DHWANI SHRISTI FOUNDATION ,BAGANALORE V. COMMISSIONER OF INCOME TAX(EXEMPTIONS) , BANGALORE

ITA 2464/BANG/2024

AI Insights

The case involves the Dhwani Shristi Foundation, a charitable trust based in Bangalore, which appealed against the orders of the CIT (Exemptions) cancelling its registration under section 12AB and approval under section 80G of the Income Tax Act. The CIT (E) had cancelled the registration and approval primarily due to the trust's low expenditure on charitable activities in its initial operational year and the receipt of a significant donation from another trust where the main trustee was common. The Tribunal, after reviewing the submissions and evidence, concluded that the CIT (E) had misapplied the criteria for registration and approval, focusing incorrectly on the quantum of expenditure rather than the genuineness of the trust's activities.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633058 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Other Referred Cases: Ananda Social & Educational Trust v. Commissioner of Income tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINANDINI DAS
• Assessee Lawyers: SUNAINA BHATIA
• Keywords: Charitable institution
• Section: 32; 11; 12AA; 12A; 80G

Judgement Text

"ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “A’’BENCH: BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No.2463 & 2464/Bang/2024 Assessment Years : 2024-25 & 2024-25 Dhwani Shristi Foundation Designation:Charitable Trust Unit No.3, 1st Floor, West Gate Point #77 RV Road, Basavanagudi, Bangalore 560 004 Karnataka PAN NO : AAETD4633Q Vs. CIT (Exemptions) Bangalore APPELLANT RESPONDENT Appellant by : Ms. Sunaina Bhatia, A.R. Respondent by : Ms. Srinandini Das, D.R. Date of Hearing : 17.03.2025 Date of Pronouncement : 09.06.2025 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: These appeals at the instance of the assessee are directed against the order of ld. CIT(Exemptions), Bangalore vide DIN & Notice No. ITBA/EXM/F/EXM45/2024-25/1069931143(1) dated 24.10.2024 cancelling the registration u/s 12AB of the Act and vide DIN & Notice No. ITBA/EXM/F/EXM45/2024-25/1069948856(1) dated 25.10.2024 cancelling the approval u/s 80G of the Act. 2. First, we take up ITA No.2463/Bang/2024 for adjudication. In this appeal, the assessee has raised the following grounds of appeal: ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 2 of 12 ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 3 of 12 3. The assessee is registered as a public trust on 28.6.2023 and is keenly engaged in charitable activities including providing medical aid to the under privileged sections of the society which are covered u/s 2(15) of the Act. The provisional registration was granted in Form 10AC on 21.7.2023 i.e. within one month of its formation and was applicable from assessment year 2024-25 till 2026-27. Thereafter, assessee trust applied for the final registration u/s 12A (1)(ac)(iii) of the Act by filing form 10AB on 20.4.2024. On receipt of the application for registration u/s 12AB of the Act, the ld. CIT (E) assigned the case to the JAO for verification. On perusal of submission made by the assessee both the Range head and ld. JAO did not recommend for the registration mainly on the ground that the assessee Trust had received general donation of Rs.48,80,444/- along with service income of Rs.2,09,000/- and interest income of Rs.1,92,024/-, however the assessee trust had incurred medical relief expenses of Rs.5,90,512/- (apprx. 13% of general donation) only and the amount of Rs.40 lakhs (80-84%) had been invested in a fixed deposits. Further, in the provisional statement furnished by the assessee trust for the period 1.4.2024 to 31.8.2024, the assessee trust had not charged any expenditure towards the object of the trust. 3.1 Further, the ld. CIT(E) also observed that the assessee trust had not made substantial amount of expenditure towards the objects and also the assessee has not submitted any proof or evidence of activities and accordingly held that the assessee has not commenced its activities towards the attainment of the object. The ld. CIT(E) specifically observed that in the present case, the assessee submits all the necessary documents/details as required for registration u/s 12AB of the Act. However, rejected the ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 4 of 12 application in form 10AB dated 20.4.2024 filed for registration under 12AB of the Act. 4. Aggrieved by the order of ld. CIT(E), the assessee trust has filed the present appeal before this Tribunal. 5. Before us, the ld. A.R. of the assessee submitted that the ld. CIT(E) erred in observing that the assessee has not commenced its activities towards the attainment of the objects. Further, ld. A.R. of the assessee vehemently submitted that assessee had produced all the necessary documents/details as required for registration as the ld. CIT(E) herself observed in the order. Lastly, ld. A.R. submitted that it is only the genuineness of the activity and not the quantum of expenditure which are relevant for granting registration u/s 12AB of the Act. 6. Ld. D.R. on the other hand, supported the order of the ld. CIT(E). 7. We have heard the rival submissions and perused the materials available on record. On going through the order of ld. CIT(E), we find that the ld. Jurisdictional assessing officer (JAO) observed that assessee had received general donation of Rs.48,40,444/- along with service income of Rs.2,09,000/- and interest income of Rs.1,92,024/-. Further, the ld. JAO also observed that medical relief expenses of Rs.5,90,512/- were incurred towards the object of the trust & could not find it to be non-genuine. Therefore, we do not agree with the contention of the ld. CIT(E) that the assessee had not commenced its activity towards the attainment of the objects. Further, it is an undisputed fact that the assessee trust was registered as a public trust only on 28.6.2023. Therefore, we agree with the contention of the ld. A.R. ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 5 of 12 of the assessee that since it was the first year of its operation, the assessee trust could not spend towards the large scale activity and accordingly the assessee trust had invested Rs.40 lakhs in the fixed deposits as per the modes prescribed in section 13(5) of the Act in order to spend for future applications. Further, we also take a note of the fact that the ld. CIT(E) on the one hand, herself observed that the assessee has submitted all the necessary documents/details as required for registration u/s 12AB of the Act and on the other hand, observed that assessee has not submitted any proof or evidence of activities, which in our opinion is contradictory in itself. We take a note of the fact that the main judiciousness in rejecting the registration of the assessee trust is that the assessee had not made substantial amount of expenditure towards the object. We are of the firm opinion that for the purpose of granting registration, the ld. CIT(E) shall call for such documents or information or make such inquiry as she thinks necessary in order to satisfy herself about the twin object:- (a) the genuineness of the activity of the trust and (b) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its object. 7.1 In the present case, the ld. CIT(E) has observed that the assessee had submitted all the necessary documents/details as required for registration u/s 12AB of the Act. Further, there is not even a whisper about any non-genuineness of the activities carried on by the assessee trust. The only allegation by the ld. CIT(E) is that the assessee had not made substantial amount of expenditure towards the object of the Trust. We are of the considered opinion that it is not the quantum of expenditure which are 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 is ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 6 of 12 relevant for granting registration. Therefore, we agree with the contention of the ld. A.R. of the assessee that it is only the genuineness of the activity and not the substantial amount of expenditure which are relevant for granting registration u/s 12AB of the Act. In the present case, it is an undisputed fact that the assessee had already commenced its activity towards the attainment of the object as the assessee trust had incurred the medical relief expenses towards attainment of its objects as observed by the JAO & ld. CIT(E). Since it was the first year of its operation, the assessee was not able to spend towards the large scale activity and hence, filed Form No. 10 on 30.9.2024 vide ack. No.548944470300924 for accumulation of Rs.38,50,000/- for the purposes of “project vision and educational support” for a period of 5 years and invested the amount in the fixed deposit as per the prescribed mode. 7.2 At this juncture it is worthwhile here to mention the observations of the Apex Court in the case of Ananda Social & Educational Trust v. Commissioner of Income taxreported in (2020) 426 ITR 340 as below- “We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant - Director of Income-tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 7 of 12 Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. We therefore find that the view of the Delhi High Court in the impugned judgment is correct and liable to be upheld. Ms. Bhati, learned Senior Counsel for the appellant, fairly drew our attention to a judgment of the Allahabad High Court in IT Appeal No. 36 of 2013 titled as \"Commissioner of Income Tax-II vs. R.S. Bajaj Society\" which has taken the same view as that of the Delhi High Court in the impugned judgment. The Allahabad High Court has also referred to a similar view taken by the High Courts of Karnataka and Punjab & Haryana. Apparently, a contrary view has been taken by the Kerala High Court in the case of Self Employers Service Society v. Commissioner of Income-tax - [2001] Vol.247 ITR 18. That view however does not commend itself. However, the facts in Self Employers Service Society (supra) suggest that the Commissioner of Income-tax had observed that the applicant for registration as a Trust had undertaken activities which were contrary to the objects of the Trust. In the result, we find that there is no reason to interfere with the impugned judgment of the High Court of Delhi. The appeal is, accordingly, dismissed” 7.3 We respectfully following the above judgment are of the opinion that the purpose of section 12AB of the Act is to enable the registration only of such trust or institution whose objects and activities are genuine. In other words, the ld. CIT(E) is bound to satisfy herself that the object of the trust is genuine and that its activities are in furtherance of the objects of the trust, that is equally genuine. Since Section 12AB of the Act pertains to the registration of the trust and to assess of what a trust has actually done, we are of the view that the term ‘activities’ in the provision include proposed activities’. In the present case, the assessee trust had filed form 10 for accumulation of Rs.38,50,000/- for the purpose of “project vision and educational support” which in our view is a proposed activity in line with the objects of the Trust. 7.4 In these circumstances, we are of the considered opinion that the ld. CIT(E) grossly erred in not granting registration merely on ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 8 of 12 the basis of not incurring the substantial amount of expenditure and accordingly, we allow the appeal of the assessee and direct the ld. CIT(E) to grant registration u/s 12AB of the Act as applied by the assessee trust on 20.4.2024 in form No. 10AB. It is ordered accordingly. 8. In the result, appeal filed by the assessee is allowed. 9. Now we take up ITA No.2464/Bang/2025, wherein the assessee has raised following grounds of appeal: ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 9 of 12 10. On going through the order of the ld. CIT(E), we find that the ld. CIT(E) has cancelled the approval u/s 80G of the Act mainly on the following grounds: i. The assessee trust has received the donation of Rs.45,33,642/- from the ‘Quest informatics Foundation Trust’ in which the Trustee of the Assessee Trust Mr. Rudresh S Basavarajappa is also the main trustee. ii. The assessee has not made any substantial expenditure towards the object & thus has not commenced its activity. iii. The assessee was mandated to submit necessary documents to prove the genuineness of the activities and fulfillment of all the conditions laid down in clauses (i) to (v) of section 80G. iv. The assessee’s application for registration u/s 12AB of the Act was rejected and registration cancelled. 10.1 With regard to ground no. (i), i.e. receiving donation from the trust in which the main trustee are common, we are of the considered opinion that merely because the main Trustees of the both the Trust namely ‘Quest informatics Foundation’ & ‘Dhwani Shristi Foundation’ are common and thereby receiving donation of Rs.45,33,642/- from the ‘Quest informatics Foundation Trust’ cannot be a ground for the denial of approval u/s 80G of the Act. We are of the considered opinion that for the purpose of granting approval u/s 80G of the Act, the relevant section is sub-section (5) of section 80G of the Act. The ld. Commissioner(Exemptions) after receiving the application for granting approval u/s 80G of the Act, ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 10 of 12 shall call for such document or information and make such enquiry as he/she thinks necessary in order to satisfy himself/herself about the genuineness of the activity of such institution or fund and the fulfillment of all the conditions laid down in clause (i) to (v) as follows: (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills the following conditions, namely:- (i)where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 [* * *] [ Certain words omitted by Act 21 of 1998, Section 29 (w.e.f. 1.4.1999).] [* * *] [ Certain words omitted by Act 20 of 2002, Section 30 (w.e.f. 1.4.2003).] [or clause (23-AA) or clause (23-C)] [ Substituted by Act 11 of 1987, Section 35, for \" or clause (23-C)\" (w.e.f. 1.4.1988).] of section 10: [Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if- (a)the institution or fund maintains separate books of account in respect of such business; (b)the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c)the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; (ii)the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii)the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv)the institution or fund maintains regular accounts of its receipts and expenditure; ][*] [ The word \" and\" omitted by Act 32 of 1994, Section 24 (w.e.f. 1.4.1994).] ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 11 of 12 (v)[ the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, ] [Inserted by Act 11 of 1983, Section 39 (w.e.f. 1.4.1984).][* * *] [ Certain words omitted by Act 20 of 2002, Section 30 (w.e.f. 1.4.2003).][or is an institution financed wholly or in part by the Government or a local authority; ] [Inserted by Act 11 of 1983, Section 39 (w.e.f. 1.4.1984).][*] [ The word \" and\" omitted by Act 33 of 2009, Section 33 (w.e.f. 1.4.2009).] 10.2 In view of the above we are of the considered opinion that at the time of granting of approval u/s 80G of the Act, the authority has to satisfy herself that the chartable institution is established in India for charitable purposes and the activities of the assessee trust are genuine and the assessee trust also fulfilled all the conditions as mentioned above. Thus, the ground that the main trustee of the donor & donee trust are common & the assessee trust had received donation of Rs. 45,33,642/- is irrelevant for granting registration u/s 80G of the Act. Had it be the amount of expenditure/application, then the question of genuineness may come to play. 10.3 The ld. CIT(Exemptions) in our view has not brought any material on record to show that the assessee trust’s activities are not-genuine or the conditions as specified above are not fulfilled by the assessee trust. 11. Further, with regard to ground nos. (ii) to (iv) for rejection of approval u/s 80G of the Act by the ld. CIT(E), since we have dealt these issues in granting registration u/s 12AB of the Act in ITA No.2463/Bang/2024, the same finding shall mutatis mutandis will apply to the present case also for granting registration u/s 80G of the Act. Since we have already directed the ld. CIT(E) to grant ITA Nos.2463 & 2464/Bang/2024 Dhwani Shristi Foundation Designation: Charitable Trust, Bangalore Page 12 of 12 registration u/s 12AB of the Act, as per the application filed on 24.10.2024, accordingly we also allow this appeal of the assessee and direct the ld. CIT(E) to allow the approval u/s 80G of the Act. 12. In the result, appeal filed by the assessee in ITA No.2464/Bang/2024 is allowed 13. In the combined result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on 9th June, 2025 Sd/- (Laxmi Prasad Sahu) Accountant Member Sd/- (Keshav Dubey) Judicial Member Bangalore, Dated 9th June, 2025. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. "