Minor procedural lapses should not lead to denial of Section 12AB registration: ITAT Nagpur

Vyankanath Maharaj Shikshan Sanstha Murtizapur Vs ITO (ITAT Nagpur)

ITAT Nagpur order on Minor procedural lapses should not lead to denial of 12AB registration if the trust’s charitable activities remain genuine

1. Brief facts:

The case concerns Shri Vyankanath Maharaj Shikshan Sanstha Murtizapur, a trust engaged in educational activities, which had applied for registration under Section 12AB of the Income Tax Act, 1961. The trust previously held provisional registration under Section 12A(1)(ac)(vi). However, the Commissioner of Income Tax (Exemptions) [CIT(E)] Pune rejected its application for final registration and also cancelled the provisional registration citing non-compliance with the Maharashtra Public Trusts Act, 1950.

The trust challenged this order before the Income Tax Appellate Tribunal (ITAT), Nagpur Bench.

2. Grounds of Appeal Raised by the Assessee

The assessee trust raised the following key grounds in the appeal:

1. Erroneous rejection of registration under Section 12AB

• • The CIT(E) erred in rejecting the application for registration under Section 12AB, despite the trust having provisional registration.
  • The rejection was based on non-compliance with Section 36A(3) of the Maharashtra Public Trusts Act, 1950, which mandates prior permission for borrowing funds.

2. Unjustified cancellation of provisional registration

• • The provisional registration was cancelled without citing any specified violation.
  • The trust raised temporary, interest-free deposits from trustees, which were fully repaid, and hence, prior permission should not have been necessary.

3. Failure to consider subsequent compliance