Skill Development Trusts and Charitable Status: Key Takeaways from NSDC Skill Impact Trust Vs CIT(Exemptions) (ITAT Delhi)

The Delhi Bench of the Income Tax Appellate Tribunal has clarified an important issue for organisations involved in Government-backed skill development initiatives. In NSDC Skill Impact Trust Vs CIT(Exemptions), the Tribunal held that a trust engaged in implementing skill development programmes under the National Skill Development Programme is entitled to registration under Section 12AB and to consequential benefits under Section 80G, even where a nominal management fee is collected to cover operating expenses.

This decision is particularly relevant for charitable institutions connected with Government-sponsored schemes that receive reimbursements or cost-based fees for implementation work.

Background of the Case

Constitution and Initial Registration of the Trust

  • The assessee, NSDC Skill Impact Trust, was created on 31.05.2022.
  • It obtained provisional registration under Section 12A(1)(ac)(vi) on **12.08.2022`.
  • On 20.09.2024, the assessee applied in Form 10AB seeking regular registration under Section 12A(1)(ac)(iii) (i.e., registration under the new regime introduced via Section 12AB).

The trust deed reflected two primary charitable purposes:

  1. Imparting education, and
  2. Advancement of any other object of general public utility.

The Settlor, as noted by the Tribunal, was National Skill Development Corporation (NSDC), a Government-promoted body, which contributed an initial corpus of Rs. 1 lakh to the trust.

Activities and Operational Framework of the Trust

Role Under NSDC and Government Skill Programme

The assessee explained before the CIT(E) and later before the Tribunal that:

  • It is a registered trust of NSDC.
  • It acts as an approved training partner under the National Skill Development Programme run by the Ministry of Skill Development and Entrepreneurship, Government of India.
  • Its mission is to:
    • Promote and expand skill development,
    • Enhance employability and entrepreneurship skills,
    • Support competency development, and
    • Create frameworks for information outreach so that individuals are aware of job prospects associated with specific vocational skills.

To formalise these responsibilities, the assessee entered into an agreement with NSDC on 24.09.2024, which was produced before the authorities.

Claimed Management Fee

As per the NSDC agreement:

  • The trust was to provide training and implementation services.
  • It was entitled to receive 10% of the actual expenses as management fee/compensation.

The assessee consistently maintained that:

  • This 10% fee was not profit-oriented,
  • It was intended solely for recovery of operational and administrative costs,
  • It served to sustain and efficiently manage the trust’s charitable activities.

Co-Implementation Arrangement with Edujobs Academy Pvt. Ltd.

Agreement with Co-Implementation Partner

The CIT(E) also focused on another agreement:

  • On 11.09.2024, the assessee entered into an arrangement with M/s. Edujobs Academy Pvt. Ltd. as a co-implementation partner.
  • Edujobs Academy Pvt. Ltd. was engaged to handle the on-ground execution of skilling programmes in the State of Odisha.

A key issue raised by the CIT(E) was the sequence of agreements:

  • The co-implementation agreement with Edujobs Academy Pvt. Ltd. was signed before the formal NSDC agreement dated 24.09.2024.
  • This, according to the CIT(E), created doubts about the genuineness and charitable nature of the trust’s operations.

Explanation by the Assessee

The assessee clarified that: