Ruth Foundation Charitable Trust Vs CIT (Exemptions) (ITAT Bangalore)
Genuineness of activities, Not quantum of expenditure, Determines Eligibility for 12AB & 80G Registration: ITAT Bangalore
Bangalore ITAT has allowed the appeal filed by Ruth Foundation Charitable Trust against the order of the CIT (E) who had cancelled registration u/s 12AB & approval u/s 80G. Tribunal observed that at the inception stage of a trust, the extent of expenditure incurred is not decisive & what is material is the genuineness of the activities carried out in line with the objects of the trust.
Assessee trust was constituted by deed dated 11.01.2021, later amended on 30.11.2022 & was granted provisional registration on 31.05.2021 u/s 12A & provisional approval u/s 80G valid till AY 2024-25. On 07.06.2024, it applied for final registration in Form 10AB. CIT (E), however, cancelled both approvals observing that no substantial activities had commenced & only nominal expenses such as rent & administrative charges were shown, apart from a sum of Rs.30,000 incurred towards a blanket distribution program. On that basis, the application was held premature & rejected.
Before Tribunal, Assessee argued that all required documents had been furnished & that CIT(E) had herself acknowledged receipt of the same. It was further submitted that photographs & details of the blanket distribution program conducted on 30.12.2024 along with a healthcare initiative titled “Pratham Upchaar” were produced to establish commencement of activities. It was contended that law mandates examination of the genuineness of activities & not the quantum of expenditure at the inception stage & that meagre activity cannot be a ground for refusal of registration.
Tribunal noted that Assessee trust had indeed carried out activity in line with its objects & there was no finding from CIT (E) or JAO that the activities were non-genuine. The only ground for rejection was insufficiency of expenditure, which Tribunal held to be unsustainable. It was categorically observed that what matters for granting registration is the genuineness of activities aligned with the charitable objects & not the magnitude of expenditure incurred.
Accordingly, Tribunal allowed the appeal of Assessee & directed CIT (E) to grant registration u/s 12AB as applied on 07.06.2024. Since registration was directed to be granted, the consequential rejection of approval u/s 80G also could not survive. Tribunal remitted the matter back & directed CIT (Exemptions) to grant approval u/s 80G as well.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals at the instance of the assessee are directed against the orders both dated 18.12.2024 of the Learned Commissioner of Income Tax (Exemptions), Bangalore vide Din & Notice No. ITBA/EXM/F/EXM 45/2024-25/1071347396(1) cancelling the registration u/s.12AB of the Income Tax Act, 1961 (in short ‘the Act’) and vide DIN & Notice No. ITBA/EXM/F/EXM45/2024-25/1071347621(1) cancelling the approval u/s.80G of the Act.
ITA No.444/Bang/2025
2. In this appeal, the assessee has raised the following grounds of appeal:
“1. The Order dated 18/12/2024 vide DIN ITBA/EXM/F/EXM 45/2024-25/1071347396(1) passed by the learned CIT (Exemptions) is without appreciating the factual of the documents submitted.
2. The CIT (Exemptions) has erred in passing the order without appreciating subject matter and the provisions of Income-tax Act and judicial pronouncements.
3. The CIT (Exemptions) has not considered the provision of income tax that the organisations are required to apply for final registration u/s 80G either at least 6 months prior to expiry of provisional registration or Within 6 months from commencement of activities, whichever is earlier. The CIT (Exemptions) not considered the fact that the activities taken by the organisation may less at the time of application for registration u/s 80G, which can’t be the mere reason rejection of application.
4. The CIT (Exemptions) has not considered various judgments by Honourable Supreme Court and High Courts confirming that registration can’t be rejected because of no activity taken.
5. That the appellant craves leave to add or alter, amend, resend, modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of this appeal.
3. Brief facts of the case are that the assessee is a trust constituted vide deed of trust dated 11.1.2021 along with the amended trust deed dated 30.11.2022. The assessee trust has been granted provisional registration on 31.5.2021 under sub-clause (vi) of clause (ac) of sub-section (1) of Section 12A of the Act from A.Y 2022-23 to A.Y 2024-25 vide provisional registration No. AAETR3060PE2021401. The trust has also been granted provisional approval under clause (iv) of first proviso to sub-section (5) of Section 80G of the Act on 31.5.2021 w.e.f. 31.5.2021 to AY 2024-25. Thereafter, the assessee trust submitted an application on 7.6.2024 in Form No.12AB of the Act for final registration. On receipt of the application, the ld CIT(Exemptions) assigned the case to the JAO for verification. However, on perusal of the submissions made by the assessee, both Range head and JAO did not recommend for grant of registration for the following reasons:
i) As seen from the part financial furnished, an amount of Rs.30,000/- is debited for the year ended 31.3.2024 towards the “blanket distribution program”. However, no activity is seen during the current financial year upto 31.10.2024.
ii) The only major expenditure incurred by the assessee trust is towards rent paid and other minor expenditure being administrative in nature.
(iii) The trust has neither furnished any bank account extract nor any proof supporting the said activity undertaken during the last year.
(iv) As the charitableness of the activity is not established in the case, and since the trust has not yet commenced its activities, the present application is premature at this juncture and accordingly recommended for rejection on technical grounds for non-commencement/insufficient activities.
4. Further, the ld CIT (Exemptions) also herself observed that the assessee trust has not made any substantial expenditure towards objects of the trust and thus, held that the assessee has not commenced its activity towards attainment of the object, hence rejected the application in form No.10AB dated 7.6.2024 filed for registration u/s.12AB of the Act.
5. Aggrieved by the order of the ld CIT(Exemptions), the assessee trust has filed the present appeal before this Tribunal. The assessee trust has also filed a paper book comprising 20 pages containing therein the copy of written submission, photographs of blanket distribution program, detailed note on “ Pratham upchaar”, health care initiative.
6. Before us, the Ld AR vehemently submitted that the ld CIT(Exemptions) erred in observing that the assessee has not commenced its activity towards the attainment of its object. The Ld AR also submitted that the assessee had produced all the necessary documents/details as required for registration as the ld CIT(Exemptions) herself observed the same in her order. Lastly, the ld AR submitted that it is only the genuineness of the activity and not quantum of expenditure which are relevant for granting registration u/s.12AB of the Act.
7. The Ld CIT DR supported the order of ld CIT(Exemptions).
8. We have heard the rival submissions and perused the materials available on record. We take a note of the fact that the assessee trust had been constituted vide deed of trust dated 11.1.2021 along with the amended trust deed dated 30.11.2022 & thus it is at the inception stage. Further we take a note of the fact that it is not a case that the assessee had not produced all the necessary documents/details as required for registration u/s.12AB of the Act. In fact the ld CIT (Exemptions) herself in para 5 of the order has categorically stated that the assessee had submitted all the necessary details/documents as required for registration u/s.12AB of the Act. We observe that the only contention of the ld CIT( Exemptions) in rejecting the approval u/s.12AB of the Act is that the assessee trust has not made any substantial expenditure towards the object of the trust. On going through the order of the ld CIT(Exemptions), we take note of the fact that the JAO himself observed that “on going through the part financial furnished before him, an amount of Rs.30,000/- had been incurred towards the “blanket distribution program”, which in our opinion is one of the object of the assessee trust i.e. relief to poor. Before us also, the assessee submitted the detailed photographs of blanket distribution program conducted on 30.12.2024 along with the detailed note on “Pratham Upchaar” health care initiative. Therefore, we do not agree with the contention of ld CIT (Exemptions) that the assessee Trust had not commenced its activity towards the attainment of the object. We also observe that there is not even a whisper about any non-genuineness of the activities carried on by the assessee trust. We are of the considered opinion that it is not the quantum of expenditure which is relevant for the purpose of granting registration but in fact the genuineness of the activity of the trust in accordance with the object of the trust which are relevant for granting registration. At the inception stage of the Trust, the activities may be less or meager but that cannot be sole basis for cancelling the registration of the assessee Trust. Therefore, we agree with the contention of ld AR of the assessee that it is only the genuineness of the activity and not substantial amount of expenditure which are relevant for granting registration u/s.12AB of the Act. In the present case, it is not in dispute that the assessee has not commenced its activity towards the attainment of its object as can be seen from the order of the ld CIT(Exemptions) that the JAO on verification of financial furnished before him observed that the assessee has incurred expenditure towards blanket distribution Program. The JAO/CIT(E) also did not find any non genuine activity carried on by the assessee Trust.
9. In these circumstances, we are of the considered opinion that the ld CIT (Exemptions) grossly erred in not granting registration merely on the basis of not incurring substantial amount of expenditure and accordingly, we allow the appeal of the assessee and direct the ld CIT(Exemptions) to grant registration u/s.12AB of the Act as applied by the assessee trust on 7.6.2024 in Form No.10AB. It is ordered accordingly.
10. The assessee in its grounds of appeal has objected to the denial of grant of approval u/s.80G of the Act.
11. We find that the ld CIT(Exemptions) has rejected the approval u/s.80G of the Act on the ground that although the assessee has been receiving donation from last three years, however, the expenses were not towards the objects of the trust and accordingly, held that the assessee has not commenced its activity. Further, as the assessees’s application filed for registration u/s.12AB of the Act was rejected, the ld CIT(Exemptions) accordingly rejected the approval u/s.80G of the Act.
12. Since we have allowed the appeal in ITA No.444/Bang/2025 while dealing in registration u/s.12AB of the Act by holding that the assessee has commenced its activity and it is not the quantum of expenditure but genuineness of the expenditure which are relevant for granting registration. Accordingly, we also remit this issue to the file of the ld CIT(Exemptions) to grant the approval u/s.80G of the Act. Accordingly this appeal of the assessee is also allowed.
13. In the result, appeal in ITA No.444/Bang/25 is allowed and the appeal in ITA No.445/Bang/25 is also allowed.
Order pronounced in court on 25th day of August, 2025
