Shishu Kalyan Educational Society Vs CIT(Exemption) (ITAT Delhi)
The Delhi Income Tax Appellate Tribunal considered an appeal against the order of the Commissioner of Income Tax (Exemptions), Chandigarh dated 19.02.2026 rejecting the assessee society’s application for renewal of registration under Section 12AB filed in Form No. 10AB under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961.
The assessee society, established on 23.01.2009 for educational activities, stated that its activities fell within the definition of charitable purpose under Section 2(15). It had earlier been granted registration under Section 12AA and thereafter under Section 12AB. Along with its renewal application dated 26.09.2025, it furnished its memorandum of association, financial statements and other supporting records.
During examination of the application, the CIT (Exemptions) observed from the financial statements that substantial amounts had been advanced to various persons and entities, including persons closely connected with the society. A notice dated 06.02.2026 was issued seeking details regarding the nature, purpose and justification of the advances. The assessee replied that the loans and advances had since been recovered and produced ledger accounts. However, the CIT (Exemptions) noted that the assessee had not furnished confirmations from the parties, loan agreements, board resolutions or documentary evidence establishing the purpose, necessity and terms of the advances. Holding that such advances amounted to diversion of charitable funds for non-charitable purposes, the CIT (Exemptions) rejected the renewal application.
Before the Tribunal, the assessee challenged the rejection, contending that the statutory scope of proceedings under Section 12AB was confined to examining the genuineness of activities and compliance with applicable legal requirements and did not extend to reviewing accounts at the stage of renewal of registration.
The Tribunal observed that the assessee had continuously enjoyed registration since 2009 and that the present application was only for renewal under Section 12AB. It further noted that the Revenue had not doubted either the genuineness of the assessee’s activities or its educational activities, which qualified as charitable purpose under Section 2(15).
The Tribunal held that the only objection of the CIT (Exemptions) related to loans and advances given to certain related parties from charitable funds. It observed that if the Revenue intended to examine the veracity, purpose or nexus of such loans and advances with the charitable activities of the society, the issue could be examined during assessment proceedings. Such matters, according to the Tribunal, could not constitute a relevant ground for refusing renewal of registration under Section 12AB.
Accordingly, the Tribunal directed the CIT (Exemptions) to grant renewal of registration under Section 12AB to the assessee society. The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No.2704/Del/2026, arises out of the order of the ld Commissioner of Income Tax (Exemptions), Chandigarh [hereinafter referred to as ‘ld. CIT(E)’, in short] dated 19.02.2026 against the revenue of registration of trust u/s 12AB(1)(b)(ii) of the of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
2. The Assessee has raised the following grounds of appeal before us:-
1. The Ld. CIT(E), has committed gross injustice to the appellant by and passed the order rejecting the application for renewal of registration filed by the assesse trust u/s 12A(1)(ac)(ii) of the Income Tax Act, 1961 which is bad both in the eye of law and on the facts of the case and the same is arbitrary and unjustified.
2. On the facts and circumstances of the case, the Ld. CIT (E) has erred on both on facts and in law in passing the order rejecting the application for renewal of registration u/s 12A(1)(ac) (ii) of the Income Tax Act without considering the detailed reply filed by the applicant during the registration proceedings before Honorable CIT(E). Therefore the order passed by the L. CIT(E) is totally against the mandate of Income tax act and Law and the same is liable to be quashed.
3. On the facts and circumstances of the case, the order passed by the Ld. CIT(E) are in violation of the statutory conditions of the Income Tax act and the procedure prescribed under the Income tax law in relation to the registration u/s 12AB which clearly says that at the time of registration the Honorable CIT(E) 3 has power to check the genuineness of the activities in accordance with the objects of the charitable trust and compliance of such requirements of any other law which are materials to achieve the objects and cannot review the accounts of the trust at the registration stage. Therefore the same is bad in law and liable to be quashed.
4. On the facts and circumstances of the case, the Ld. CIT (E) has erred both on facts and in law in rejecting the application for renewal of registration u/s 12A(1)(ac) (ii) of the Income Tax act despite the fact that the assesse filed the application within the prescribed time limit and fulfilled all the conditions as provided under the Income Tax act in relation to registration and thus, eligible for registration.”
3. We have heard the rival submissions and perused the materials available on record. The Assessee society was created on 23-01-2009 for the purpose of engaging itself in educational activities. The said activity duly falls within the definition of charitable purpose under section 2(15) of the Act. The Assessee preferred an application in Form No. 10AB on 26-09-2025 seeking renewal of the registration under section 12AB of the Act. The initial registration was indeed granted to the Assessee. The Assessee along with the application furnished the supporting documents including memorandum of association, financial statements and other records. However, the learned CIT (exemptions) during the course of examination observed from the financial statements and records, that substantial amount had been advanced to various persons and entities including persons closely connected with the Assessee society. Accordingly, a hearing notice dated 6-2-2026 was issued to the Assessee to explain the nature, purpose and justification of such advances and furnish supporting documentary evidences. In response, the Assessee submitted that the loans and advances have since been received back and furnished the complete ledger accounts of the parties in support of its claim. The learned CIT (Exemptions) noted that even though the amounts were received back from the parties to whom advances were given, the Assessee failed to provide confirmation from these parties, loan agreements, board resolutions or documentary evidence establishing the purpose, necessity and terms of such advances. The learned CIT (Exemptions) noted that such financial arrangement of giving advances to related parties would tantamount to diversion of charitable funds for non-charitable purposes. Accordingly, the learned CIT (Exemptions) proceeded to deny the renewal of registration and rejected the application filed in Form No. 10AB under section 12A(1)(ac)(ii) of the Act. Aggrieved, the Assessee is in appeal before us.
4. At the outset, we find that Assessee had been indeed granted registration from 2009 onwards as per the erstwhile provisions of section 12AA of the Act and thereafter under section 12AB of the Act. The present application filed in Form 10AB on 26-9-2025 was only seeking renewal of the registration under section 12AB of the Act. It is not in dispute that the Assessee is engaged in educational activities which falls within the definition of charitable purpose under section 2(15) of the Act. The learned CIT (Exemptions) nowhere in the order had doubted the educational activity carried on by the Assessee. The only grievance of the CIT (Exemptions) is that Assessee had given some loans and advances to certain related parties from the charitable funds of the Assessee society. This according to him would amount to diversion of charitable funds for non-charitable purposes. In our considered opinion, the Assessee has sought only renewal of registration. The genuineness of the activities of the Assessee society are not doubted by the revenue. Further the educational activity carried out by the Assessee are also not doubted by the revenue. Hence, the Assessee’s application seeking renewal of registration under section 12AB of the Act cannot be denied. If at all the revenue seek to examine the veracity of the loans and advances given to various persons together with its purpose and the nexus with the charitable activities of the Assessee society, the same could very well be taken up at the time of assessment proceedings . That can never be a relevant consideration for denial of renewal of registration sought by the Assessee. Hence, we direct the learned CIT (Exemptions) to grant renewal of registration under section 12AB of the Act to the Assessee society in the facts and circumstances of the instant case. Accordingly, the grounds raised by the Assessee are allowed.
5. In the result, the appeal of the Assessee is allowed.
Order pronounced in the open court on 08/07/2026.
