REJECTION OF APPLICATION FOR APPROVAL UNDER SECTION 80G (5) OF INCOME TAX ACT, 1961

In MAHINDRA UNIVERSITY HYDERABAD VERSUS COMMISSIONER OF INCOME TAX (EXEMPTION) HYDERABAD - 2025 (6) TMI 722 - ITAT HYDERABAD, the appellant university was established in May, 2020.  The university is carrying on 35 different programmes, curriculums, for under graduation, post-graduation and Ph.D. Nearly 4100 students are studying in the 5 schools and 4 centres.  The University is having nearly 240 faculties. The appellant has built up an infrastructure comprising of class rooms, hostel facilities, auditorium etc., as well as sports complexes.   It has collaboration with various reputed companies such as Nividia Global, Tata Steel, Airbus Innovation Centre, DRDLK, ISRO etc., so that the students are equipped with better exposure to practical issues and also helpful in their employment career after education.  The appellant university was granted exemption from income tax under section 10 (23C) (vi) by the Commissioner of Income Tax (Exemption) [‘CIT (E)’ for short) on 10.02.2021.  the appellant applied for grant of exemption from income tax under Section 80G(5) of the Income Tax Act, 1961 (‘Act’ for short).  The said application was rejected by the Department.  The appellant, being aggrieved by the order CIT (E) filed the present appeal before the Income Tax Appellate Tribunal (‘ITAT’ for short).  The appellant raised the following grounds of appeal before the ITAT-

• The CIT-(E) erred in not appreciating the fact that ‘education’ is a charitable purpose under Section 2(15) of the Act, which is being pursued by the appellant from its inception on 20.05.2020.
• The CIT(E) erred in not properly appreciating the charitable activity of education being carried out by the appellant in the past periods as submitted in response to notices issued during the approval process.
• The CIT(E) erred in not considering the submission of appellant that around 5,200 students enrolled in academic year 2024-25 in 45 programs being offered by the appellant across 6 schools and four centres supported by 300 plus faculty, robust infrastructure and huge campus environment.
• The CIT(E) grossly erred in not considering the fact the appellant is a private university established under Telangana State Private Universities (Establishment and Regulation) Act, 2020, which allowed the appellant recognition as private university solely for the reason that the charitable activity of education is to be carried out by the appellant.
• The CIT(E) failed to appreciate the charitable activities being education carried out by the appellant which enhanced the research and development in various fields by publication of 459 articles, creating 16 patents, sponsoring 50 national and 10 international projects, which aggregated to incurring expenditure over Rs. 14 Crores during the past periods.
• The CIT(E) failed to appreciate the appellant is using infrastructure worth around Rs. 582.24 crores provided by its sponsoring body Mahindra Educational Institutions for carrying out the charitable activity of education.
• The CIT(E) failed to appreciate that the charitable nature of the institution and the utilization of the funds for the charitable purpose has been conclusively examined at the time of grant of approval under section 10(23C) of the Act.
• The CIT(E) erred in not appreciating the fact that the university has complied with all the conditions laid down under section 80G of the Act.

The appellant submitted the following before the ITAT-

• At the time of granting approval under section 10(23C) (vi) of the Act, the  CIT (E) examined the charitable nature of activities of the appellant being education of the University and only after complete satisfaction about the charitable nature of the activity granted the approval.
• The University applied for approval under Section 80G of the Act which was denied/rejected by the CIT (E).
• The CIT (E) issued a notice in this regard for which the appellant filed suitable reply and also furnished the documents required by CIT(E).
• The approval was granted by him on 24.09.2021.
• once the activities of the appellant are considered as charitable while granting approval u/s 10(23C) (vi), then the rejection of the application for granting approval under section 80G of the Act on the ground that, no substantial charitable activities are being carried out by the appellant is contrary to the record and highly arbitrary and unjustified.
• The appellant does not earn any income from business as the only activity carried out is education reflected by the audited financials of the appellant.
• Once the registration under section 12AA is granted on satisfaction of the condition laid down therein, the activities of the appellant are charitable until and unless the appellant acted in violation of the provisions of section 11 to 13 as well as section 80G of the Act and hence, the approval under section 80G of the Act cannot be denied. 
• When the appellant is carrying out the only charitable activity i.e., imparting education, then the impugned order passed by the learned CIT (E) is not sustainable in law and liable to be set aside.

Therefore, the appellant prayed before ITAT that the approval u/s 80G(5) of the Act,  be granted to the appellant university.

The Revenue submitted the following before the ITAT-

• the genuineness of the activities of the institution is a necessary condition for which the CIT has to satisfy himself before granting approval under section 80G(5) of the Act.
• In case he is not satisfied about these conditions, he shall pass an order in writing rejecting such application.
• The appellant failed to produce the proof of expenditure to establish the charitable nature of the activities of the appellant.
• In the reply to the notice, the appellant has simply stated that the record is voluminous and cannot be uploaded
• The appellant has incurred more expenditure under the head “other expenses” then the expenditure incurred on the education/academic activities which shows that the appellant is not solely exists for educational purposes.
•  At the time of granting approval u/s 10(23C) (vi), no physical verification of the record as well as the genuineness of the activities of the appellant was made. 

The ITAT considered the submissions of the appellant and that of the Revenue.  The ITAT was of the view that once the appellant has satisfied the conditions for grant of approval under section 10(23C)(vi) of the Act being solely existed for the charitable activities of imparting education as a University, then the nature of the activities of the appellant being charitable in nature cannot be disputed while granting approval under section 80G(5) of the Act until and unless it is found that the appellant has carried out the activities in contrary to the objects of the appellant university or the activities of the appellant were found to be not genuine activities. the impugned order of the CIT (E) that it is a non-speaking cryptic order summarily rejecting the application without giving a definite finding of fact that the activities carried out by the appellant university are not charitable in nature or are not genuine for achieving its objects of imparting education.  The ITAT found that find the impugned order passed by the learned CIT (E) is highly arbitrary not giving a definite finding and hence, the matter is set aside to the record of the learned CIT (E) for reconsideration of the application of the appellant after considering all the relevant facts including the approval granted by the competent authority under section 10(23C)(vi) of the Act. 

The High Court set aside the impugned order and directed the Department to consider all the relevant facts as well as record to be filed by the appellant and then decide the application for approval under section  80G(5) of the Act after giving an appropriate opportunity of hearing to the appellant.