Charitable Status Recognised u/s 12A cannot Cease under FCRA: Madras HC sets aside Rejection, Orders Reconsideration [Read Order]

The Madras High Court, in a recent case, has ruled that once an entity gets recognised as charitable under section 12A of the Income Tax Act, 1961 it cannot cease to be one under the Foreign Contribution (Regulation) Act of 2010 (FCRA).

The impugned order was set aside, and the matter was remitted back to the Director of the FCRA wing for reconsideration

The petitioner, Arsha Vidya Parampara Trust, is a trust established on 08.06.2017. The founders are the disciples of Swami Dayananda Saraswati of Arsha Vidya Gurukalam, Coimbatore. The petitioner is engaged in teaching and training students from around the world, for spreading knowledge of Vedanta along with the Sanskrit language, teaching Hatha Yoga and yoga philosophy and also digitising and preserving ancient manuscripts.

The petitioner applied to the second respondent Director of the FCRA wing, for registration under the FCRA Act. The application was not processed for three years. In October 2024, certain queries were raised. The petitioner submitted a fresh application. Clarifications were sought.

The petitioner responded to them. However, the application seeking a grant of registration was

Rejected by the respondent. In response, this writ petition has been filed.

The rejection rested on two grounds, (a) The petitioner had received foreign contribution funds without prior permission and there has been a transfer of FC funds as a donation to another organisation and (b) The nature of the petitioner-organisation appears to be religious.

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The bench of Justice GR Swaminathan observed that the first ground was not sustainable.

It was noted that in the queries raised in April 2025, the authority had only raised the issue of receipt of foreign funds without proper permission. And in their reply, the petitioner admitted their fault. Also, when the authority once again drew the petitioner's attention to the very same receipt of funds and gave them an option of compounding the same, the petitioner compounded the offence by paying Rs.3,70,500/-.

Also, it was observed that the source of the said donation was not of any suspect origin. It was from the author of the Trust, who is based in the USA.

It was also observed that once compounded a contravention cannot be held against the applicant. So, where the violation is purely technical, and there is no larger implication, and the offence has also been compounded, then the lapse committed by the applicant ought not to be put against them. And once an offence is compounded, the slate is wiped clean. Moreover, it was observed that the allegation of transfer of funds to another organisation was raised for the first time in the rejection order, without prior notice or details, amounting to vagueness and violation of natural justice.

On the second ground, the court rejected the contention that the trust was religious as it taught the Bhagavad Gita, Vedanta, and Yoga. The court observed that the Bhagwad Gita is not a religious book as it placed its dependence on Allahabad High Court’s decision in Shyamal Renjan Mukherjee v. Nirmal Ranjan Mukherjee.

It was noted that many leaders of our freedom struggle, such as Mahatma Gandhi, Maharishi Aurobindo, Lokamanya Tilak, etc., invoked the Bhagavad Gita to inspire the nation to fight against colonial rule.

Also, it was further opined that Vedanta represents the pure philosophy evolved by the ancestors, and yoga is considered something universal

The Court also observed that the Income Tax Appellate Tribunal had already recognised the trust as a charitable organisation under Section 12A of the IT Act. Section 52 FCRA provides that its provisions are in addition to, and not in derogation of, other laws. Therefore, recognition under the IT Act cannot be negated under the FCRA regime.

For these reasons, the court set aside the impugned order and ordered the second respondent to reconsider the matter. It was also directed that the process should be completed within a period of three months from the date of receipt of copy of the order.

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