Mere Purchase of Land Not Commencement of Charitable Activities: ITAT directs to Grant Registration u/s 12AB [Read Order]
Mere receipt of donation or purchase of land cannot be considered as commencement of charitable activities; such steps are only preparatory and facilitate future operations.
Purchase of Land - Charitable Activities - ITAT - taxscan
Purchase of Land - Charitable Activities - ITAT - taxscan
The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the mere purchase of land or preparatory steps such as acquiring infrastructure cannot be equated with the commencement of charitable activities.
Imame Rabbani Foundation, a trust based in Punjab, had filed an application in Form10AB on 28 June 2024 seeking regular registration under Section 12AB. Earlier, the trust had been granted provisional registration by the Central Processing Centre (CPC), Bengaluru, on 16 January 2024.
However, the CIT(E), Chandigarh, rejected the application, observing that the trust had already commenced activities on 26 December 2022, when it purchased a piece of land. According to the CIT(E), such a trust could not seek provisional registration, which is meant only for entities that had not commenced charitable activities.
The assessee’s counsel argued that the rejection was hyper-technical and unjustified, contending that purchasing land cannot amount to the commencement of charitable activities. It was submitted that the act of acquiring land or initial infrastructure merely represents preparatory steps to enable future operations, not the implementation of the trust’s charitable objectives.
The assessee relied on the decision of the ITAT Surat Bench in Shrimati Shantaben Haribhai Gajera Foundation v. CIT(E), where the Tribunal held that receiving seed donations or purchasing land does not constitute commencement of charitable activity, which begins only when the trust actually delivers charitable benefits to beneficiaries.
The counsel further argued that the denial of registration on a technical error or mistaken selection of a category defeats the purpose of Section 12AB, which is to facilitate the registration of genuine charitable entities, not to penalize them for procedural lapses.
The Departmental Representative supported the CIT(E)’s order, contending that under Section 12A(1)(ac)(iii), provisional registration is available only to trusts that have not commenced activities. Since the assessee admitted to purchasing land, it was argued that charitable activity had begun, making the provisional registration invalid.
The ITAT held that the purchase of land cannot be considered as commencement of charitable activity. The Tribunal noted that the CIT(E) had not questioned the genuineness of the trust or its charitable objectives but had rejected registration merely on technical grounds.
The Bench comprising Shri Laliiet Kumar (Judicial Member) and Shri Manoj Kumar Aggarwal (Accountant Member), referred to the Shantaben Haribhai Gajera Foundation ruling, stating that “mere receipt of donation or purchase of land cannot be considered as commencement of charitable activities; such steps are only preparatory and facilitate future operations.”
The bench also stated that charitable activity begins when beneficiaries actually receive benefits, not when infrastructure is acquired. It also observed that technical or procedural errors in digital filings should not defeat substantive rights, especially in light of the recent procedural transitions following amendments to Section 12AB and the digitalization of the registration process.
Accordingly it directed the Commissioner of Income Tax (Exemptions) [CIT(E)], Chandigarh, to grant registration to Imame Rabbani Foundation under Section 12AB of the Income Tax Act, 1961.
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