Vetaleshwar Shikshan Sanstha Vs CIT (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT), Pune Bench, partially allowed the appeals filed by Vetaleshwar Shikshan Sanstha, an educational trust, against the orders of the Commissioner of Income Tax (Exemption) [CIT (Exemption)], Pune. The CIT (Exemption) had rejected the trust’s applications for permanent registration under Section 12A(1)(ac)(iii) and for approval under Section 80G(5) of the Income Tax (IT) Act, 1961. The ITAT’s decision centered on the failure of the CIT (Exemption) to consider the assessee trust’s online submission before passing the rejection order.
Background and Initial Rejection
Vetaleshwar Shikshan Sanstha, registered under the Bombay Public Trust Act, 1950 since 1984 and actively engaged in providing education, had applied for registration and Section 80G approval on June 10, 2022, using Form No. 10AB for both.
The CIT (Exemption) issued a notice on September 2, 2022, requesting various pieces of information to verify the genuineness of the activities of the trust and its compliance with other laws material to its objects. When the assessee allegedly did not comply, the CIT (Exemption) rejected the applications on December 31, 2022, based on the following concerns:
- Financial Inconsistencies: The trust maintained extremely high provisions under the head “Salary Payable,” amounting to Rs. 6.47 crores for FY 2019-20 and Rs. 9.75 crores for FY 2020-21. The CIT (Exemption) questioned why such a large number of teachers would remain unpaid for five to six years and noted that deducting the payable salary showed a very high profit ratio, ranging from 23% to 86%, and even 99% in one institution for FY 2020-21. The ratio of salary payable to salary debited was found to be 64.26% in FY 2020-21.
- Non-Compliance with Other Laws: The trust had not deducted Tax Deducted at Source (TDS) and Provident Fund (PF) on the debited salary. Furthermore, the trust raised unsecured loans of Rs. 3.63 crores in FY 2020-21 without obtaining the required permission from the Charity Commissioner. This non-compliance was deemed material to the trust’s objects.
Based on these points, the CIT (Exemption) stated that they were “not satisfied with the genuineness of the activities of the assessee” and its compliance with other laws.
