Quantum Of Expenditure Not Relevant for Purposes of S.12AB Registration: ITAT Holds Genuineness of Object, directs to Grant Registration [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that quantum of expenditure was not relevant for granting registration under section 12AB and holds genuineness of object for granting registration.

Dhwani Shristi Foundation (assessee), a charitable trust, applied for final registration under Section 12AB and approval under Section 80G by filing Form 10AB on 20.04.2024. The trust, registered as a public trust on 28.06.2023, engages in charitable activities, including providing medical aid to underprivileged sections of society.

The CIT(E) rejected the applications, citing that the assessee had not made substantial expenditure towards its objectives, failed to submit proof of activities, and had not commenced activities towards achieving its objectives.

The CIT(E) noted that the trust received donations of Rs. 48,80,444, service income of Rs. 2,09,000, and interest income of Rs. 1,92,024, but incurred only Rs. 5,90,512 (approximately 13% of donations) on medical relief, with Rs. 40 lakhs invested in fixed deposits.

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Aggrieved by the CIT(E)’s orders, the assessee filed appeals before the ITAT. The counsel for the assessee argued that the CIT(E) erred in focusing on the quantum of expenditure rather than the genuineness of the trust’s activities.

The counsel submitted that the trust, being in its first year of operation, had submitted all required documents, and the investment in fixed deposits was in compliance with Section 13(5) of the Act for future charitable projects.

The two-member bench comprising Laxmi Prasad Sahu (Accountant Member) and Keshav Dubey (Judicial Member) observed that the CIT(E)’s rejection was primarily based on the trust’s low expenditure, despite the assessee submitting all necessary documents.

The Tribunal observed that the Jurisdictional Assessing Officer (JAO) confirmed medical relief expenses of Rs. 5,90,512, which were not deemed non-genuine. The Tribunal held that the purpose of Section 12AB is to ensure the genuineness of a trust’s objects and activities, including proposed activities.

The Tribunal emphasized that the quantum of expenditure is not relevant for granting registration, but rather the authenticity of the trust’s activities in line with its objectives. The Tribunal found no evidence of non-genuineness in the trust’s activities.

The Tribunal directed the CIT(E) to grant registration under Section 12AB and approval under Section 80G of the Income Tax Act. The Tribunal held that the CIT(E) must focus on the genuineness of the trust’s activities rather than the extent of expenditure. The appeals of the assessee were allowed.

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