Leasing School Property Without Own Educational Activity Cannot Secure Section 12A Registration: ITAT Delhi

Vandematram Educational Trust Vs CIT (E) (ITAT Delhi)

Summary: The ITAT Delhi dismissed the appeal of Vandematram Educational Trust against rejection of its application filed on 29.09.2025 for registration under section 12A(1)(ac)(ii) of the Income-tax Act, 1961. The Commissioner of Income Tax (Exemption), Chandigarh had rejected the application on several grounds, including dominant control of the trust by one person, non-deduction of TDS, substantial lease-rent income, loans and advances to various persons and entities, and SARFAESI proceedings relating to a loan from Reliance Home Finance Ltd. The principal concern was that although the trust owned school and hostel premises, these had been leased to another educational trust and the assessee had not demonstrated that it was itself directly engaged in imparting education or otherwise carrying on charitable activities.

The assessee contended that the CIT(E), at the registration stage, could examine only the charitable objects and genuineness of activities and could not convert registration proceedings into assessment proceedings by scrutinising individual transactions. It relied upon C.J. Mangaliwala Vs. CIT(E), Chandigarh, CIT Vs. Red Rose School, Aggarwal Mitra Mangal Trust Vs. DIT (Exemption), New Delhi and Hardayal Charitable & Educational Trust Vs. CIT-II, Agra. It argued that the school building continued to be used for education by Shree Vaishnavi Education Trust and that the loans and advances were connected with the trust’s charitable objects. The Department, however, relied upon the impugned order and pointed out that the assessee’s dominant income was rent and its financial statements did not indicate that it conducted any educational activity.