Section 80G Denial Invalid for Surplus Holding | ITAT

Case Details: Dr. T.M.A. Pai Foundation vs. Commissioner of Income-tax (Exemptions) - [2025] 175 taxmann.com 719 (Bangalore-Trib.)

Judiciary and Counsel Details

• Prashant Maharishi, Vice President & Keshav Dubey, Judicial Member
• Smt. Sheetal Borkar, A.R. for the Appellant.
• Shivanand Kalakeri, DR for the Respondent.

Facts of the Case

The assessee-Trust was established for educational purposes and applied for approval under section 80G. However, the Commissioner (Exemptions) rejected the approval under section 80G because the assessee reported a yearly surplus, which was not utilised for charitable purposes. In the first appeal, the CIT(A) confirmed the order of CIT(E). Aggrieved by the order, the assessee appealed to the Bangalore Tribunal.

ITAT Held

The Tribunal held that it is undisputed that the assessee was registered under section 12A. The registration under section 12A must have been granted only after the Commissioner (Exemptions) requested the document/information from the trust to satisfy herself about the genuineness of the trust’s activity or institution.

There were two reasons for the rejection of approval under section 80G. The assessee reported a surplus annually, which was not utilised for charitable purposes. The assessee submitted that the surplus amount was accumulated in FDs and received interest income. It also submitted that the private institution, well-funded by high fee receipts and management fees, does not commensurately pass on tangible and intangible facilities.

The assessee also contended that the fee receipts are revenue generated from the institution’s regular activities, and it has not been issued any certificate under section 80G, like any other donations. Further, the assessee received tuition and hostel fees and receipts from donations/grants, eligible for deductions under section 80G. The fee receipts were revenue generated from the assessee’s regular activities.

CIT(E) did not even whisper about any activity of the trust being non-genuine. CIT(E) did not point out any specific circumstances under which the fees received had not been commensurately passed on regarding tangible and intangible facilities. These were merely sweeping statements without any corroborating evidence.

Thus, the approval under section 80G could not be denied, especially when it was established for charitable purposes within the meaning of section 2(15), and registration under section 12A had already been granted after verifying the genuineness of the activities carried out by the assessee.