Lala Sohana Mal Jagmohan Lal Khanna Educational And Charitable Trust Vs CIT Exemptions (ITAT Delhi)
NBFC Fixed Deposits Cannot, by Themselves, Defeat a Trust’s 12AB Renewal: Delhi ITAT
A possible violation of the permitted investment modes under Section 11(5) is an issue for assessment. It does not, by itself, establish that a charitable trust’s activities are not genuine. The Delhi Bench of the ITAT has made this distinction while considering the rejection of a trust’s applications for renewal under Section 12AB and approval under Section 80G.
The decision is Lala Sohana Mal Jagmohan Lal Khanna Educational and Charitable Trust v. CIT(E), ITA Nos. 3645 and 3646/Del/2026, pronounced on 28 September 2026. The Tribunal set aside the basis on which the CIT(E) had objected to the trust’s fixed deposits with non-banking finance companies and sent the matter back for verification of another factual issue. The approvals were not granted outright; both appeals were allowed for statistical purposes.
Why the CIT(E) rejected the applications
The trust had sought renewal of its registration under Section 12AB and the related approval under Section 80G. The CIT(E) rejected the applications on two grounds. First, the trust had placed money in fixed deposits with certain non-banking finance companies (NBFCs), which the CIT(E) considered contrary to the investment requirements of Section 11(5). Second, the trust had made donations to institutions which, according to the CIT(E), were not registered under Section 12AB.
