TaxTMI 
TaxTMI 
2026 (3) TMI 1230
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....cy, assistance to members by way of monitoring major part of finance, coordinate with Reserve Bank of India in their policy formation and variety of activities which are within the objectives of the society and are charitable in nature. The assessee got the provisional registration for AY 2021-22, 2022-23 and 2023-24 under Section 12AB, the copy whereof in Form No.10AC is attached as page 1 to 3 of the paper book filed before us. The activities of the Society towards charitable purpose were existing at the time of making application under Section 12AB. Neither the assessee is infringing upon the objectives stated in the Memorandum of Association or in the bylaws. The application in Form No.10AB was filed within six months from the commencement of the activities within the extended period of time limit as provided by the CBDT. Further, that no part of the income of the assessee trust ensures directly or indirectly for the benefit of a person specified under Section 13(3) of the Act. 3. The assessee claims to be a premier institution network coordinating with the Reserve Bank of India and assisting them in the policy formulation after educating and implementing the RBI's direction....
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....ther it is a regulatory duty undertaken under the RBI supervision. The claim of advancement of general public utility is, therefore, absent in the case of the assessee, it operates solely through its membership base which comprises nonbanking finance companies, micro finance institutions, most of which are for profit entities. There is no mechanism, structure or even stated object could have been found which could suggest over reach to the general public, let alone the under privileged which is sine qua non for general public utility clause under Section 2(15) of the Act as also observed by the Ld. CIT(A). The submission of the appellant was found to be devoid of charitable content, where the legal line between service to members and service to public are quite blurred. The applicant society does not satisfy the conditions envisaged u/s 12AB of the Act and, thus, the application filed by the assessee in Form No.10AB u/s 12AB(1)(ac)(ii) of the Act was rejected. Hence, the instant appeal before us. 5. We find the following activities done by the assessee on the basis of which the claim of registration was sought for. In fact, such details were also made known to the order issuing ....
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....e ('MFIN') towards activities involving public outreach along with the Annual report of FY 2024-25 to correlate expenses with the activities referred herein. The annual accounts for FY 2022-23 (PB-178) and FY 2023-24 (PB-260) are already part of the Paper Book as filed as further considered by us: Customer Grievance System (Toll Free No.) 1. MFIN operates a customer grievance system in all major (12) vernacular languages. The free service works 24*7 and receives nearly 2 lakh queries/complaints in a year. MFIN has spent the following amounts on these activities, leading to direct benefit of 4,72,119 borrowers of microfinance sector during the captioned periods. Financial Year Amount (INR) Incoming Calls Unique Caller Complaints filed Complaints Resolved 2025-26 (till 31.12.25) 32,07,895 2,10,786 96,236 1.590 1,517 2024-25 39,37,126 2,84,631 1,29,036 1,947 1,947 2023-24 33,28,305 2,11,405 1,03,661 2,045 2,045 2. The expenditure as tabulated above, excludes salary of senior technical staff who are employed exclusively to supervise this activity. That amount is approximately Rs. 45 lakh ....
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....fits of formal finance, regulatory architecture for customer protection, and ill-effects of taking money from money lenders. An NCAER study in 2025 shows that share of moneylenders has declined heavily to only 1% in areas where microfinance is available, while government data states that moneylenders account for 23% of loan funds in other places. e. In the current financial year, till December 2025, MFIN has conducted 128 MFAP's, handled by 7 technical regional heads, all of whom are senior management professionals (MBA)with 10 plus years of experience. Total expenses on these activities in FY 2024-25 by way of staff allocation, was Rs. 95 lakhs, as may be referred from note 14 on page No. 84 of Annual Report 2024-25. Outlay on this count in the current financial year is projected at Rs. 1.20 crore on 2025-26. This excludes travel expenses of approximately 7 experts and coordinators, who have conducted these programmes in 18 states of India. f. Climate Change Adaptation Project - This project is aimed at equipping poor people to mitigate income-loss due to climate events by developing an appropriate insurance product as also building awareness and capacity. MFIN h....
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....taken from one bureau. These reports form a crucial consumer protection tool. Against this activity, MFIN has spent sums of Rs. 65,52,918/- during FY 2024-25, as may be gleaned from Note 15 on page No. 84 of Annual Report 2024-25, while a sum of Rs. 40,08,982/- stands spent thus far during the current financial year. Regulatory Function as per RBI Mandate. 6. MFIN has been authorised by Reserve Bank of India to regulate the microfinance industry in India, as of 2014 onwards, with a view to overseeing protection of low-income borrowers, with the duty to submit periodic reports to RBI. While this activity is not in the nature of direct public outreach, it is undertaken for the benefit of the public - borrowers - only. MFIN's expenditure as to its regulatory activity during the past five years, is as under. This expense does not include salary & emoluments of senior management & executives: Financial Year Amount (INR) 2025-26 (till 31.12.25) 3,07,33,355 2024-25 3,22,41,017 2023-24 3,73,33,715 2022-23 2,17,85,804 2021-22 2,06,13,389 Summary Table Clause No Particulars Amount (Rs. Crore) F.Y 2024- 25 ....
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....olved in microfinance, and to make representations before all regulatory, government and policymaking authorities in India including, without limitation, the government of India, the Reserve Bank of India and the Securities and Exchange Board of India, and to promote microfinance and to help create a favourable policy environment for the microfinance sector. 4. To create, develop, distribute and publicize, sound development, operational, and financial practices, and minimum thresholds of performance for its members, and to encourage other persons engaged in the microfinance sector to adhere to, and comply with, such practices and thresholds. 5. To provide a forum for persons engaged in the field of microfinance to meet, share and exchange their view, expertise, experience and resources. 6. To conduct research, consultancy and training in different aspects of microfinance so as to strengthen the capacity of persons engaged in microfinance. 7. To establish linkages between members and resource institutions, such as funding agencies, financial institutions, rating agencies and training, consultancy and research institutions. 8. To provide s....
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....'s Financial Inclusion Advisory Committee, PSIG Think Tank, and the Access Assist Advisory Group. Your Honour we assure you, MICRO FINANCE INDUSTRY NETWORK("applicant") is working towards betterment of the society and betterment of India's economy and there is no infringement of objectives of the society. We plead before you to kindly approve the renewal application under section 12AB and oblige. We shall be pleased to assist you, in case if any clarification/further information is required and we request you to issue show cause notice in case any adverse conclusion is being drawn and provide the assessee sufficient opportunity to clarify. We hope you will find all the details in order, if any further information or documents as may be desired by you, we shall be obliged to submit. Power of attorney in favor of ourselves is enclosed (Page no. 2031- 2032)" 10. At the time of hearing of the instant appeal, the Ld. Counsel Mr. S. Krishnan vehemently argued in support of the case made out by the assessee as above and he has drawn our attention to page 58 of the paper book in order to justify that the society is giving educational, social, ....
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.... page 1 of the paper book. However, notice dated 20.09.2022 was thereafter issued by the CIT(E), Chandigarh under Section 12A of the Act with the following queries:- "1. Whether the trust/society/company has been granted provisional registration u/s 12AB? If yes, please furnish the self-certified copy of the Form 10AC issued by CPC, Bangalore. 2. Please specify the date of commencement of activities and furnish documentary evidence(s) to prove beyond doubt that the activities as mentioned in the MoA/trust deed/registration certificate under Societies Registration Act had actually commenced on the above mentioned date along- with the bank(s) statements to substantiate your claim. 3. Whether the application in Form 10AB has filed within six months from the commencement of activities or within the extended time limit provided vide CBDT instruction/circular/notification, if any? 4. Please furnish the self-certified copy of MoA/Trust Deed i.e. document creating or establishing the applicant. Also furnish the proofs of the identities of the main / managing trustees/ directors/ president/ secretary of the institution. 5. Please furnish a self-c....
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....ear in terms of provisions of section 115TD, the applicant shall be liable to pay tax and interest in respect of accreted income within specified time as per provisions of section 115TD to 115TF of the Income Tax Act, 1961 unless the application for fresh registration under section 12AB for the said previous year is granted by the Commissioner. 5. The Trust/ Institution should quote the PAN in all its communications with the Department. 6. The registration u/s 12AB of the Income Tax Act, 1961 does not automatically confer any right on the donors to claim deduction u/s 80G. 7. Order u/s 12AB read with section 12A does not confer any right of exemption upon the applicant u/s 11 and 12 of Income Tax Act, 1961. Such exemption from taxation will be available only after the Assessing Officer is satisfied about the genuineness of the activities promised or claimed to be carried on in each Financial Year relevant to the Assessment Year and all the provisions of law acted upon. This will be further subject to provisions of section 2(15) of the Income Tax Act, 1961. 8. No change in terms of Trust Deed/ Memorandum of Association shall be effected without du....
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....curring heavy expenditure making payments for advertising, public relations, campaigns funding whereof are appearing from pages 7 to 23 therein whereas we find that the as the RBI appointed Regulatory entity and industry platform for the micro finance sector, the assessee is composed of economists, financial/regular experts, bankers at the highest level as it is evident from different documents annexed to the paper book filed by the assessee the contents whereof has not been able to be controverted by the Ld. DR. The activities of the assessee has already been explained hereinabove which has also formed part of the order impugned establishes the need for advertising and public expenses to raise consumer awareness and to rationalize the tenor of events and the activities conducted by the assessee. Participation in CII conclaves and Asia level conferences by the assessee cannot be at the assessee's ipse-dixit. The Act does not determine particularly the provision of Section 12A of the Act that entities structured and working like corporate bodies cannot be held as charitable in nature. We note that the entire details of expenditure incurred by the assessee in holding such activities ....
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....by the Ld.CIT(E) holding as dispute resolution between the assessee's network members whereas evidences galore annexed to the paper book establishes the fact of performing activities inter alia through toll free grievance redressal system in 12 languages for micro finance borrowers, as a regular function for the industry as a whole, programmes for borrower education, protection, surveillance and self-help group which has direct benefit to the end users including the poorest of the poorer of the society as micro finance loan by its definition is a collateral-free loan given to a household having annual income of below Rs. 3 lakhs is one of the major activities found to have been performed by the assessee. These workshops are specifically held for protection of the borrowers from micro money lenders which cannot be ignored in the present scenario. Unless the assessee is found to be carrying on the business or trade mainly the assessee is working only to serve its members' interest, the assessee is still be entitled to registration as an entity engaged in advancement of an object of general public utility since regulation of an industry itself enures for the utility of the consumers o....
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....phraseology - excluding from consideration, trusts or institutions which provide services in relation to trade, commerce or business, for fee or other 115 consideration - has made a difference. Organizing meetings, disseminating information through publications, holding awareness camps and events, would be broadly covered by trade promotion. However, when a trade promotion body provides individualized or specialized services - such as conducting paid workshops, training courses, skill development courses certified by it, and hires venues which are then let out to industrial, trading or business organizations, to promote and advertise their respective businesses, the claim for GPU status needs to be scrutinised more closely. Such activities are in the nature of services "in relation to" trade, commerce or business. These activities, and the facility of consultation, or skill development courses, are meant to improve business activities, and make them more efficient. The receipts from such activities clearly are 'fee or other consideration' for providing service "in relation to" trade, commerce or business. 203. The revenue has appealed to this court, in respect of two asses....
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....e whether the quantum from these receipts, and other such receipts are within the limit prescribed by the sub-clause (ii) to proviso to Section 2(15). If they are within the limits, AEPC would be - for that year, entitled to claim benefit as a GPU charity." 18. We note that though the notice dated 13.03.2025, the Ld.CIT(E) passed specific queries as to the applicability of proviso to Section 2(15) of the Act i.e., the activity is in the nature of trade, commerce or business, etc., the provision was not found to have been invoked ultimately upon receipt of details and response from the assessee which is required to be considered in its proper perspective; the assessee involved in any trade, business or commerce has not found place in the order. Merely stating that the assessee is not involved in any public benefit programmes and unless it is engaged in trade or commerce or business is to be reckoned as a charitable entity under the 'general public utility' under the provision of Section 2(15) of the Act, the claim of the assessee in our considered opinion is again required to be revisited by the Ld.CIT(E) keeping in view the ratio laid down by the Hon'ble Apex Court in the matter....
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....d fully aligned to industry standards concerning customer engagement, employee engagement and risk/ internal controls during the pandemic situation. · Ground rules laying down the foundational aspects underlying the entire process. · A suggested model providing with indicators, weightages, and explanation, for lenders to adapt/enhance and seek required approvals from their Boards. Customer Grievance Redressal Mechanism (CGRM) Guidance Note on Pricing, 2022 Given the educational-social-economic background of microfinance customers, they can be susceptible to being misinformed and infuenced in the overall process of credit lending. Therefore, a system ensuring that the customer's voice is heard, and their interests are protected is necessary. While CGRM of NBFC-MFIs is the first port of call for the customers, it is widely acknowledged that recourse to an independent redressal process must be available to customers to address complaints that are not efficiently resolved via the financial service provider's internal dispute resolution mechanisms. The latest regulation by the Reserve Bank of India deregulates the pricing (interest rate charged to customers) for ....
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....act of Covid on income and repayment of the customers. Customer Surveys Four customer surveys were undertaken through CGRM via outbound calls in the year. These are as follows: Household income, pricing, debt serviceability, choice: In the micro-credit segment, there are varied viewpoints, assumptions and thin evidence about customers' monthly earnings and debt serviceability, their awareness/sensitivity to pricing and what factors do they consider in choosing a credit product. To bridge these knowledge gaps and understand customers' thoughts and perspectives on these issues, customers who called on MFIN CGRM were surveyed. Staff behaviour issues: Fair interaction with customers, including respectful/decent behaviour by employees, is the foremost principle of the customer protection norms. However, the objective measure of employee misbehaviour is not always easy. Customer complaints about employee misbehaviour on the Customer Grievance Redressal Mechanism (CGRM) can be a powerful source to measure this. During the pandemic when a significant percentage of repayments were under stress, a survey was undertaken with customers to get an understanding on the problems and co....
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....tution in Annexure-6 5. Self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts is enclosed in Annexure-7. 6. Yes the applicant is registered under Foreign Contribution (Regulation) Act,2010. 7. Copy of Self certified copy of Registration certificate under Foreign Contribution (Regulation )Act,2010 is enclosed in Annexure-8 8. Affidavit / undertaking. to the effect that the institution is complying all the requirements of Law as are material for the purpose of its objects as enumerated in the trust deed/MoA is enclosed in Annexure-9. 9. Undertaking that there will be no infringement to the 1st proviso to Section 2(15) of the Income Tax Act, 1961 is enclosed in Annexure-10a. 10. No part of income of the institution enures, directly or Indirectly, for the benefit of a person specified u/s 13(3) of the Income Tax Act, 1961. Kindly also refer to undertaking given in Annexure-10b which Includes CEO's declaration in this regard. The society is established to pursue the following objectives: a. To act as a self-regulatory organisation for the microfinance sector and to regulate the business of ....