The assessee trust filed applications in Form No. 10AB seeking registration under Section 12AB of the Income-tax Act, 1961 and approval under Section 80G(5). The Commissioner of Income Tax (Exemptions), Lucknow rejected both applications on the ground that the trust was not engaged in substantial charitable activities and that the genuineness of its activities was not established.

During appellate proceedings, the assessee submitted that it had received limited contributions, which were primarily utilised for the construction of a Satsang Bhawan, forming an integral part of its charitable objectives. It was further explained that due to financial constraints, other charitable activities could not be undertaken on a large scale at the initial stage. It was also placed on record that the construction of the Satsang Bhawan had since been completed and that charitable activities, including Satsang, had commenced.

The Income Tax Appellate Tribunal observed that utilisation of funds for construction of charitable infrastructure aligned with the objects of the trust cannot be construed as absence of charitable activity. The Tribunal accepted the explanation regarding paucity of funds and took cognizance of the fact that charitable activities had begun after completion of construction.

Accordingly, the Tribunal held that rejection of registration solely on the ground of non-commencement of substantial activities was unjustified. The impugned orders passed by the Commissioner (Exemptions) were set aside, and directions were issued to grant registration under Section 12AB and approval under Section 80G(5). Consequently, both appeals of the assessee were allowed.

 

SOURCE LINK:
https://itat.gov.in/public/files/upload/1767606794-JADCwk-1-TO.pdf