ITAT Mumbai Directs Fresh Adjudication: FCRA Renewal Rejection Cannot Be Sole Basis for Denying Section 12AB and Section 80G Registration
Case Overview
Case: Tusli Eye Hospital Vs Exem Ward 2(4)
Forum: Income Tax Appellate Tribunal, Mumbai
**ITA Nos.😗* 3768/Mum/2026 and 3769/Mum/2026
Assessment Year: 2026-27
Date of Order: 30.06.2026
The Mumbai Bench of the Income Tax Appellate Tribunal recently delivered a significant ruling in the matter of Tusli Eye Hospital, addressing a critical question: whether rejection of an application for renewal under the Foreign Contribution (Regulation) Act, 2010 (FCRA) can, by itself, constitute sufficient grounds to deny renewal of registration under Section 12AB and approval under Section 80G of the Income-tax Act, 1961. The Tribunal answered this in the negative and restored both matters to the Commissioner of Income Tax (Exemptions) [CIT(E)] for fresh consideration.
Background and Facts of the Case
The assessee, a charitable eye hospital, had filed an application in Form No. 10AB on 20.09.2025 under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961, seeking renewal of its registration under Section 12AB. A separate Form No. 10AB was also filed on 22.09.2025 for renewal of approval under Section 80G(5) of the Act. Both applications were governed by Rule 17A of the Income-tax Rules, 1962, which prescribes the documents required to accompany such applications.
The FCRA Angle
During examination of the Section 12AB renewal application, the CIT(E) discovered that the assessee's application for renewal of FCRA registration had been rejected by the competent authority vide order dated 28.10.2024. The rejection was made under Section 16(2) read with Section 12(4)(f)(iii) of the Foreign Contribution (Regulation) Act, 2010.
The FCRA authority's rejection was based on the following findings:
- An enquiry conducted through the Central Security Agency revealed that the address furnished by the assessee in its renewal documents corresponded to another NGO — Mission for Vision
- Both entities were found to have common trustees
- The FCRA authority noted an inconsistency between the registered address of the association and the address disclosed in Form FC-3C
- The authority treated this inconsistency as suppression of material facts
The assessee had explained that the premises had been voluntarily made available by one of its trustees for use as its head office and for conducting outreach activities including free eye check-up camps and surgeries for rural beneficiaries. However, the competent FCRA authority rejected this explanation and also dismissed the revision application preferred by the assessee vide order dated 10.09.2025.
CIT(E)'s Decision
Relying heavily on the FCRA rejection, the CIT(E) concluded that the assessee had violated a law material for achieving the objects of the trust, thereby attracting the provisions relating to "specified violation" under Section 12AB(4) of the Act. The CIT(E) observed that grant or renewal of registration under Section 12AB is contingent on:
- Satisfaction regarding the objects of the trust or institution
- Genuineness of its activities
- Compliance with other laws material for achieving its charitable objects
Holding that the assessee had failed to satisfy the third requirement on account of the FCRA non-renewal, the CIT(E) rejected the Section 12AB application vide order dated 26.03.2026 under Section 12AB(1)(b) of the Act. The Section 80G renewal was subsequently rejected as a consequential outcome of the Section 12AB rejection, since the condition under Section 80G(5)(i) — requiring a valid Section 12AB registration — stood unfulfilled.
Grounds of Appeal Raised by the Assessee
The assessee challenged both orders before the Tribunal, raising several substantive grounds.