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Judgment
PER MAHAVIR SINGH, VICE PRESIDENT :
This appeal by the assessee is directed against the order dated 29.9.2025 of the Ld. Commissioner of Income Tax (Exemption), Delhi [hereinafter referred to as “CIT(E)”] passed u/s. 12AB(1)(b)(ii)(B) of the Income Tax Act, 1961 (hereinafter referred as Act).
Brief facts of the case are that the assessee filed application in Form 10AB in Registration of Trust u/s. 12A(1)(ac)(ii) of the Act dated 24.3.2025. In response to this application, the CIT(E) issued questionnaire dated 4.4.2025 to file certain details / documents/ clarifications in support of its claim for registration. The assessee filed submission and CIT(E) on perusal of financial statement for A.Y. 2024-25 noted that assessee trust has given loan of Rs. 7,50,841/- to Jaivik Haat Private Limited (JHPL). The CIT(E) further noted that assessee has violated the provisions of section 13(3) of the Act and also violated the provisions u/s. 11(5) of the Act and observed in para 3.3 and 3.4 as under:-
“3.3From the above, it is clear that the applicant Trust has violated the provision of section 13(1)(c) of the Act by using the Trust Fund for personal benefits of the trustee. At the same time, it has given a false undertaking that section 13(1)(c) has not been violated. Therefore, the applicant trust failed to comply the provision of section 13(1)(c) of the Act.
3.4The said transaction of giving loan is also a specified violation as per section 12AB(4) of the Income Tax Act. Further, as per submission of applicant, it has also invested Rs. 2,55,000/- in equity of JHPL. This is again in violation of section 11(5), as trust’s fund have not been invested as per specified mode. Since the money of the trust has been diverted for purposes other than objectives of the trust, the funds have not been parked / deposited as per the mandate of section 11(5) of the I.T. Act.”
Accordingly, the Ld. CIT(E) rejected the assessee’s application for registration u/s. 12AB(1)(b)(ii)(B) of the Act and also rejected the provisional registration granted vide order dated 30.03.2022 registered for the period from 2022-24 to A.Y. 2024-25.
Aggrieved with above action, assessee moved appeal before this Tribunal.
We have heard the rival contentions and perused the records. Before us, Ld. Counsel for the assessee argued that the assessee has filed complete details during the provisional registration granted by CIT u/s. 12AB of the Act vide order dated 30.3.2022. The assessee i.e. Gram Disha Trust is a charitable organization established to pursue the charitable activities and social, welfare activities, which is not in doubt. The CIT(E) rejected the assessee’s registration application in Form 10AB and also cancelled the provisional registration on the following grounds:-
Loan given to Jaivik Haat Private Limited amounting to Rs. 7,50,841/-
ii) Investment of Rs. 2,55,000/- in equity of Jaivik Haat Pvt. Ltd.
iii) Violation of provisions of section 13(1)(c) and 11(5) of the Act.
iv) Violates undertaking filed by the assessee and also ineligible to file From 10AB.
The assessee replied that the loan/advance to JHPL was temporary and was disclosed which is business related and not for personal benefit of the trustees. This plea of the assessee was not accepted by the CIT(E) and he rejected the registration application filed in Form 10AB. Ld. Counsel for the assessee further stated that the CIT(E) has not examined the aims and objectives of the trust, which are charitable in nature and without examining the same just that loans given to JHPL and shares purchased of JHPL is in violation of the provisions of section 13(3) of the Act, does not debar the assessee for the registration that can be subject matter of assessment. Ld. Counsel for the assessee relied upon the decision of Hon’ble Allahabad High Court in the case of Fifth Generation Education Society vs. CIT dated 10.5.1990 [1990] 185 ITR 634 (ALL) wherein, Hon’ble High Court has held as under:-
2.A reading of the section shows that the registration under section 12A is a pre-condition for availing of the benefit under Sections 11 and 12. Section 11 provides for exemption of income which is applied for charitable purposes. Section 12 is in the nature of an explanation to Section 11. Before a person can claim the benefit of Section 11, or Section 12, as the case may be, he must obtain registration under Section 12A. The application for registration under Section 12A has to be made in From No. 10A prescribed by Rule 17A before the expiry of one year from the date of creation of the trust or the establishment of the institution, whichever is later. It has to be made by the person in receipt of the income of the trust.
3.It is evident that, at this stage, the Commissioner is not to examine the application of income. All that he may examine is whether the application ins made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not proper to examine the application of income.
4.The order impugned does not say that the objects of the society are not charitable in nature; it merely says that they are general in nature. Just because they are general, they do not cease to be charitable. The Commissioner has also observed that no activity has been carried on by the society. It is also not the requirement of Section 12A of the Act. Nor has Section 80G any relevance at this stage. The impugned order cannot, therefore, be sustained and it is quashed.
5.The Commissioner shall re-examine the issue in the light of the objects of the society and in the light of the observations made therein and pass fresh orders accordingly.”
In the present case, there is no specified violation pointed out of by the Ld. CIT(E) as mentioned in Explanation to Section 12AB(4) and hence, simply on this reason the registration cannot be denied. Hence, we set aside the order of the Ld. CIT(E) and remit back the matter to the file of the CIT(E) to examine the aims and objectives of the charitable trust and then decide the registration accordingly in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes.