ITAT Delhi on Section 12AB: Registration Cannot Be Refused Merely by Questioning Expenditure Details

1. Background and Context

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) in the case of Visan Foundation Vs CIT has delivered an important ruling on the manner in which applications for registration under Section 12AB of the Income Tax Act 1961 are to be examined by the Commissioner of Income Tax (Exemptions) [CIT(E)].

The dispute arose when the assessee, a public charitable trust named Visan Foundation, applied for renewal/registration under Section 12AB through Form 10AB in terms of Section 12A(1)(ac)(ii). The CIT(E), Chandigarh rejected the application, mainly on the basis that:

• The assessee’s expenditures on food, rent and training showed large variations between years;
• The assessee allegedly failed to properly substantiate these expenses with detailed supporting documents;
• A substantial portion of expenditure for FY 2022-23 was routed through the Managing Trustee, Ms. Sangeeta Ranjit, instead of third-party vendors;
• The trust was undertaking CSR projects for corporates pursuant to MoUs and, in the view of CIT(E), such activities were not charitable for the benefit of the public at large.

On this basis, the CIT(E) declined to grant registration under Section 12AB. The assessee challenged this order before the ITAT.

2. Grounds Raised by the Assessee

The assessee, a registered public charitable trust engaged in social impact initiatives, filed an appeal contesting the rejection of its registration application. In substance, the assessee contended:

1. The application for registration filed in Form 10AB dated 30.09.2025, in respect of Acknowledgement No. 897001810300925, had been wrongly rejected by the CIT(E), Chandigarh vide order dated 28.02.2026.

2. In additional grounds, the assessee argued:

   • The impugned order was passed under provisions that did not empower the CIT(E) to cancel or reject the registration in the manner done, hence it was without jurisdiction.
   • The order was passed without affording due and proper opportunity of being heard, contrary to the mandate of Section 12AB.
   • The jurisdiction of the CIT(E) at the stage of registration under Section 12AB is confined to examining the objects of the trust and the genuineness of its activities, and not to embark upon a detailed inquiry into allowability of expenditure.
   • No adverse findings were recorded by the CIT(E) either:
     • that the objects of the trust are non-charitable, or
     • that the activities are not genuine.

Accordingly, the assessee sought that the denial of registration be quashed and registration under Section 12AB be directed to be granted.

3. Facts Regarding Activities and Expenditure

The assessee is a public charitable trust operating mainly in the social development domain. As recorded:

• It works on employment-linked programmes for marginalised youth, especially in healthcare and hospitality.
• It implements CSR and other social projects, both residential and non-residential, in collaboration with reputed organisations and corporates.
• Projects are executed in partnership with funding organisations, and the funds are stated to be project-specific and monitored.

In processing the registration application, the CIT(E) called for several details and supporting documents to verify:

• The genuineness of activities; and
• Compliance with statutory conditions under Section 12A and Section 12AB.

During scrutiny, the CIT(E) highlighted that:

• Food, rent and training expenses significantly fluctuated across different financial years;
• Year-wise itemised breakdowns, along with bills, vouchers and relevant contracts, were asked for;
• Despite submissions, the CIT(E) concluded that the assessee failed to adequately substantiate these expenses or establish a clear nexus with charitable objects;
• A large component of expenditure was booked in the name of the Managing Trustee, which raised concerns for the Department;
• The CSR work performed for corporates, being project-based and backed by MoUs, was perceived as being carried out in terms of contractual consideration, and was doubted as a “charitable activity” benefiting the public at large.

On this reasoning, the registration request was rejected.

4. Arguments Before the Tribunal

4.1 Submissions of the Assessee

The assessee’s authorised representative submitted that: