Facts of the Case

The assessee, a charitable trust/institution, claimed exemption under Section 11 of the Income-tax Act on the basis of registration under Section 12A/12AA. During assessment proceedings, the Assessing Officer examined the activities and financial transactions of the trust and concluded that the statutory conditions for availing exemption were not fully satisfied. Accordingly, exemption was denied. The appellate authority upheld the action of the Assessing Officer, leading the assessee to approach the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether registration under Section 12A/12AA automatically entitles a trust to exemption under Section 11.
  2. Whether the assessee complied with conditions regarding application of income for charitable purposes.
  3. Whether violation of provisions such as Section 13 disentitles the trust from exemption.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that it was duly registered as a charitable institution.
  • It was argued that the activities carried out were for charitable purposes.
  • The denial of exemption was claimed to be unjustified and contrary to law.
  • The assessee sought restoration of exemption under Section 11.

Respondent’s (Revenue’s) Arguments

  • The Revenue submitted that registration alone does not guarantee exemption.
  • The assessee failed to comply with statutory conditions governing application of income.
  • Certain activities or transactions violated provisions restricting benefit to specified persons or non-charitable purposes.
  • Therefore, exemption was rightly denied.

Court Order / Findings (ITAT)

The Tribunal observed that registration under Section 12A/12AA is a necessary but not sufficient condition for claiming exemption under Section 11. The assessee must also demonstrate actual application of income for charitable purposes and compliance with all statutory requirements.

Where provisions such as Section 13 are violated, exemption cannot be granted even if registration remains valid. Considering the facts and evidence on record, the Tribunal upheld the denial of exemption.

Important Clarification

The Tribunal emphasized that charitable institutions must strictly comply with statutory conditions each year. Registration confers eligibility to claim exemption but does not provide automatic or unconditional relief. Any deviation from prescribed requirements may result in denial of benefits.

Link to download the order – https://itat.gov.in/public/files/upload/1574673331-JAISHREE-238(TE).pdf

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