Idhayangal Charitable Trust Vs CIT (Exemption) (ITAT Chennai)
Chennai, February 18, 2025: In a significant pronouncement for non-profit organizations, the Income Tax Appellate Tribunal (ITAT), Chennai Bench, has set aside an order by the Commissioner of Income Tax (Exemptions) [CIT(E)] that denied renewal of registration under Section 12AB of the Income Tax Act, 1961, to Idhayangal Charitable Trust. The Tribunal’s ruling clarifies that trusts engaged primarily in “medical relief” fall under a specific category of “charitable purpose” not subject to the restrictive 20% commercial receipt limit imposed by the proviso to Section 2(15) of the Act.
The case centered on Idhayangal Charitable Trust, established in 2017 by Dr. Krishnan Swaminathan and his wife, both medical professionals, with the primary objective of providing medical relief, particularly to poor children suffering from Type 1 diabetes. The trust had initially secured registrations under Section 12A and 80G of the Act. Following amendments to its trust deed in 2024 and the establishment of a unit named “Madhuram Diabetic and Thyroid Centre (MDTC)” in 2021, the trust applied for renewal of its 12AB registration.
Revenue’s Stance: Commercial Activity Exceeds Limits
The CIT(E) rejected the trust’s application, concluding that MDTC was providing treatment to financially affluent patients, thereby engaging in commercial activities. The CIT(E) held that these activities were incidental but violated the proviso to Section 2(15) of the Act, which specifies that for entities advancing “any other object of general public utility,” commercial receipts should not exceed 20% of the total receipts.
