TaxTMI 
TaxTMI 
2026 (7) TMI 785
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....24.09.2021 was cancelled. 2. ITA No. 4053/Mum/2026 is directed against the consequential order passed by the CIT(E) rejecting the assessee's application for approval under section 80G(5) of the Act filed in Form No. 10AB under clause (ii) of the first proviso to section 80G(5). The said application was rejected primarily on the ground that the assessee's application for renewal of registration under section 12AB had been rejected by the CIT(E) on the same date. 3. The assessee has also filed Stay Application No. 65/Mum/2026 arising out of ITA No. 4054/Mum/2026 seeking stay of operation of the order dated 30.03.2026 passed under section 12AB of the Act whereby renewal of registration was rejected and the existing registration granted under section 12A/12AB was cancelled with retrospective effect. 4. Since the issues involved in both the appeals are interconnected and arise out of the same set of facts and findings recorded by the learned CIT(E), both the appeals as well as the Stay Application were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. 5. At the outset, it may be noted that these appeals were ....
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....the learned CIT(Exemption) erred in rejecting the application for renewal of existing registration granted u/s.12A of the Act without issuing any specific show-cause notice setting out the alleged defaults and without affording the appellant an opportunity of being heard and without granting personal hearing, in gross violation of section 12AB(1)(b)(ii)(B) of the Act and thus in violation of the principles of natural justice. Prayer: The Appellant prays that the order of the CIT (Exemption) ought to be quashed and the registration may be granted for further period of 5 years or 10 years effective from 1.4.2026 as the Hon'ble Tribunal deems fit. (B) CANCELLATION OF EXISTING REGISTRATION (A.Y.2022-23 TO 2026-27) 6. On the facts and in the circumstances of the case and in law, the learned CIT(Exemption) erred in cancelling the existing registration granted u/s.12A of the Act from the date of its grant i.e. w.e.f.24.9.2021. 7. On the facts and in the circumstances of the case and in law, the learned CIT(Exemption) erred in cancelling the existing registration with retrospective effect from 24.09.2021, without following due process of law. ....
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....Appellant's application for registration u/s 12A of the Act is rejected vide order dated 30.3.2026. Prayer: The Appellant prays that the order of the CIT (Exemption) ought to be quashed and the approval may be granted for further period of 5 years effective from 1.4.2026. (B) GENERAL 2. The Appellant craves leave to add, amend, delete, rectify, substitute, modify, or otherwise, all or any of the aforesaid grounds or add a new ground(s) at any time before or during the hearing of the above appeal and consider the grounds of appeal as without prejudice to each other. ITA No. 4054/Mum/2026 Facts of the Case 8. The assessee, M/s. Mandke Foundation, having PAN AAATM4557G, is a public charitable institution incorporated on 17.03.1998 as a company under section 25 of the Companies Act, 1956 (now section 8 of the Companies Act, 2013). The assessee was granted registration under section 12A of the Income-tax Act, 1961 vide order dated 29.03.2000 with effect from 17.03.1998 and was subsequently granted approval under section 80G on 24.06.2008. Pursuant to the new registration regime introduced under section 12AB, the registration under section 12A was ....
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....ments. On examination, it was noticed that the application was incomplete and all requisite documents had not been furnished. Accordingly, a notice dated 01.11.2025 was issued, in response to which the assessee filed submissions dated 18.11.2025. 12. Thereafter, the CIT(E) examined the objects contained in the trust deed/Memorandum of Association and formed a prima facie view that several clauses empowered the assessee to apply its funds outside India. The CIT(E) specifically referred to object clauses 3(a)(1), 3(b)(2), 3(b)(14), 3(b)(17), 3(b)(18) and 3(b)(19) and observed that these clauses envisaged activities extending beyond India and therefore indicated an intention to apply trust funds outside India. According to the CIT(E), such clauses attracted the provisions of section 11 of the Act and warranted examination. Consequently, a show cause notice dated 22.11.2025 was issued to the assessee calling for an explanation regarding the perceived violation. 13. In response, the assessee filed detailed submissions on 09.12.2025. The assessee contended that the clauses highlighted by the department merely reflected an inclusive and enabling framework for carrying out charitable....
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....n India. 14. The CIT(E), however, was not satisfied with the explanation furnished by the assessee. According to the CIT(E), even if the clauses formed part of incidental or ancillary objects, they remained an inseparable component of the trust deed and constituted the legal foundation of the activities undertaken by the trust. The CIT(E) further observed that clause 3(B)(2) specifically contemplated sponsorship of foreign visits and therefore directly envisaged expenditure outside India. The CIT(E) concluded that the language employed in the various clauses left scope for future activities requiring application of funds outside India. 15. The CIT(E) further recorded that the assessee had in fact incurred expenditure outside India over the years and that this fact had been admitted by the assessee in its submissions dated 09.12.2025. The order notes that foreign expenditure had been incurred under the following heads: Sr. No. Foreign Payment Head 1 Acquisition of capital assets for hospitals/camps 2 Import of drugs, consumables, diagnostics and other medical equipment 3 Travel and related costs 4 Healthcare facilitation fees 16. The CIT(E) the....
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.... 3,400 1,15,600/- 4 Daycare obscured 500 48,500/- 5 General 83 3,500 2,90,500/- 6 LDRP 4 12,000 48,000/- 7 Newborn 5 3,500 17,500/- 8 Single Classic Room 42 12,000 5,04,000/- 9 Single Deluxe 28 16,000 4,48,000/- 10 Single Regular - - - 11 Twin Sharing 115 4,950 obscured 12 King Suite 5 31,000 obscured 15 Prince Suite 6 18,000 1,08,000/- 16 Queen Suite 4 23,000 92,000/- 17 NICU 15 10,000 1,50,000/- 18 PICU 10 10,000 1,00,000/- 19 Single Economy - - - 20 PICU Stepdown 3 10,500 31,500/- 21 Suppletor 4 12,500 50,000/- 22 STOKE/Isolation obscured 25,000 6,00,000/- Total 550 46,65,600/- 19. The CIT(E) observed that bed charges varied from Rs. 3,400/- per ....
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....t was roughly 18 to 21 times such monthly income. The CIT(E) therefore held that such high-cost medical treatment by a charitable hospital made it clear that its healthcare services were not accessible to the public at large but were confined to affluent sections. 23. The CIT(E) held that the total number of patients treated under indigent/economically weaker section category was short of the prescribed minimum of 20% of total patients. The table reproduced in the order is as under: FY Total General Category Patient admitted Prescribed 20% of total patient (10% Indigent patients + 10% Weaker Section Patient) Total number of indigent/Weaker Section Patient actually treated Actual Indigent/Weaker Section Patient (in Percentage with respect to General Patient) treated 2022- 23 48,492 9698 1,368 2.82% 2023- 24 50,610 10122 1,214 2.40% 2024- 25 55,138 11028 1,506 2.73% 24. The CIT(E) held that during F.Y. 2024-25, normal patients admitted were 55,138 whereas only 1,506 patients were treated under IPF category, which came to hardly 2.73%. Similar pattern was notic....
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....l basis with manifest intent to earn substantial profits in a systematic and organised manner. The CIT(E) held that the overall activities were in the nature of business of providing high-end and super-speciality healthcare services for commercial consideration and did not exhibit characteristics genuinely associated with a charitable hospital. The CIT(E) finally rejected the application for renewal of registration on the following grounds: (i) violation of section 2(15) of the Act, as activities were held not to be charitable in nature but based on commercial motive and in the nature of providing high-end healthcare services; (ii) failure to comply with other laws material for achieving the objects, namely the Maharashtra Public Trusts Act, 1950, within the meaning of section 12AB(1)(b); and (iii) failure to comply with section 11(1)(c) of the Act by applying funds outside India without obtaining prior approval of the CBDT. 30. The existing registration was cancelled with effect from the date on which registration was granted, i.e. 24.09.2021, as per section 12AB(1)(b)(ii)(B) of the Act. 31. Consequent to the rejection of the assessee's applica....
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....to the legal contention that the grounds relied upon by the learned CIT(E) do not constitute "specified violations" within the meaning of section 12AB(4), the learned Authorised Representative also assailed the factual findings recorded by the learned CIT(E) while concluding that the assessee's activities were commercial in nature. 34. The learned AR submitted that the learned CIT(E) called for details of beds maintained in the hospitals operated by the assessee and the per-day bed charges. Based on such details, the learned CIT(E) noted that bed charges ranged from Rs.3,400/- per day to Rs.31,000/- per day and, without any objective basis, categorised 270 out of 550 beds as belonging to a "higher category". It was submitted that the learned CIT(E) appears to have treated all beds carrying charges in excess of Rs.10,000/- per day as higher-category beds and thereafter compared such charges with the estimated monthly income of an average household in India. According to the learned AR, the entire exercise was misconceived inasmuch as the average bed charge computed by the learned CIT(E) himself was only Rs.8,483/- per day and there existed no rational basis for segregating be....
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....d violation of the said enactment or the scheme framed thereunder could not constitute a basis for cancellation of registration. It was further argued that the learned CIT(E) had no jurisdiction to adjudicate upon alleged violations of the Maharashtra Public Trusts Act, such power being vested in the authorities administering the said enactment. In support of this proposition, reliance was placed upon the decisions of the Hon'ble Bombay High Court in CIT vs. Sir KikabhaiPremchand Settlement Trust [(2025) 181 taxmann.com 26 (Bom)], PCIT vs. Milestone Real Estate Fund (ITXA No.3056 of 2019) and Virendra vs. Appropriate Authority [(2010) 327 ITR 185 (Bom)]. 37. The learned AR further submitted that the learned CIT(E) had specifically enquired whether any objection had been raised by the Charity Commissioner in relation to compliance with the Maharashtra Public Trusts Act and the assessee had categorically informed that no such objection or adverse order existed. It was argued that clause (f) of the Explanation to section 12AB contemplates a specified violation only where there exists an order, direction or decree of the competent authority holding that non-compliance with the r....
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....ount, the learned AR submitted that the shortfall figures computed by the learned CIT(E) were based on erroneous assumptions. It was contended that while computing the prescribed contribution, the learned CIT(E) had included revenues of all three hospitals, non-operating income such as interest, donations and profit on sale of assets and had also failed to exclude IPF/EWS billings. According to the learned AR, once the computation was corrected by considering only relevant hospital receipts, there was in fact no shortfall and the actual expenditure incurred exceeded the prescribed requirement. It was further pointed out that as on 31.03.2025, the IPF account reflected a deficit balance of Rs.6,91,03,959/-, demonstrating that expenditure incurred on eligible patients exceeded the prescribed contribution. 42. The learned AR also challenged the computation of average revenue per bed per day ranging from Rs.62,591/- to Rs.83,497/- adopted by the learned CIT(E). It was submitted that the computation incorrectly included OPD revenues and non- operating receipts and further compared revenues of all hospitals with bed strength of only one hospital. According to the learned AR, upon appl....
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.... alter the charitable character of an institution engaged in medical relief. 45. The learned AR also disputed the observations of the learned CIT(E) regarding the nature of expenditure incurred by the assessee. It was submitted that the expenditure of approximately Rs.350.97 crore incurred on employees, which according to the learned CIT(E) reflected operation of a luxurious hospital, substantially represented salaries paid to doctors, nurses, paramedical personnel and clinical support staff. Such expenditure, according to the learned AR, was indispensable for providing quality medical services and could not be construed as evidence of commerciality. It was further submitted that these professionals render services to all categories of patients, including economically weaker sections, and therefore the expenditure was directly connected with the charitable activity of medical relief. 46. The learned AR further submitted that the learned CIT(E) had incorrectly observed that the assessee had not undertaken any positive and concrete steps to publicise the availability of concessional treatment under the IPF/EWS scheme. Referring to the material placed before the authorities, it ....
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....tended that apart from inpatient treatment provided under the IPF and EWS categories, a significant number of economically weaker patients availed OPD facilities and other concessional medical services. According to the learned AR, these services formed an integral part of the charitable activities of the assessee and ought to have been considered while evaluating the true nature and extent of medical relief provided by the institution. 50. To rebut the findings of the learned CIT(E) regarding alleged commerciality of operations and generation of substantial surplus, the learned AR furnished detailed financial workings demonstrating that the surplus figures relied upon by the learned CIT(E) were distorted by inclusion of non-operating income and receipts not directly attributable to hospital operations. 51. The learned AR furnished a year-wise summary of patient revenues generated by the Mumbai, Indore and Navi Mumbai hospitals together with other operating and non-operating income. The details furnished are summarised below: Particulars Total (Rs. in lakhs) Mumbai Hospital Patient Revenue 1A 591,280.18 Indore Hospital Patient Revenue 1B 1....
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....ase in revenues was primarily attributable to a sharp rise in the number of surgeries performed after the easing of pandemic restrictions. The comparative figures furnished were as under: Particulars FY 2020-21 FY 2021-22 Total Surgeries 13,078 18,263 Increase in Number of Surgeries - 5,185 Percentage Increase - 40% 55. The learned AR explained that during FY 2020-21 many patients had deferred surgeries because of Covid restrictions and uncertainty. With reopening of hospitals and easing of restrictions in FY 2021-22, a large number of postponed surgeries were undertaken, resulting in approximately 5,200 additional surgeries and consequential increase in revenues. 56. Based on the aforesaid data, the learned AR submitted that the surplus generated in FY 2021-22 and partly in FY 2022-23 was an exceptional consequence of post-pandemic normalisation of healthcare services and not the result of any commercial exploitation or increase in charges. It was further submitted that the generated surplus had been deployed for expansion of charitable medical infrastructure, including establishment of the Indore hospital and ongoing projects at Raipur an....
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....NambyarSaarf Law Charitable Trust v. UOI (2004) 269 ITR 556 (Del.) It was submitted that the Hon'ble Delhi High Court held that the issue of application of income outside India pertains to eligibility of exemption under section 11 and is not a relevant criterion while considering registration. The Court observed that income applied outside India without requisite approval may affect exemption but cannot constitute a ground for rejecting registration after being satisfied regarding the charitable objects and genuineness of activities. (ii) Gem &Jewellery Export Promotion Council v. ITO (1999) 68 ITD 95 (Mum.) The learned AR pointed out that the Mumbai Bench held that section 11 requires the charitable purpose for which income is applied to be in India. The provision does not mandate that the expenditure itself must necessarily be incurred within India. The Tribunal illustrated that expenditure incurred abroad for purchasing books for a library in India or equipment for a charitable hospital in India would still amount to application of income for purposes in India. Therefore, expenditure incurred outside India does not lose eligibility merely because payment is made abr....
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....ion 80G was consequential to the denial of registration under section 12A and was not founded on any independent reasoning. Accordingly, if registration under section 12A is restored, approval under section 80G would necessarily follow. 66. By way of written submission, the learned Departmental Representative (DR) relied heavily upon the impugned order passed by the learned CIT(E) and reiterated the reasons recorded therein for rejecting the assessee's application for registration under section 12AB and approval under section 80G. 67. The learned DR supported the impugned order of the learned CIT(E) and submitted that the assessee is operating a large multi-speciality healthcare institution on commercial lines and the substantial surpluses generated year after year demonstrate that the dominant character of the activities is commercial rather than charitable. According to the Revenue, the issue is not merely the existence of surplus but the manner in which the institution is conducted, having regard to the premium facilities, specialised infrastructure and pricing structure adopted by the hospitals. 68. The learned DR further contended that the plea of cross- subsidisa....
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....rangements abroad. It was contended that once application of income outside India is established, compliance with the requirements of section 11(1)(c) assumes significance and the assessee could not disregard the statutory mandate on the plea that the ultimate benefit of such expenditure accrued to charitable activities carried on in India. According to the learned DR, section 11(1)(c) constitutes a specific statutory provision governing application of income outside India and the requirement of obtaining a general or special approval of the CBDT is a substantive condition prescribed by Parliament. Reliance was also placed upon the observations of the Hon'ble Delhi High Court in NASSCOM v. DIT(E), wherein, according to the learned DR, the Court recognised the independent field occupied by section 11(1)(c) and cautioned against interpretations that would render the provision otiose. The learned DR, therefore, submitted that the learned CIT(E) was justified in examining the assessee's foreign expenditure and its compliance with the statutory framework while considering continuation of registration under section 12AB. 72. On the issue of cancellation of the existing registr....
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....ure and no longer retain the character of charitable activities within the meaning of section 2(15) of the Act. 77. In our considered view, the aforesaid approach proceeds on a fundamentally incorrect understanding of the statutory scheme governing charitable institutions engaged in medical relief. 78. Section 2(15) of the Act defines "charitable purpose" to include, inter alia, "medical relief". The legislature has consciously treated medical relief as a distinct and independent head of charity. Unlike the residual category of "advancement of any other object of general public utility", the concept of medical relief is not conditioned by considerations relating to trade, commerce or business in the manner contemplated for institutions falling under the residuary limb. 79. The Constitution Bench of the Hon'ble Supreme Court in Ahmedabad Urban Development Authority v. ACIT (449 ITR 1) recognised that section 2(15) contains distinct categories of charitable purposes and that the statutory treatment applicable to one category cannot automatically be imported into another. Similarly, the principles laid down in Surat Art Silk Cloth Manufacturers Association (121 ITR 1), Ad....
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....ty as a statutory precondition. No doubt, medical charity has a deep social content and access to healthcare for weaker sections is an important public value. However, the Income Tax Act does not prescribe that medical relief will qualify as charity only if it is provided at a particular price, or only if every service is affordable to the average household, or only if premium facilities are absent. A cancer hospital, a cardiac hospital, a transplant centre or a multi-speciality tertiary care institution may necessarily involve expensive treatment. That does not mean that the institution is not rendering medical relief. The law does not recognise a distinction between basic medical relief and advanced medical relief for the purpose of section 2(15). The moment the enquiry is shifted from 'whether medical relief is being provided' to 'whether the medical relief is sufficiently inexpensive', the authority travels beyond the statutory text. The learned CIT(E) has precisely committed this error." (para 131) 85. We respectfully adopt the aforesaid reasoning. 86. The learned CIT(E) has also attached considerable significance to the existence of premium rooms, suites....
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....aritable character. 90. As observed by the Co-ordinate Bench: "Even where the activity of a charitable institution is carried on in an organised manner resembling business operations, the Act itself provides an answer in section 11(4A) ... In the case of a hospital, the carrying on of medical operations, charging of fees from patients, maintenance of accounts, employment of professional staff and acquisition of modern equipment are all integrally connected with the object of medical relief. They are not extraneous commercial adventures covered by section 11(4A)." (para 130) 91. The financial analysis undertaken by the learned CIT(E) also does not advance the Revenue's case. Generation of surplus, assuming there is any surplus, is not determinative of charitable character. The settled law is that the destination and application of the surplus are relevant and not the mere existence of surplus. No material has been brought on record to establish that any part of the income has been distributed for private benefit or utilised for purposes alien to the objects of the trust. 92. The Co-ordinate Bench further explained: "A charitable hospital may have payin....
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....ngaged in medical relief may necessarily recover charges from patients, acquire sophisticated medical equipment, employ highly qualified medical professionals and create modern infrastructure for delivery of healthcare services. Likewise, educational institutions may collect fees from students and charitable organisations may derive income from investments and other assets held under trust. Mere generation of income, collection of fees or charges, creation of reserves, expansion of infrastructure or emergence of surplus in a particular year does not, by itself, detract from the charitable character of the institution so long as the dominant purpose continues to be charitable and the income is applied in accordance with the provisions of sections 11 to 13 of the Act. 96. In this regard, the Hon'ble Supreme Court in CIT v. Surat Art Silk Cloth Manufacturers Association (121 ITR 1) held that the decisive test is the dominant purpose of the institution and not the fact that income is generated in the course of carrying on its activities. Similar principles were reiterated in Aditanar Educational Institution v. Addl. CIT (224 ITR 310) and Queen's Educational Society v. CIT (3....
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....r achieving its objects. 101. While dealing with an identical issue in the case of Reliance Foundation Hospital Trust (supra), the co-ordinate Bench extensively examined the statutory framework of section 41AA and the Indigent Patient Fund (IPF) Scheme. The Bench recorded the following findings: "In the present case, despite extensive arguments advanced by the Revenue, we have not been shown any order of the Charity Commissioner, any determination by an authority functioning under the Maharashtra Public Trusts Act, any decree of a competent forum, or any final adjudication holding that the assessee has violated section 41AA or the IPF Scheme. This fact assumes immense significance because section 41AA is not a provision under the Income Tax Act. It forms part of a specialised regulatory framework governing charitable hospitals in the State of Maharashtra. The legislature has entrusted administration of that framework to specific authorities possessing expertise, statutory powers and institutional responsibility under that enactment. The learned CIT(E), however, has independently interpreted the scheme, analysed patient ratios, computed alleged deficiencies, concluded th....
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....cupancy may vary depending upon factors beyond its control. To automatically equate lower occupancy with statutory violation would require a clear mandate in the scheme itself. We do not find such a mandate reflected in the material brought before us." (para 101) 102. The aforesaid observations are directly relevant. Section 41AA itself does not prescribe that at all times 20% of actual admissions must necessarily consist of indigent and weaker section patients. The scheme essentially requires reservation and earmarking of specified facilities and creates a regulatory mechanism under the supervision of the Charity Commissioner. Consequently, if there is any perceived inadequacy in the design, operation or implementation of the scheme, such issue pertains to the regulatory framework administered under the Maharashtra Public Trusts Act. 103. The Co-ordinate Bench in Reliance Foundation Hospital Trust has clearly recognised that the learned CIT(E) proceeded on the premise that actual utilisation alone is the test of compliance. However, the scheme itself contemplates reservation and availability of facilities. Therefore, the alleged shortfall noticed by the learned CIT(E) arises....
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....the learned CIT(E) cannot substitute himself for the statutory authorities administering the Maharashtra Public Trusts Act and cannot independently adjudicate alleged violations thereunder for the purpose of withdrawing charitable registration under the Income- tax Act. Consequently, the alleged shortfall in occupancy, even if assumed to exist, cannot furnish a valid basis for holding that the assessee's activities are no longer charitable within the meaning of section 2(15) or for cancelling the registration granted under section 12AB of the Act. 106. Accordingly, following the aforesaid decision, we hold that the finding of the learned CIT(E) proceeds upon an erroneous understanding of the scope and operation of the scheme framed under section 41AA. If at all any deficiency is perceived in the manner in which actual utilisation is measured vis-à-vis reserved facilities, the same lies within the regulatory domain of the scheme and the authorities administering the Maharashtra Public Trusts Act, as canvased by the assessee. Such perceived deficiency cannot, by itself, furnish a valid basis for holding that the assessee has ceased to exist for charitable purposes or fo....
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....e assessee has explained that the expenditure referred to by the learned CIT(E) substantially relates to procurement of medical equipment, hospital infrastructure, drugs, consumables, diagnostic systems and other facilities utilised in hospitals operated by the assessee in India. It has also been explained that travel-related expenses were either reimbursed or were incurred in connection with the functioning of hospitals in India. Thus, according to the assessee, the ultimate charitable purpose and beneficiary remained within India notwithstanding that certain payments were made abroad. 112. In support of the aforesaid proposition, reliance was placed upon the decision of the Delhi High Court in M.K. Nambyar SAARF Law Charitable Trust v. Union of India (2004) 269 ITR 556 (Del). The relevant observations reproduced by the assessee read as under: "So far as income which is applied outside India is concerned, is not a relevant criteria for rejecting the application. In absence of order under section 11(1)(a)/ (c), one cannot seek benefit for application of income for charitable or religious purposes outside India. Therefore, the order dated 24-2-2004 made by the Director o....
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....stitutes application outside India, whether approval of the Board was required, and what tax consequences follow therefrom are matters falling within the domain of assessment proceedings. Such questions do not automatically establish that the activities of the institution are not genuine or that its charitable character stands extinguished. 118. More importantly, the material placed before us shows that the expenditure referred to by the learned CIT(E) relates predominantly to procurement of medical equipment, drugs, consumables and hospital facilities utilised in providing medical relief in India. The charitable purpose for which such expenditure was incurred remained the operation of hospitals and rendering of medical relief within India. Therefore, merely because payments were made to entities situated outside India, it cannot ipso facto be concluded that the assessee applied its income for charitable purposes outside India. 119. We also note that the learned CIT(E) himself had earlier initiated proceedings under section 12AB(4) on substantially similar allegations concerning expenditure outside India. After examining the assessee's explanation, supporting documents, b....
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....idered view, the Revenue's argument proceeds on the assumption that every alleged infraction of section 11 necessarily furnishes a ground for refusal or withdrawal of registration under section 12AB. Such an interpretation does not emerge from the statutory scheme. The provisions of sections 11 and 12AB operate in distinct though interconnected fields. Section 11 governs the availability and computation of exemption in a particular assessment year and determines the extent to which income derived from property held under trust qualifies for exemption. Section 12AB, on the other hand, is concerned with the existence of the institution as a charitable entity, the charitable nature of its objects and the genuineness of its activities. 123. It is true that compliance with the provisions of the Act may be relevant while examining an application under section 12AB. However, the enquiry contemplated therein cannot be divorced from the statutory grounds on which registration may be granted, continued or withdrawn. The Commissioner is required to satisfy himself regarding the objects of the trust and the genuineness of its activities. An alleged violation of section 11, by itself,....
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....ceased to pursue charitable objects or that its activities are not genuine. 126. In the present case, the learned CIT(E) has not recorded any finding that the assessee's objects have ceased to be charitable. Nor has he recorded any finding that the activities of medical relief carried on by the assessee are not genuine, are being conducted for private profit or are otherwise inconsistent with the objects for which the institution was established. The hospitals established and operated by the assessee continue to provide medical services in furtherance of its stated objects. The entire objection proceeds on the footing that certain expenditure incurred outside India may not satisfy the requirements of section 11(1)(c). Even assuming such objection to be correct, the consequence would ordinarily relate to the determination of exemption available under section 11 in the relevant assessment proceedings. By itself, such an issue does not establish either absence of charitable objects or lack of genuineness of activities so as to justify refusal of renewal under section 12AB. 127. We also find it significant that while enacting the framework of section 12AB(4), Parliament ident....
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.... outside India. The controversy before the Hon'ble High Court related to the allowability of exemption under section 11 and the scope of the statutory requirement contained in section 11(1)(c). The issue before us, however, is materially different. We are not concerned with the computation of exempt income or the allowability of exemption in a particular assessment year but with the validity of refusal of renewal of registration under section 12AB.More importantly, in the present case, the expenditure identified by the learned CIT(E) principally relates to acquisition of medical equipment, import of drugs, consumables and diagnostic systems, travel-related expenditure and healthcare facilitation arrangements undertaken for operating and strengthening hospitals situated in India and for carrying on the assessee's activities of medical relief in India. The learned CIT(E) has not recorded any finding that the assessee carried on independent charitable activities outside India or that its charitable objects were pursued outside India. The question whether a particular item of expenditure constitutes application of income outside India and the consequences flowing therefrom may ....
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.... under section 12AB(4). After considering the assessee's explanation, supporting material and the nature of the expenditure incurred, the learned CIT(E), by order dated 15.07.2025, dropped the proceedings. Thus, the competent authority had already examined the very issue and consciously chose not to invoke the cancellation provisions. 133. In these circumstances, the same facts, in the absence of any fresh material or any finding affecting the charitable nature of the objects or the genuineness of the activities, could not have been relied upon as an independent basis for refusing renewal under section 12AB(1), particularly when no finding has been recorded that the assessee's objects have ceased to be charitable, that its activities of medical relief are not genuine, or that the expenditure in question has resulted in abandonment of the charitable purposes for which the institution was established. Having regard to the statutory scheme of sections 11 and 12AB, the nature of the expenditure incurred by the assessee, the legislative framework governing specified violations, the judicial precedents discussed hereinbefore and the earlier order dated 15.07.2025 dropping proc....
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....r it should continue. Retrospective cancellation, on the other hand, proceeds on a far more serious premise, namely that the registration already granted deserves to be nullified from the very date of its grant. Such a consequence necessarily requires a far stronger legal and factual foundation than what would ordinarily be required in a simple renewal proceeding." 137. The Co-ordinate Bench thereafter noted that where the allegations themselves pertain to subsequent years, cancellation from the date of original registration becomes inherently incongruous: "118. A careful reading of the impugned order shows that the entire exercise undertaken by the learned CIT(E) arose from the assessee's application seeking renewal of registration ... The findings recorded in the impugned order are themselves founded on data relating to Financial Years 2022-23, 2023-24 and 2024-25. However, despite the fact that the entire factual examination concerns subsequent years, the ultimate consequence imposed is cancellation of registration from 23.09.2021. This, in our opinion, creates a serious disconnect between the material relied upon and the consequence ultimately imposed." 138. ....
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....rant is shown to be defective, retrospective cancellation would amount to treating a valid statutory registration as though it never existed, a consequence which cannot be lightly inferred. 142. We further note that the proceedings before the learned CIT(E) originated from an application seeking renewal of registration. A renewal proceeding proceeds on the assumption that a valid registration already exists. Such proceedings cannot ordinarily be converted into proceedings for annulment of the original registration from inception without satisfying the strict jurisdictional and factual requirements necessary for such drastic action. 143. Accordingly, even independently of our findings on the merits of the alleged violations, we hold that the learned CIT(E) was not justified in cancelling the assessee's registration retrospectively from 24.09.2021. The retrospective cancellation is therefore liable to be quashed on this ground also.The impugned order is therefore set aside and the learned CIT(E) is directed to grant/continue the registration sought by the assessee in accordance with law. 144. In view of the foregoing discussion, we hold that none of the reasons assigned ....