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.
The Tribunal found that the trust deed dated 13.12.2012 contained objects relating to establishment of educational institutions at various levels and provision of cheaper education to marginalised sections of society. It also held that dominant control of the settlor over the trust was not, by itself, a factor justifying refusal of registration, particularly when registration under section 12AA(1)(b)(i) had earlier been granted on 26.10.2016. The decisive issue, however, was whether the material established that the assessee was actually running an educational institution in accordance with its objects.
The audited financial statements for AY 2022-23 to AY 2024-25 did not identify any school being run by the assessee, the number of students studying in any institution, or any statutory recognition held by the assessee for operating an educational institution. Although inquiry at the registration stage is confined to charitable objects and genuineness of activities rather than commercial wisdom or propriety of expenditure, the Tribunal held that the prescribed authority could call for material evidence to prima facie establish that the activities actually carried on were charitable.
The assessee had specifically been asked to provide documentary evidence of charitable activities for FY 2024-25 and FY 2025-26. Its response merely stated that the school building was being used for education and referred to a lease agreement, settlement with Reliance Home and advertisement bills. There was no material identifying any educational institution run by the assessee itself, statutory recognition, brand name, or verifiable strength of teachers, students and staff. The material instead indicated that the assessee owned the building while another entity used it for educational purposes.
The Tribunal held that merely leasing property to another trust or entity operating an educational institution did not establish that the assessee itself was carrying on educational or charitable activities. Genuineness had to be reflected through some overt activity and could not rest merely upon formation of the trust and ownership of property. Rental income from another educational trust would not make the assessee’s own activity charitable unless there was evidence that such rental income was being applied to some charitable activity of its own. The Tribunal observed that the other allegations concerning loans, advances and SARFAESI proceedings might not independently make the activities non-genuine, but the material showed that the trust essentially owned movable and immovable properties used to generate rental income. The judicial decisions relied upon by the assessee were distinguished on facts. Accordingly, the rejection of registration was upheld and the appeal was dismissed.
Cases Discussed
- C.J. Mangaliwala Vs. CIT(E), Chandigarh, ITA No. 2335/Del/2025 dated 10.12.2025 — relied upon by the assessee for the proposition that the registration inquiry should be confined to charitable objects and genuineness of activities and should not become an examination of individual transactions.
- CIT Vs. Red Rose School (2007) (2) TMI 575 dated 07.02.2007 (Allahabad High Court) — relied upon by the assessee concerning the scope of inquiry into charitable objects and genuineness of activities at the registration stage.
- Aggarwal Mitra Mangal Trust Vs. DIT (Exemption), New Delhi (2007) 106 ITD 531 dated 29.09.2006 (ITAT Delhi) — relied upon by the assessee in support of its challenge to rejection of registration.
- Hardayal Charitable & Educational Trust Vs. CIT-II, Agra (2013) (3) TMI 377 dated 15.03.2013 (Allahabad High Court) — relied upon by the assessee on the scope of registration proceedings and genuineness of charitable activities.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal preferred by the assessee against the order dated 13.03.2026 of Ld. Commissioner of Income Tax (Exemption) Chandigarh (hereinafter referred to as the First Appellate Authority or ‘the Competent Authority’ for short) in DIN & Notice No: ITBA/EXM/F/EXM45/2025-26/1087344891(1) against the rejection of application for registration u/s 12A(1)(ac)(ii) of the Act, 1961.
2. On hearing both sides we find that assessee’s application for registration u/s 12A(1)(ac)(ii) of the Act filed on 29.09.2025 has been rejected by ld. Prescribed authority primarily for the reason that trust is controlled by one person and the trust does not have right to choose its leader. It is one man show of Mr. Pawan Kumar. Then allegation is that assesse is not being run as per the provisions of Act and law as TDS is not deducted. Then allegation of ld. Prescribed authority is that the financial statement revealed substantial portion of the income of the trust is reflected under the head with lease rent income and indicating the primary activity of the trust is leasing out immovable property. Ld. Prescribed authority observed that applicant has entered into a lease agreement whereby the school and hostel premises owned by the trust have been leased out for running educational institutions. Thus, ld. Prescribed authority concluded that applicant has not demonstrated that it is directly engaged in impartin g education for carrying out charitable activities through the said property. Ld. Prescribed authority further alleges that the balance sheet of the assesse reveals that substantial loans amounts have been given to various persons and entities which are no t duly supported by evidences and there is no evidence to show nexus between advance made in charitable activities of the trust. Then, there is allegation that assesse has taken loan from Reliance Home Finance Ltd. which was not paid and SARFAESI Act proceedings have been initiated. Thus ld. Prescribed authority concluded that administration and management of the assesse trust is distinct from a charitable application in Form 1 0AB was rejected and further observations are that this rejection supersedes any registration granted u/s 12AB of the Act by any authority at any earlier time. Accordingly the assesse is n appeal and has raised following grounds;
3. Ld. Counsel has submitted that ld. CIT(E) has no jurisdiction to analyse individual transaction of the trust or convert registration proceedings into assessment proceedings and the inquiry should be confined examining to charitable objects and genuineness of activities which ar e reflected in trust deed of the assesse. Reliance has been placed on the Coordinate Bench decision in C.J. Mangaliwala Vs. CIT(E), Chandigarh (ITA No. 2335/Del/2025 dated 10.12.2025) and Hon’ble Allahabad High Court in case of CIT Vs. Red Rose School (200 7) (2) TMI 575 dated 07.02.2007 and ITAT Delhi Bench decision in Aggarwal Mitra Mangal Trust Vs. DIT, (Exemption) New Delhi (2007) 106 ITD 531 dated 29.09.2006 and Hon’ble Allahabad High Court decision in Hardayal Charitable & Educational Trust Vs. CIT-II, Agra (2013) (3) TMI 377 dated 15.03.2013. It was also contended that merely on the basis of suspicion and conjectures application cannot be rejected. More so, when there is no adverse findings about genuineness of the trust activities. It was contended that while considering this application ld. Prescribed authority has no authority to examine the governance structure of the trust. It was contended that the property has been leased to Shree Vaishnavi Education Trust exclusively for running school and imparting the property as long as funds are used for charitable purposes and the property continued to be used by another educ ation trust. Ld. Counsel has also contended that during the course of SARFAESI proceedings there is nothing to allege that the loan was not obtained for the charitable activities. As with regard to loan and advances ld. Counsel has submitted that the same were made in furtherance of charitable objects of the trust.
4. Ld. DR has relied the impugned order and contended that the dominant income comes from rent and nowhere from the financial of the assesse there is indication of assesse conducting any educational activity.
5. On considering the rival contentions and of perusal of m aterial on record we find at page No. 10- 20 assessee has provided copy of its trust deed dated 13.12.2012 executed by one Pawan Kumar and the objectives of trust definitely indicate that the trust has been established for establishing educational institutions in various categories of studies and for various level of studies and at the same time to provide cheaper education to marginalized section of society.
6. Now, with regard to the settler having dominant control over the trust does not seem to be a factor which can be considered at the time of grant of registration when earlier vide order dated 26.10.2016 registration u/s 12AA(1) (b)(i) of the Act was granted (copy available at page No. 22-23 of the paper book).
7. The crucial point for determination is whether the material on record establish that assesse is running educational institution in accordance with its objects and the foremost material to consider this issue is the c opies of audited financial statement for AY: 2022-23 to AY: 2024-25, made available at page No. 24-69 of the paper book and the same does not reflect anything specific coming from the financials that assesse is running any school under any particular name, as to how many students are studying in any particular institution being run by assesse. There is nothing on record which shows that the assesse holds any recognition from any statutory body for running any educational institution and imparting education.
8. No doubt, at the stage of grant of registration or renewal of registration only inquiry supposed to be made by ld. Prescribed authority is examining the charitable objectives and genuineness of the activities and not the commercial wisdom or propriet y of expenditure incurred while carrying those activities. However, the primary onus of the assesse to establish its charitable objects is discharged by reference to the constitution of the trust deed but as for determining genuineness of the activities, l d. Prescribed authority is very much in its power to examine the genuineness of the activities on the basis of enquiry calling for material evidence which can at list prima facie show that activities run are charitable.
9. In this context we find, when th e notice was issued to the assesse by the ld. Prescribed authority, copy of which is available at page No. 70- 72 of the paper book, it appears that assesse was specifically asked to provide details of charitable activities in Financial Year 2024-25 & 2025- 26 with documentary evidences. At page No. 73- 74 assessee has provided the copy of response to this notice and if we go through the same we find that corresponding to this query calling details of charitable activities in Financial Year 2024-25 and 2025- 26 with the documentary evidences, assesse merely mentions that ‘ the school building is being used for education which is charitable activity’ and attachment to this response merely mention attachment of lease agreement, settlement with Reliance Home and bills (advertisement bills). T he response of the assesse and the paper book filed before us nowhere mentions as to which particular educational institution recognized from any statutory body. under any specific brand name having a verifiable strength of teachers, students and staff is run by the assesse to indicate that assesse itself is engaged in providing education by institutions established and managed by the assesse trust, as part of its settlers intention to run educational instutions. The response indicates only the building owned by the assesse is being used for educational purposes.
10. Now, if the building is being used for e ducational purposes for running an institutions by another trust or entity then the question is if assesse can be said to be running educational institution and establishes its own charitable activities. are of the considered view that in the given facts and circumstances, the answer to this would be ‘no’. The assesse is not running any educational institution in order to attain its objectives but as merely leased out its property to another entity and what is being received is only lease rent. The genuineness of activity should be reflected by some overt act of an assesse and not by mere formation of a trust and holding property. The genuineness of the activity in the case of assesse is not challenged on mere suspicion and conjectures but for lack of evi dences establishing the charitable activities as called for vide notice dated 24.02.2026. Merely showing aim and object of providing education in the trust deed does not serve the purpose of inquiry and the genuineness of activities being charitable specially, if the same is claimed on the basis of educational activities should be established by some material evidences indicating that assesse itself has established and running educational institutions. The rental income received from another educational tru st does not make assessee’s activity charitable in nature unless there is further evidence that the rental income derived is used for some minimal charitable activity of its own which also does not seem to be the case here and the other allegations of loan s and advances being made beyond scope of objectives and the SARFAESI proceedings independently may not make the genuineness of the activities of the assesse questionable but certainly in the present facts and circumstances, it appears that the trust is merely having ownership of certain movable and immovable properties and t he same is being used to generate rental income. In that eventuality, grant of the basis of reference of educational activities as o bject in the trust deed does not go with the intention of the provisions the A ct and thus, while rejecting the application of assesse, the view taken by ld. Prescribed authority needs no interference. The judicial decisions relied are thus distinguishable on facts.
11. We thus, find no substance in the ground as raised and the appeal is dismissed.
Order pronounced in the open court on 31.08.2026
