Construction of educational infrastructure qualifies as commencement of charitable activity for Section 80G(5) approval

ORDER

Dr. Manish Borad, Accountant Member.- This appeal by the assesse is directed against the order dated 26.07.2024 of the Commissioner of Income Tax (Exemption), Bhopal.

2. Assessee has raised following grounds of appeal:

“1. The Ld. CIT Exemption has erred in rejecting the application of final registration sought u/s 80G. Such action of Ld. CIT – Exemption is against the facts and circumstances of the case and in Law.

2. The Ld. CIT Exemption grossly erred in rejecting the application for final registration u/s 80G filed in form 10AB and also erred in rejecting the provisional registration u/s 80G at 10/03/2022 granted by CPC. On the erroneous fundings that the trust has not started any charitable activities.

3. That, the appellant, carves leave to add, amend or modify any of the grounds of the appeal.”

3. Brief facts of the case are that the assessee, a charitable trust established on 28.07.2014 is duly registered with Registrar of Public Trust vide certificate dated 26.06.2015. The main object of the assessee trust includes comprehensive development of society through education and welfare initiatives and also establishing, operating, and managing schools, colleges, and other educational activities with the aim of working in the field of education, health, environment and eradication of illiteracy. The assessee has commenced its activities on 10.10.2021 and after obtaining provisional registration on 10.03.2022, the assessee trust has also obtained the regular and final registration u/s 12A r.w.s. 12AB of the Act on 29.11.2023 vide registration No.ABGAS2485K23BP01 The assessee has also obtained provisional registration u/s 80G(5) of the Act on 10.03.2022. Subsequently the assessee filed From 10AB for getting the final approval u/s 80G(5) of the Act vide application dated 18.01.2024. Various information were called for by Ld. CIT(Exemption) vide notices dated 23.02.2024, 02.07.2024 and 19.07.2024. The assessee made detailed submissions along with annexures on 06.03.2024, 08.07.2024 and 24.07.2024. However Ld. CIT (Exemption) rejected the assessee’s application for grant of approval u/s 80G of the Act solely on the ground that the assessee has not conducted any charitable activities till date and only constructing building and genuineness of the activities of such institution cannot be examined as on date which is necessary to verify the eligibility of the assessee. In short Ld. CIT(Exemption) has denied the approval u/s 80G(5) of the Act solely on the ground that the assessee has not conducted any charitable activity.

4. Aggrieved assessee is now in appeal before this tribunal and the assessee has filed detailed paper book running into 219 pages on 23.04.2025 and also filed written submission along with the list of judicial pronouncements vide submission dated 06.08.2025. Ld. Counsel for the assessee vehemently argued referring to the paper book and detailed written submission and the crux of the arguments are that the assessee trust in order to fulfill the object for which it has been established has started construction of the building and has incurred Rs.86,17,124/- towards land and building which is evident from the audit report dated 18.01.2024 and also the pictures of the construction site placed in the paper book from pages 30 to 54. He further submitted that for attainment of the object of the trust including that of imparting education, the building are necessary and the construction of the building have also been commenced and the source of fund utilised for acquiring land and construction of building are from the donation received by the assessee trust. Referring to the following judicial precedence he stated that if the trust created the infrastructure to carry out charitable activities then such infrastructural activities qualify as charitable in nature and the genuineness of the trust intent and its stated object should be the primiary consideration for grant of registration:-

1. CIT v. D.P.R. Charitable Trust [MAIT No. 17/2003, dated 1-8-2011]

2. Shri Ram Krishna Ramdev Sewa Sansthan v. CIT Exemption [IT Appeal Nos. 406 & 407 (Ind.) of 2022, dated 9-11-2023]

3. Gurudham Ashram v. CIT (Exemptions) [ITA Nos. 470 & 471/Ind/2018] – ITAT Indore Bench, A.Y. [as applicable], decided on 23.01.2020

5. On the other hand Ld. CIT-DR apart from supporting the order of Ld. CIT(Exemption) also referred to the decision of coordinate bench, Mumbai in the case of Hemlata Charities v. CIT, Exemptions  (Mumbai – Trib.) and another decision of coordinate bench, Agra in the case of Hardayal Charitable and Educational Trust v. CIT-II, Agra  ITD 179 (Agra).

6. We have heard rival contentions and perused the records placed before us. We observe that the assessee is a charitable trust and has been granted final registration u/s 12A r.w.s. 12AB of the Act vide certificate dated 29.11.2023. The assessee trust is engaged in charitable activities in the area of operate and organize schools, colleges and all other education related activities with the aim of working in the field of education, working for health, education, environment and eradication of illiteracy,to establish and operate schools, libraries, educational institutions etc. and to motivate the youth of the society for employment by providing computer education and training.

7. We further observe that the assessee trust filed an application for grant of approval u/s 80G(5) of the Act so that the donors gets the benefit of deduction u/s 80G of the Act and such benefit is like an incentive for the donors for giving donation for the charitable activities carried out by various organisations. In the instant case the assessee trust has started the activity of constructing the building which will be used in the future to operate/run school, colleges and other educational institutions for carrying out charitable activity in the field of education, health, environment and eradication of illiteracy. It remains an undisputed fact that for carrying out charitable activity in the field of health and education one needs the building and other office spaces. Now the assessee’s application for approval u/s 80G(5) of the Act has been rejected by the Ld. CIT(Exemption) solely on the ground the assessee has not carried out any charitable activity till date and only constructing building. Thus the observation of Ld. CIT(Exemption) itself indicates that he after perusing the submission filed by the assessee on various dates 06.03.2024, 08.07.2024 and 24.07.2024 has appreciated the fact that construction of building activities are under going as per paper book placed from pages 50 to 54 and the pictures also show that the building with ground plus three floors stands constructed and other activities are in process. Even the audited financial statement also asserts this fact that the assessee has incurred capital expenditure of Rs.86,17,124/- on land and building. In view of Ld. CIT(Exemption) construction of building does not fall in the category of charitable activities. We however defer from impugned observation of Ld. CIT(Exemption) because once the assessee has been registered u/s 12A r.w.s. 12AB of the Act shows that the revenue authorities have accepted that the object of the trust are charitable in nature as provided in Section 2(15) of the Act. Now the object of the assessee is of imparting education and related fields as mentioned (supra) and as a part of achieving this object land have been purchased and building is under construction. Such buildings play very important role for carrying out charitable activities and the major funds in the form of donation are required for construction of such buildings. Therefore in our considered view the construction of buildings with the object of utilising them for carrying out the charitable activities is to be construed as a part and parcel of the charitable activity forming part of the objects for which the assessee trust is registered.

8. So far as the judicial precedence relied by the Ld. CIT(DR) is concerned we find that in the case of Hardayal Charitable and Educational Trust (supra) the issue relates to rejection of registration u/s 12AA and approval u/s 80G of the Act and the same is not applicable on the present case as the assessee in the instant case has already been granted registration u/s 12A r.w.s. 12AB of the Act. In the other decision referred by Ld. CIT(DR) in the case of Hemlata Charities (supra) we find that the issue in this case relates to change of object of the trust and even the tribunal in para 6 of this order dated 21.02.2025 has held that the assessee will take time to get the relevant object clauses either clarified or amended in the trust deed with the Office of Charity Commissioner. Further the tribunal has given liberty to the assessee to file the amended trust deed and the Ld. CIT(Exemption) was directed to consider the application in accordance with law. This decision is also not applicable on the facts of the instant case because the issue relates to change in the object of the trust whereas in the instant case there is no dispute about the object of the assessee trust. Therefore both the decisions referred by Ld.CIT(DR) not applicable on the instant case.

9. We therefore in the given facts and circumstances of the case are of the considered view that since the assessee has started the activity of constructing the building for running school/colleges and other educational institutions it indicates that the assessee has started carrying out the charitable activity during the year under consideration as per registered objects and is therefore very much eligible for grant of approval u/s 80G(5) of the Act. We therefore set aside the impugned finding and direct Ld. CIT(Exemption) to grant approval u/s 80G(5) of the Act to the assessee trust as requested in the application filed in Form No.10B on 18.01.2024. Effective grounds of appeal No.1 & 2 are allowed. Ground No.3 is general in nature.

10. In the result appeal of the assessee is allowed as per terms indicated herein above.