The Sustainability Foundation vs. CIT(E), ITA Nos. 5044 & 5045/Del/2024
ITAT Delhi set aside orders passed by the CIT (Exemptions) rejecting applications under Section 12AB and Section 80G of the Income Tax Act, 1961. The ITAT emphasized that tax authorities must assess charitable intent and proposed activities, not merely the past conduct of an organization, when considering registration applications from newly formed trusts.
Background
The applicant, a newly set up charitable organization with limited resources, filed:
- Form 10AB seeking registration under Section 12AB(1)(b)(ii)(B)
- Form 10AD for approval under Section 80G(5)(ii)(b)(B)
The CIT (Exemptions) issued multiple notices seeking clarifications and documentation, and the applicant submitted partial responses due to operational constraints. However, the CIT(E) rejected both applications citing failure to establish commencement of charitable activities.
The trust argued that:
- It was still in its formative years with minimal staff and funds.
- Documents were submitted, but some could not be uploaded due to technical glitches.
- Rejection was made without a personal hearing or adequate consideration of submissions.
- Authorities ignored proposed activities and evaluated only on lack of past actions.
ITAT’s Key Findings
The ITAT found merit in the appellant’s arguments and relied on the Supreme Court’s ruling in Ananda Social & Educational Trust v. CIT (426 ITR 340), which clarified that:
“Section 12AA pertains to the registration of the trust and not to the assessment of what a trust has actually done… The term ‘activities’ includes ‘proposed activities’.”
This reinforced that registration cannot be denied solely because charitable activities haven’t fully commenced, especially for newly established organizations.
Outcome
The ITAT:
✅ Set aside both rejection orders
✅ Remanded the matter back to the CIT(E)
✅ Directed the CIT(E) to reassess the applications after giving the applicant a fair opportunity of being heard
Why This Matters
This judgment is a vital precedent for:
- Newly established NGOs and charitable trusts that may not have extensive activities to show.
- Clarifying that intent and proposed programs are sufficient grounds for seeking tax exemption registrations.
- Reminding authorities to uphold the principles of natural justice and avoid mechanical rejections.
Takeaway for Non-Profits
Trusts applying under Section 12AB or 80G should:
- Clearly articulate their charitable objectives and future plans
- Maintain even minimal evidence of organizational activity
- Request personal hearings if unable to submit complete information online
- Cite the Ananda Social Trust case if facing premature rejection