TaxTMI 
TaxTMI 
2026 (4) TMI 1533
X X X X Extracts X X X X
X X X X Extracts X X X X
....ls, awards for excellence in studies, sports and scientific research, distribution of books and note books for poor and deserving students. 3) To spread public awareness of Heath Care and Preventive Health Care. 4) To grant aid and provide financial assistance to deserving people for medical treatment. 5) To promote high quality and innovative learning and development programmes, primarily in the field of Cardiology, Cardio-thoracic health, Cardio-thoracic and Vascular Surgery and related medical fields. 6) To advance public awareness in the fields of Cardiology, Cardio-thoracic health, Cardio-thoracic and Vascular Surgery and related disciplines. 7) Establishment, conduct, maintenance of clinical laboratories, hospitals, nursing homes, dispensaries and institutions of similar nature and providing financial assistance to the deserving persons for medical treatment, in any medical institution. 8) To conduct awareness programs including training in advancement in medical skills such as Robotic Surgery in advanced medical procedures. 9) Establishment, conduct, maintenance of old age homes, homes for physically challenged m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation on the principle of mutuality it is necessary to bear in mind two concepts. The first concept is that the principle of mutuality is based on the doctrine that no person can make a profit out of himself. To take a common instance, supposing a dozen persons' gather together and agree to purchase certain commodities in bulk and distribute them among themselves in accordance with their individual requirements, they may collect a certain amount provisionally based on the anticipated price of the commodities to be purchased. If it ultimately happens that the commodities are available at a cheaper price so that at the end of the distribution of the commodities among themselves, a part of the original amount provisionally collected is repaid, then what is repaid cannot by any test be classified as income. This would represent savings and not income. The Income-tax Act seeks to tax income and not savings. In general, the following are the characteristics of a Mutuality organization: They are carried on the for the benefit of members' collectively. They have members that share a common purpose. Those members are all entitled to participate i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or free of cost and the assessee is intending to carry out other related charitable activities. The Ld. AR further submitted that the CIT(E) has denied the registration merely based on the financial statements by holding that the beneficiaries of the assessee trust is limited to its members only. The Ld. AR also submitted that the CIT(E) has held that in assessee's case there is no charitable activity being carried out and that the assessee is functioning on the principle of mutuality. The Ld. AR argued that the assessee's trust is formed by a group of medical professionals with an intention to help the public at large and that the CIT(E) has denied the registration merely by analysing the income derived by the assessee through conducting a seminar which according to the CIT(E) is for the benefit of the members alone. The Ld. AR further argued that the assessee is in the first year of operations and therefore denying the registration based on one activity conducted by the assessee is not correct. The ld AR also argued that in the case of new trusts who are yet to start full fledged charitable activities, the CIT(E) for the purpose of registration need to consider the propos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heard; (c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution. ..... (4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to subsection (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall- (i) call for such documents or information from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8. It is seen that, the Ld. CIT(E) had invoked Explanation (e)(i) of Section 12A(1)(ac)(iii) of the Act and held that the activities of the assessee trust were not genuine. According to us, the Ld. CIT(E)'s interpretation of the Explanation (e)(i) of Section 12A(1)(ac)(iii) suffered from fundamental infirmity. If the activities of a charitable trust are yet to commence, it cannot be straight away alleged that the activities are not genuine. So long as the proposed activities of the assessee trust to achieve its objects are found to be charitable in nature, mere noncommencement of the activities at the time of filing of application or at the time of passing of order for grant of registration u/s 12AB of the Act, cannot be treated as a 'specified violation' to deny registration to an assessee. In our view, where the assessee trust demonstrates that it has been formed for charitable objects and shows that the proposed activities are charitable in nature, then the conditions prescribed in Section 12AB cannot be said to be not satisfied. If in the facts and circumstances of the given case, the assessee is able to show that it had carried out charitable activities in the subsequent year....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and that its activities are in furtherance of the objects of the Trust, that is equally genuine. 12. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under subsection (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. 13. We therefore find that the view of the Delhi High Court in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....look into all the materials and satisfy itself whether the exemption has been claimed genuinely or not. If the assessing officer is not convinced it is always open for him to decline grant of exemption." 10. Having taken note of the provisions and the position of law, we revert back to the case before us. From the facts placed on record it is observed that, the assessee is a registered public charitable trust which was formed on 12.04.2006 with the following objects: "5. OBJECTS a. Educational - to run, maintain or assist any educational or other or to grant individual scholarships for poor, deserving and needy students for elementary and higher education. b. Medical - to run, maintain or assist any medical institution, nursing home or clinics or to grant assistance to needy and indigent persons for meeting the cost of medical treatment. c. Relief of the poor - to give financial or other assistance in kind by way of distribution of books, notebooks, clothes, uniforms, or meals for the poor and indigent. d. Other objects of general public utility:- (i) To acquire property for the sole use for public good by making it ava....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the assessee trust got stalled. It was in 2022, when there was a change in trustees, whereby Mrs. D Sindhu, a young medical professional, Mrs. M Jayakumari, teacher by profession having several years of experience and Mr. D Harish Kumar, an engineering professional, came on board, that the trust recommenced the activities, applied for conversion of land in 2023, obtained approval in 2026 etc. The assessee is thus noted to have demonstrated that it had indeed undertaken activities towards achievement of its charitable objects. Having taken note of these facts, we hold that the Ld. CIT(E) was unjustified in holding that the assessee trust did not undertake any activity whatsoever, particularly when the contemporaneous facts show that the assessee trust had acquired land parcels for setting up medical educational institution. 12. We also find that, none of the activities undertaken by the assessee trust relating to acquisition of land or which was undertaken subsequently involving conversion of land usage, expending for charitable purposes, can be regarded as non-genuine or contrary to the objects for which the assessee trust was formed. There is also merit in the submiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alify as 'specified violation' under Explanation (e)(i) to Section 12A(1)(ac)(iii) of the Act. 13. In so far as the Ld. CIT(E)'s observation regarding fixed assets and unsecured loans is concerned, it is observed that, the fixed assets of Rs. 1,26,31,451/- comprised of the land parcels acquired by the assessee for setting up the educational institution and therefore, the genuineness of purchase of such assets could not have been doubted. It is indeed noted that, there was an omission on the assessee's part to describe this asset in column no.14 of the application form in Form 10AB, but at the same time, it is seen that, the details of this fixed asset was evident from the face of the financial statements enclosed with the said form and the same was also submitted before the Ld. CIT(E). Hence, we are in agreement with the Ld. AR that, the inadvertent omission to describe this asset in column no. 14 could not be stated to be reason for disputing the genuineness of the trust. 14. Further, as noted earlier, the land parcels were acquired out of the loans arranged by the trustees from their close relative. The Ld. CIT(E) however disputed the genuineness of the outstand....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the matter is remanded to the record of the learned CIT(E) for fresh adjudication." 16. For the reasons set out above, we hold that the Ld. CIT(E) was unjustified in rejecting the application of the assessee u/s 12AB of the Act and therefore, quash the impugned order dated 22.09.2025. the Ld. CIT(E) is directed to issue the registration in Form 10AD to the assessee trust. 17. Since the reasons given by the Ld. CIT(E) for rejecting the approval u/s 80G of the Act and the argument put forth by the assessee are verbatim same as involved in relation to the issue of registration u/s 12AB of the Act, following our observations above, we hold that, the Ld. CIT(E) was unjustified in rejecting the application seeking approval u/s 80G of the Act and direct him to grant the same." 6. The Ld. Departmental Representative (DR), on the other hand, vehemently argued that the assessee's claim that it is for the welfare of the general public is not substantiated. The Ld. DR further argued that the activity as reflected in the financial statements is held for the specific community i.e, doctors and therefore the CIT(E) has corrected the denied the registration u/s. 12AB of ....