to the assessee to submit a fresh application upon fulfilling the prescribed eligibility conditions. Prima facie, such liberty indicates that the competent authority itself did not foreclose the assessee’s entitlement permanently and left open the possibility of obtaining fresh registration upon satisfying the statutory requirements. This aspect has not been examined by the learned CIT(E) while treating the rejection of renewal as a conclusive violation attracting section 12AB of the Act.
15. The learned AR has further submitted that the assessee has not received any foreign contribution governed by the provisions of the FCRA for the last several years. In our considered view, this factual assertion assumes considerable importance while examining whether the alleged non-renewal of FCRA registration had any real or material impact upon the assessee’s ability to achieve its charitable objects. However, this aspect has neither been examined nor verified by the learned CIT(E).
16. We further find that except referring to the rejection of renewal of FCRA registration, the learned CIT(E) has not recorded any independent finding that the objects of the assessee are not charitable or that its activities are not genuine. Likewise, there is no finding that the alleged non-compliance under the FCRA has resulted in diversion of charitable funds, misuse of foreign contribution, or otherwise materially impaired the attainment of the charitable objects of the assessee.
17. In these circumstances, we are of the considered opinion that the matter requires fresh examination by the learned CIT(E). We, therefore, deem it appropriate to set aside the impugned order passed under section 12AB and restore the matter to the file of the learned CIT(E) for adjudication afresh in accordance with law. The learned CIT(E) shall specifically examine the factual submissions made by the assessee, including the contention that no foreign contribution has been received for the last several years, the legal effect of rejection of renewal vis-à-vis cancellation of FCRA registration, the liberty granted by the competent FCRA authority to submit a fresh application, and, most importantly, whether the alleged non-compliance under the FCRA constitutes non-compliance with a law material for achieving the objects of the assessee within the meaning of section 12AB of the Act. The learned CIT(E) shall also independently record his satisfaction regarding the objects of the trust and the genuineness of its activities in accordance with the statutory requirements after affording adequate opportunity of being heard to the assessee.
18. If, upon such examination, the assessee is otherwise found to satisfy the conditions prescribed under the Act, the learned CIT(E) shall grant renewal of registration under section 12AB in accordance with law.
19. Since the rejection of approval under section 80G is purely consequential upon rejection of registration under section 12AB, the impugned order passed under section 80G is also set aside and restored to the file of the learned CIT(E) for fresh adjudication in conformity with the decision taken in the proceedings under section 12AB.
20. Accordingly, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 30.06.2026.
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