Private university wins Section 80G approval challenge after arbitrary rejection despite existing 10(23C)(vi) status

ITAT Hyderabad allowed the appeal challenging rejection of Section 80G approval for a private university. The university, established in 2020 under Telangana State ordinance, had previously received Section 10(23C)(vi) approval for charitable activities. The CIT(E) rejected the 80G application citing lack of substantial charitable activity. ITAT held that since the university already satisfied conditions for 10(23C)(vi) approval for educational purposes, its charitable nature cannot be disputed for 80G approval unless activities are contrary to objectives or not genuine. The tribunal found the rejection order arbitrary and non-speaking, lacking definite findings despite the university operating on 107 acres with 4000+ students and 240 faculty. Matter remanded to CIT(E) for reconsideration after proper examination of facts and evidence.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the assessee university, established under the Telangana State Private Universities Act, 2020, qualifies as a charitable institution engaged in the activity of imparting education within the meaning of Section 2(15) of the Income Tax Act, 1961, thereby entitling it to approval under Section 80G(5)(vi) of the Act.

(b) Whether the rejection of the application for registration/approval under Section 80G(5)(vi) by the CIT (Exemption) is justified on the ground that the assessee has not carried out any substantial charitable activity.

(c) Whether the prior grant of approval under Section 10(23C)(vi) for the assessee's educational activities conclusively establishes the charitable nature of its activities for the purpose of Section 80G approval.

(d) Whether the CIT (Exemption) complied with the statutory mandate under Section 80G(5) of the Act to examine the genuineness and fulfillment of conditions before rejecting the application, and whether the impugned order is sustainable in law.

(e) The adequacy and sufficiency of the evidence and submissions made by the assessee to establish charitable activities and compliance with conditions for approval under Section 80G.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) - Qualification as a Charitable Institution Engaged in Education:

The relevant legal framework includes Section 2(15) of the Income Tax Act, which defines "charitable purpose" to include education, and Section 80G(5)(vi), which provides for approval of institutions carrying out charitable activities, including education, for donors to claim deduction. The assessee was established as a private university under the Telangana State Private Universities (Establishment and Regulation) Act, 2020, with the primary object of imparting education.

The Tribunal noted that the assessee runs 35 programmes across undergraduate, postgraduate, and doctoral levels, with 4100 students enrolled and 240 faculty members. The university has extensive infrastructure, including classrooms, hostels, auditoriums, sports complexes, and a campus spanning 107 acres. It also maintains collaborations with reputed international universities and companies, enhancing the quality and scope of education and research.

The Court emphasized that education is an established charitable purpose under Section 2(15), and the university's activities, as evidenced by enrolment numbers, faculty strength, infrastructure, and academic collaborations, demonstrate substantial educational activity.

In applying the law to facts, the Tribunal held that the assessee's activities fall squarely within the charitable purpose of education and that the institution qualifies as a charitable entity for the purposes of Section 80G.

Issue (b) - Justification for Rejection of 80G Application on Grounds of No Substantial Charitable Activity:

The CIT (Exemption) rejected the application under Section 80G(5)(vi) on the basis that no charitable activities were being carried out by the assessee, as per the impugned order's brief reasoning. The Tribunal observed that the order was cryptic and non-speaking, lacking any detailed factual or legal findings to support the rejection.

The Tribunal noted that the assessee had submitted extensive details, including audited financials, Form 10B, ITR-7, registration certificate under Section 10(23C), and other supporting documents. The assessee also pointed out that the university had been granted approval under Section 10(23C)(vi) after due scrutiny of its charitable activities.

The Court found the rejection arbitrary and unjustified, particularly given the substantial evidence of educational activity and infrastructure. The Tribunal held that mere assertion without definite findings or consideration of the record does not satisfy the statutory requirement for rejection under Section 80G(5).

Issue (c) - Effect of Prior Approval under Section 10(23C)(vi):

The assessee relied on the prior approval granted under Section 10(23C)(vi) as conclusive proof of its charitable nature. The Tribunal referred to precedents wherein once registration under Section 12AA or approval under Section 10(23C) is granted on satisfaction of conditions, the activities are presumed charitable unless proven otherwise.

The Court observed that the CIT (Exemption) had not disputed the validity or genuineness of the activities at the time of grant of Section 10(23C)(vi) approval. Therefore, the rejection of Section 80G approval on grounds inconsistent with the earlier approval was held to be legally untenable.

Thus, the Tribunal underscored that the prior approval under Section 10(23C)(vi) serves as a significant, though not absolute, indicator of charitable status for Section 80G purposes.

Issue (d) - Compliance with Statutory Mandate under Section 80G(5):

Section 80G(5) mandates that the Commissioner must be satisfied about the genuineness of activities and fulfillment of conditions before granting approval, and if not satisfied, must record reasons in writing for rejection.

The Tribunal found that the impugned order failed to provide any detailed examination or definite findings on the genuineness or nature of activities. It was a summary rejection without addressing the voluminous evidence submitted by the assessee. The learned DR's submission that the assessee did not produce sample bills was countered by the Tribunal's observation that the CIT (Exemption) did not make any effort to verify or seek further evidence before rejecting.

The Tribunal concluded that the impugned order was arbitrary and non-compliant with the statutory mandate, warranting reconsideration.

Issue (e) - Adequacy of Evidence and Submissions by the Assessee:

The assessee submitted audited financials, registration certificates, details of students, faculty, infrastructure, scholarships granted, research output including publications and patents, and collaborations with reputed institutions and companies. These facts were not disputed by the Department.

The Tribunal noted that the assessee's activities were substantial and genuine, with significant expenditure on academic and infrastructure activities. The rejection based on the claim that "other expenses" exceeded educational expenses was not supported by detailed analysis or findings.

The Court held that the evidence submitted was adequate to establish charitable activities and compliance with conditions for approval under Section 80G(5).

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Once the assessee has satisfied the conditions for grant of approval u/s 10(23C)(vi) being solely existed for the charitable activities of imparting education as a University, then the nature of the activities of the assessee being charitable in nature cannot be disputed while granting approval u/s 80G(5) of the I.T. Act, 1961 until and unless it is found that the assessee has carried out the activities in contrary to the objects of the assessee university or the activities of the assessee were found to be not genuine activities."

It was further observed:

"It is apparent from 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 assessee university are not charitable in nature or are not genuine for achieving its objects of imparting education."

Core principles established include:

• Approval under Section 10(23C)(vi) is a strong indicator of charitable status for Section 80G purposes.
• The Commissioner must record clear, reasoned findings when rejecting an application under Section 80G(5), based on examination of evidence and fulfillment of statutory conditions.
• Rejection orders must be speaking and supported by facts; cryptic or summary rejections are arbitrary and unsustainable.
• Educational institutions established by statute and engaged in substantial educational activity with adequate infrastructure and faculty qualify as charitable institutions under the Income Tax Act.

Final determinations:

• The impugned order rejecting the application under Section 80G(5)(vi) was set aside.
• The matter was remanded to the CIT (Exemption) for fresh consideration of the application after giving the assessee an opportunity of hearing and considering all relevant facts and records, including the prior approval under Section 10(23C)(vi).
• The appeal was allowed for statistical purposes.

---