Section 12AB Registration Cannot Be Denied Solely on Grounds of Non-Commencement of Charitable Activities: ITAT Chennai
Background and Overview
The Chennai Bench of the Income Tax Appellate Tribunal recently rendered a significant ruling in the matter of Sir CV Raman Educational & Charitable Trust Vs CIT (Exemptions) (ITAT Chennai), wherein both appeals filed by the trust against the orders of the Commissioner of Income-tax (Exemptions) [CIT(E)] were decided in the assessee's favour. The CIT(E) had, vide orders dated 22.09.2025, rejected the assessee's applications for registration under Section 12AB and approval under Section 80G of the Income Tax Act, 1961.
The Tribunal's ruling addresses a recurring and practically significant question: Can the failure to commence charitable activities, by itself, constitute a ground for denying registration under Section 12AB? The ITAT answered this question clearly in the negative, reinforcing the settled position of law established by the Hon'ble Supreme Court.
Facts of the Case
The assessee is a public charitable trust registered under a trust deed bearing registration no. 34 of 2006, constituted on 12.04.2006. The objects enshrined in the trust deed encompass:
- Educational activities — running, maintaining or assisting educational institutions, and granting scholarships to poor and deserving students
- Medical relief — supporting medical institutions and assisting indigent persons with treatment costs
- Relief to the poor — providing financial assistance and material support such as books, clothes, and meals
- General public utility — acquiring and making property available for community purposes including libraries, clinics, crèches, and seminar halls
In furtherance of its educational objectives, the trust acquired land parcels measuring 17.3 acres at Varadharajapuram, Kundrathur during 2006 and 2007, intending to establish an educational institution on the same. The land acquisition was funded through loans arranged by the then-trustees from close associates.
However, the project encountered a series of genuine obstacles:
- The land was agricultural in nature and required zonal conversion before any construction could be undertaken
- Financial constraints prevented the trust from raising adequate resources to proceed with the project
- The original trustees, comprising senior medical professionals, educationalists, and social workers, had advanced in age and faced physical limitations
- Certain inconsistencies in the original trust deed necessitated the execution of a supplementary deed on 26.11.2022 to align the same with the provisions of the Income Tax Act, 1961
- Following the reconstitution, new and younger trustees — including Mrs. D Sindhu (a medical professional), Mrs. M Jayakumari (an experienced educator), and Mr. D Harish Kumar (an engineering professional) — were inducted in 2022
- The trust applied for land use conversion in 2023, which was approved in 2026, and the assessee intends to establish a para-medical institution on the said land
Against this backdrop, the trust filed Form 10AB on 23.01.2025 seeking registration under Section 12AB and approval under Section 80G of the Income Tax Act, 1961.
The CIT(E)'s Grounds for Rejection
Following a show cause notice dated 10.07.2025, the CIT(E) rejected both applications primarily on the following grounds:
Absence of charitable activities: Despite being in existence since 2006, the trust had not commenced any charitable operations, and even during FY 2024-25, it reported NIL income. In the CIT(E)'s view, this absence of activity established that the trust lacked genuineness.
Non-disclosure of land in Form 10AB: The CIT(E) noted that the details of land (fixed assets) were missing from the relevant column of the Form 10AB and inferred that the assessee had deliberately withheld this information.
Doubtful loans: The interest-free loans obtained during 2006–07 remained outstanding without any repayment or interest being charged, which the CIT(E) found suspicious.