Non-commencement of activities does not render trust non-genuine for registration u/s 12AB; assesses proposed charitable objects.

आदशे/ORDER

PER ABY T. VARKEY, JM:

The present appeals filed are challenging the orders dated 22.09.2025 passed by the learned Commissioner of Income-tax (Exemptions), Chennai [in short ‘CIT(E)’] rejecting the applications seeking approval for registration u/s 12AB and 80G of the Act.

2. Briefly stated, the facts of the case are that, the assessee is a public charitable trust formed on 12.04.2006 evidenced by a registered trust deed bearing registration no. 34 of 2006. The objects of the trust deed include educational activities including running, maintaining and assisting any educational or medical institution including granting scholarships and assisting the poor and needy for medical treatments as well as relief to the poor. It is observed that, in pursuance of its objects, the assessee trust had acquired land parcels admeasuring 17.3 acres at Varadharajapuram, Kundrathur, in the years 2006 & 2007, with an intent to set up an educational institution. The acquisition of land was financed by loans obtained by the assessee. According to the assessee, due to restriction on the usage of land, pending conversion and also due to lack of financial resources, no further activity took place. Further, due to the old age of the Trustees, who had formed the trust in 2006 and certain incompatible clauses contained in the registered trust deed, a supplementary deed was executed on 26.11.2022 to make it consistent with the provisions of the Income Tax Act, 1961 [‘the Act’] and also the erstwhile trustees resigned and the younger generation of trustees were inducted in 2022. Subsequent thereto, the assessee trust had applied for the conversion of land in 2023, which was approved in 2026 and the assessee trust intended to operate a para-medical institution on the said land. In light of these developments, the assessee trust had filed Form 10AB seeking registration u/s 12AB of the Act and approval u/s 80G of the Act on 23.01.2025. After considering the details and documents furnished by the assessee trust, the Ld. CIT(E) issued a show cause notice dated 10.07.2025 in which he had sought for the details of the loans obtained along with repayment details and also the details of the fixed assets with documentary evidences.

3. The Ld. CIT(E) was of the view that, though the trust was established in the year 2006, it had not started any activities yet and that even during FY 2024-25, the assessee had reported NIL income. According to him therefore, in absence of any charitable activities, there is no genuineness of the assessee trust. The Ld. CIT(E) also referred to the contents of the Form 10AB filed by the applicant where the details of land were missing, which according to him, the assessee had purposely refrained from disclosing. The Ld. CIT(E) also doubted the veracity of the loans which were taken in the years 2006 & 2007 as these loans did not carry any interest nor had been repaid till date. The Ld. CIT(E) thus held that, there was a violation by the assessee as per Section 12AB(4), Explanation (e)(i), and thus, rejected the Form 10AB filed u/s 12A(1)(ac)(iii) of the Act and cancelled the same. On the same reasons, the Ld. CIT(E) also rejected the assessee’s application seeking approval u/s 80G of the Act. Aggrieved by these orders of the Ld. CIT(E), the assessee is in appeal before us.

4. Assailing the action of the Ld. CIT(E), the Ld. AR narrated the entire factual history of the assessee trust and explained the nature and purpose of the same, which we shall discuss in detail in the ensuing paragraphs. The Ld. AR also elaborately set out the pr