Free Classes, No Expenses in the Books: Can a Trust Lose Its Registration for That Reason Alone?

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.