BIGALA KRISHNA MURTHY FOUNDATION,HYDERABAD V. CIT (EXEMPTION), HYDERABAD

ITA 11/HYD/2025

AI Insights

The case involves M/s. Bigala Krishna Murthy Foundation, a trust that applied for registration under Section 12AB of the Income Tax Act, 1961, which was rejected by the CIT(E) on the grounds that the majority of the trust's activities were commercial in nature. The assessee appealed against this decision, arguing that the order was non-speaking and did not specify which activities were considered commercial. The Tribunal found that the CIT(E)'s order lacked specific findings and was vague, leading to the decision to set aside the order and remand the matter for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714649 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2024-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M. VENKATRAM REDDY
• Keywords: Set aside; Reasonable cause
• Section: 11; 12A

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad श्री रविश सूद, न् याययक सदस् य एवं श्री मिुसूदन सावडिया, लेखा सदस् य क े समक्ष । BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.11/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2024-25) M/s. Bigala Krishna Murthy Foundation, Hyderabad. PAN:AAKCB1687M Vs. Commissioner of Income Tax (Exemption), Hyderabad. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri M. Venkatram Reddy, Advocate रधजस् व द्वधरध/Revenue by:: Shri Narendra Kumar Naik, CIT-DR सुिवधई की तधरीख/Date of hearing: 30/07/2025 घोर्णध की तधरीख/Pronouncement: 06/08/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by M/s. Bigala Krishna Murthy Foundaton (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Exemptions), Hyderabad (“Ld. CIT(E)”), dated 24.10.2024 for the A.Y. 2024-25. Printed from counselvise.com ITA No.11/Hyd/2025 2 2. At the outset, it is seen that there is a delay of four days in filing the present appeal before this Tribunal. The assessee has filed a condonation petition explaining the reasons for the said delay. It has been submitted that while filing the online appeal before the Tribunal, the assessee faced a technical error in the ITAT website in receiving the OTP, due to which the appeal could not be filed within the prescribed time. On the other hand, the Learned Departmental Representative (“Ld. DR”) did not raise any serious objection to the condonation of delay. In view of the explanation offered and the absence of any objection from the Ld. DR, we are satisfied that the delay in filing the appeal was due to a reasonable cause. Accordingly, the delay of four days is condoned, and the appeal is admitted for adjudication on merits. 3. The assessee has raised the following grounds of appeal : “ 1. The order of the CIT(E), Hyderabad dated 24.10.2024 in the appellant’s case for the E-application made and seeking exemption for their activity is charitable activity irrespective of religion, without proper verification of the appellant produced relevant records with regard to the Bigala Krishna Murthy Foundation, the CIT exemptions rejecting application of the appellant is Printed from counselvise.com ITA No.11/Hyd/2025 3 concerned, the same is contrary to law, facts of the case and devoid of any merit. 2. That, the rejection of the application Form No.10AB under section 12AB is incorrect and unlawful in the eye of law. 3. That, the Ld. CIT(E) has erred in interpretation of the provisions governing the society and not limited to section 12AB, section 11 etc. The presumption of the Ld. CIT(A) that the appellant activity is commercial activity is not correct, it is far away from the truth. 4. The order passed by the Ld. CIT (Exemption) is alleged to be bad in law and contrary to legal provisions. The Ld. CIT (Exemption) without proper examination of the Appellant case was simply rejected the application of the Appellant is not justified. 5. The Ld. CIT (Exemption) did not consider the Appellant's requested and submitted the documentary evidence and neither considered the plea made by the Appellant and the Ld. CIT (Exemption) passed the impugned order which is bad in law. 6. The Ld. CIT (Exemption) Order is bad in law as he treated the activities of the Appellant as commercial in nature. The Appellant is a society that was founded by the members and appellant was briefly explained and submitted the Memorandum of Association and Article of Association was clearly showing the charitable activity of the Appellant Society. The Ld. CIT (Exemption) his presumption and assumption is wrong and it is against the society activity that he has treated the Appellant activity is commercial activity is not correct. Printed from counselvise.com ITA No.11/Hyd/2025 4 7. The Appellant Society is subject to Education Charitable polices providing education for the public good irrespective of Class, Cast, Creed and color of Religion and to enable/maintain/run/assist/other support all kinds of school's other educational institution and providing and prevent or relieve poverty of financial hardships etc. A copy of the Assessee Society's Memorandum of Association and Articles of Association are attached for your reference. Because of this, the Appellant's nature of activities is charity and cannot be categorized as commercial. The Appellant relaying the decisions of this Hon'ble Tribunal, Hon'ble High Court and Hon'ble Apex Court.\" Hence, the activities of the Appellant cannot be held to be Commercial in nature and are not in violation of the proviso to Section 2(15) of the Income Tax Act. 8. The Ld. CIT did not consider the following comparable institutes that have been registered and are listed as Exemption Institutions with the Income Tax Department, and are operational in different parts of India: A copy of regular Registration Form no 10AC of the above said institutes are attached herewith. 9. On facts and circumstances of the case, it is prayed before your honor that the above mentioned grounds may please be considered and necessary directions may be please and given to Ld. CIT (Exemption) for granting approval U/s 12A considering merits of the case. The same please be held accordingly. 10. Appellant craves leave to add, alter, modify or substitute any of the ground of appeal at the time of hearing of the appeal.” Printed from counselvise.com ITA No.11/Hyd/2025 5 4. The brief facts of the case are that the assessee is a trust that had applied for fresh registration under Section 12AB of the Income Tax Act, 1961 (“the Act”) in Form No.10AB. The Ld. CIT(E) rejected the said application by passing an order in Form No.10AD dated 24.10.2024. The reason stated for rejection was that the majority of the activities carried out by the trust were commercial in nature, which was considered violative of the provisions of Section 12AB of the Act. 5. Aggrieved by the said rejection order of the Ld. CIT(E), the assessee is in appeal before this Tribunal. The Learned Authorised Representative (“Ld. AR”) submitted that the order passed by the Ld. CIT(E) is wholly non-speaking and has been passed without considering the submission of the assessee. It was contended that the order merely states that the majority of the trust’s activities are commercial in nature, without specifying which activity is considered commercial. Inviting our attention to the Profit and Loss Account placed at page no. 67 of the paper book, the Ld. AR submitted that during the financial year ending 31.03.2022, the assessee had no income, and during the financial year ending 31.03.2023, the only Printed from counselvise.com ITA No.11/Hyd/2025 6 income earned by the assessee was a sum of Rs.7,40,000/-, entirely from donations. It was contended that there was no evidence of any commercial receipt or activity. The Ld. AR further submitted that the trust had complied with all procedural requirements while applying for registration under Section 12AB and had also submitted all documents required in Form 10AB. In these circumstances, the rejection of the application is unjustified and deserves to be set aside. The Ld. AR prayed that the matter be restored to the file of the Ld. CIT(E) for a fresh decision after due consideration of the financials and submissions filed by the assessee. 6. Per contra, the Ld. DR fairly submitted that the order of the Ld. CIT(E) is brief and does not contain specific findings as to which activity of the assessee was found to be commercial in nature. The Ld. DR did not raise any serious objection to the plea of the assessee for one more opportunity before the Ld. CIT(E), provided the assessee cooperates with the proceedings and furnishes the necessary evidence to substantiate its claim of charitable activity. Printed from counselvise.com ITA No.11/Hyd/2025 7 7. We have heard the rival contentions and perused the material available on record. We have gone through the Profit and Loss Account of the assessee placed at page no. 67 of the paper book, and find that during the financial year 2022–23, the only income received by the assessee was by way of donations amounting to Rs.7,40,000/-. For the preceding year ending 31.03.2022, there was no income at all. There is no evidence to suggest that the assessee carried out any activity in the nature of trade, commerce or business during the relevant period. On a perusal of the order passed by the Ld. CIT(E), we find that the order is non-speaking. It does not identify any specific activity carried out by the trust that is allegedly commercial in nature. The conclusion that the trust is engaged in commercial activity is vague and unsupported by any material or reasoning. In our considered view, the rejection of registration under Section 12AB based on such a non-speaking order cannot be sustained in law. The matter deserves to be reconsidered by the Ld. CIT(E) after examining the submissions and financials filed by the assessee and by passing a speaking order, identifying the specific grounds for rejection, if any. Accordingly, the impugned order passed by the Ld. CIT(E) in Form Printed from counselvise.com ITA No.11/Hyd/2025 8 No.10AD dated 24.10.2024 is set aside, and the matter is restored to the file of the Ld. CIT(E) for de novo adjudication in accordance with law, after granting an opportunity of hearing to the assessee. The assessee is directed to extend full cooperation and submit all required documents before the Ld. CIT(E) as and when called upon. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 6th August, 2025. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad. Dated: 06.08.2025. * Reddy gp Copy of the Order forwarded to : 1. M/s. Bigala Krishna Murthy Foundation, C/0 M Venkat Ram Reddy and M B Chary, Advocates, 76/2 RT, Saidabad Colony, Hyderabad. 2. CIT(Exemption), Hyderabad. 3. Pr.CIT (Exemption), Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "