TaxTMI 
TaxTMI 
2026 (8) TMI 1849
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....onveniently skipped the query about justification of advancing loans to other parties related or otherwise while itself paying interest on borrowed money (multiple loan and O/D accounts). As per financial statements furnished by the applicant (reproduced below), it can be seen that there is a pattern every year where it has consistently been paying interest on borrowed money to banks whereas on the other hand it has been giving unsecured and interest-free loans to other entities. 3.7 It is worthwhile to see certain extracts of bank ledgers filed by the applicant which show facts enumerated in para 3.4. 3.8 Even a cursory glance of financial statement would throw up a pattern of practice of advancing interest bearing funds to other parties related or otherwise entirely interest free. In FY 2022-23, it can be seen that it has advanced Rs. 2,51,05,236/- to related entity Om Welfare & Education Trust and Rs. 3,50,00,000/- to Sombir. FY 2023-24 Financial statements reproduced below reveal the same pattern: In FY 2024-25, the pattern continues showing disregard for the financial propriety in respect of Trust money. 4. As can be seen from above....
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....d that, the impugned order is not based on correct appreciation of the statutory provisions of law and thus, the order is totally untenable both on facts and in law." 4. Grounds of appeal in ITA No. 8279/Del/2025: "1. That the learned Commissioner of Income Tax (Exemptions), Chandigarh has grossly erred both in law and on facts in rejecting the application for registration of the appellant society u/s 12A(1)(ac)(iii) of the Act. 2. That the learned Commissioner of Income Tax (Exemption) has failed to appreciate that, while examining the application under section 12A of the Act, the scope was to merely examine the objects of the society and, whether income received by the assessee society is liable to be considered under section 11 and 12 of the Act and, not whether the income is actually exempt under section 11 and 12 of the Act and therefore rejection of application of the assessee society is wholly misconceived. 3. That order dated 31.10.2025 u/s 12A(1)(ac)(iii) of the Act holding that appellant is not entitled to registration u/s 12A of the Act further establishes that impugned order suffers from inherent contradiction and, infirmities both factual ....
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....legally misconceived and unsustainable. 9. That further conclusion of the learned Commissioner of Income Tax (Exemptions) that "the application filed by the applicant for registration u/s 12AB of the Act is hereby rejected and this rejection will also supersede any registration granted u/s 12AB of the Act by any authority at any earlier time" is not based on correct appreciation of facts on record and therefore unsustainable. 10. That the findings and conclusions contained in the order of the learned Commissioner of Income Tax (Exemptions) are based on surmises, conjectures, suspicion and, irrelevant and extraneous considerations and, therefore untenable. 11. That various adverse findings recorded in the impugned order are factually incorrect, legally misconceived and untenable 12. That even otherwise the learned Commissioner of Income Tax (Appeals) passed the order without granting personal hearing and sufficient proper opportunity to the appellant and therefore the same is contrary to principle of natural justice and hence vitiated. It is therefore, prayed that the order dated 31.10.2025 passed by the learned Commissioner of Income Tax....
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....ns are in such denominations only being considered sacrosanct and otherwise to the figures are not reflecting some scrupulous activities. 7.2 The competent authority has observed that the some of the donations have been made to non-registered trust for which there is little doubt that charitable trust can make donations to other charitable trust and Instruction No. 1132 of CBDT dated 05.01.1978 specifically refers to the same and which seems to have escaped the attention of competent authority. 7.3 As with regard to Trust receiving the donations from Shiv Shakti Inter Globe Exports amounting to Rs.5,00,000/- on 04.02.2020 and that on same day the amount was donated 10 Shree Hanuman Sewa Samiti Taraori. We find no reason to doubt the activities being not genuine as there is no allegation or evidence to establish that the entity receiving the donations was non existent or non functional. 8. As with regard to loan of Rs.5,00,000/- was given to Shanti Van Gopal Gaushalla on 24.04.2020. We are of the considered view that in helping another trust like Shanti Van Gopal Gaushalla by giving temporary loan is not prohibited under the law. On the contrary, the Trust....
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....not understandable that if Shiv Shakti Inter Globe Exports Pvt. Ltd. which is a related company of the assessee trust want to do some charity than why the company not donated directly to the trust instead of the assessee trust. The same amount Rs. 9,71,796/- was donated by Shiv Shakti Inter Globe Exports Pvt. Ltd. on 30.03.2023 from which the assessee trust repaid the loan. Thereafter, some donations amounting to Rs. 11,00,000/-and Rs. 4,00,000/-were received from Shiv Shakti Inter Globe Exports Pvt. Ltd. and the same were further donated by assessee trust to some other trust. 13.1 We are of the considered view that the assessee trust has received amount from company of Chairman and hence, given donation to another Trust as stated hereinabove is legally permissible and there is no bar on this issue. 14. In the light of aforesaid discussion we are of considered view that competent authority has somehow gone too far to examine the financial actions of Trust, to doubt the genuineness of the activity and more specifically the observation in para 8 of the impugned order that "it is difficult to ascertain the genuineness of the activities being carried out by applicant&....
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....on 2. According to this definition, as originally enacted, it includes "relief of poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit". The words 'not involving the carrying on of any activity for profit qualified the last category only te "the advancement of any other object of general public utility and did not affect the other objects mentioned in this definition clause. So, the object of 'education has been declared as object of charitable purpose per se by the legislature and consequently, the concept of altruism cannot be imported in the scheme of the Act. This view is fully supported by the judgment of constitutional bench of the Hon'ble Supreme Court in the case of Surat Art Silk & Cloth Mfrs. Association (supra) wherein it was observed as under. "It is now well settled as a result of the decision of this court in Dharmadeepti v. CIT [1978] 114 ITR 454. that the words "not involving the carrying on of any activity for profit" qualify or govern only the last head of charitable purpose and not the earlier three heads. Where. therefore, the purpose of a trust or ....
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.... v. Shanti Devi Progressive Education Society viii) 127 ITD 164 (Del) O.P. Jindal Global University v. CIT ix) 68 SOT 433 (Delhi) Meritta Welfare Trust v. CIT 12. It is submitted that, according to section 12AA(1)(b) of the Act, the learned Commissioner of Income Tax at the time of registration has to restrict himself to 'two aspects". a) OBJECTS OF THE SOCIETY b) GENUINESS OF THE ACTIVITIES 14. Having regard to the aforesaid, the appellant seeks to judgement of Hon'ble Apex Court in the case of Ananda Social & Educational Trust v. CIT reported in 426 ITR 340 (pages 33-37 of JPB) wherein it has been held as under: 9. Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12 of the Act. In other words, if it a....
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....f Hon'ble Punjab & Haryana High Court in the case of CIT v. Yadvindra Public School Association reported in 488 ITR 327 (pages 38-41 of JPB) wherein it has been held as under: "2. The respondent/assessee had challenged the refusal of registration of the association under section 12AA of the Act, passed by CIT, Patiala vide order dated 25.09.2009. The Commissioner of Income Tax observed that the society had not been carrying on with any charitable activity as the society was not imparting education as a charitable purpose within the meaning of Section 2 (15) of the Act. The society had already been granted approval under Section 10 (23)(vi) of the Act but mere approval does not automatically entitle the assessee to registration under section 12AA of the Act. Furthermore, it was for the assessee to show before the authorities that the society was carrying out charitable activities. The CIT relied upon the judgment passed by the Supreme Court in Municipal Corporation of Delhi v. Children Book Trust (1992) 3 SCC 390/[1992] 63 Taxman 385 (SC) wherein, it was held that there is no charity unless there is an element of subsidy or alimonies for the poor and needy. Whereas, in ....
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....istration under Section 10 (23C) of the Act and the same factors would also be required to be considered for the cancellation of registration already granted to the educational institutions, while examining the case under Section 12AA of the Act, of course, taking into consideration the conditions provided therein also. 5. The Supreme Court in Ananda Social & Educational Trust v. Commissioner of Income tax 2020 (17) SCC 254/[2020] 114 taxmann.com 693/272 Taxman 7/426 ITR 340 (SC) laid down the scope of Section 12AA and observed that for the purpose of allowing registration under Section 12AA of the Income Tax Act, 1961, the authority shall examine whether the object of the society is of charitable nature or not, and whether the activities being performed by the society are genuine. The relevant para is quoted below:- "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 whet....
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....n'ble High Court of Punjab & Haryana dated 27.08.2010 vii) 117 ITR 284 (AP) Governing Body of Rangaraya Medical College" 6. On the other hand, the ld. 'DR' relied on the order of the ld. CIT(E). 7. Considered the rival submissions and materials placed on record. We observed that the assessee is in existence from 21.05.2007 onwards, the assessee was granted registration u/s 12A on 26.11.2008 and since then assessee is doing charitable activities. We observed from the chart tabulating gross receipts of the society at page 5 of the synopsis filed before us. We observed that the assessee has grown substantially over the years, a glance of the receipts and expenditure of the society will indicate the growth and imparting of charitable activities. 6. A chart tabulating the details of gross receipts of appellant society are as under: Sr. No. Assessment year Receipts Revenue expenses Capital expenses Total expenses i) 2008-09 Nil Nil ii) 2009-10 1,33,70,678 1,00,39,000 28,9.00,573 3,89.39,573 iii) 2010-11 3,21,47,963 2,41,14,071 1,53,58,000 3,94,72,071 iv) 2011-12 ....
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....ehow gone too far to exempt financial action of the trust, to doubt the genuineness of the activity and more specifically the observation in para 8 of the impugned order that it is difficult to ascertain the genuineness of the activities being carried out by the applicant, itself makes the impugned order unsustainable under the law. It was further observed that the competent authority has then erred in also passing an order of superseding registration granted u/s 12AB of the Act, without following the due process u/s 12AB(4) of the Act by referring to specified violation. Accordingly, the bench directed the competent authority to grant registration. 9. From the submissions we observed that the assessee is engaged in running university and school, basically providing education. In our considered view the object of the society covered by the inclusive definition of the expression charitable purpose u/s 2(15) of the Act. Further we observed that the Hon'ble Apex Court in the case of Ananda Social & Educational Trust (supra) in which it was held as under: 11. We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel....