80G Approval Certificate is Sufficient Proof of 12A Registration

Issue

Can the Assessing Officer (AO) deny tax exemption under Section 11 to a charitable society solely because the assessee failed to produce the physical Section 12A registration certificate, even though the assessee furnished a valid approval certificate under Section 80G?

Facts

The assessee, a charitable society running a hospital, filed a return declaring nil income, claiming exemption under Section 11.
The AO denied the exemption, stating the assessee failed to submit evidence of its registration under Section 12A.
The assessee could not locate the original 12AA certificate but placed the Section 80G approval certificate on record.

Decision

The Tribunal/Court ruled in favour of the assessee.
It held that approval under Section 80G is legally dependent on the entity being registered under Section 12A/12AA. Statutory approval under 80G cannot be granted unless the underlying registration exists.
Therefore, the production of the 80G certificate serves as sufficient proof of valid registration. The exemption under Section 11 cannot be denied on this technicality.

Corpus Donations Not Taxable if 85% Income Applied; Medical Receipts Not ‘Commercial’

Issue

Can corpus donations be taxed as voluntary income if the trust has applied more than 85% of its total receipts for charitable purposes?
Does the proviso to Section 2(15) (which restricts commercial activities for General Public Utility trusts) apply to a hospital if its receipts are below the 20% threshold?

Facts

The AO treated corpus donations of ₹30.19 lakhs as ordinary voluntary donations and added them to the taxable income.
The AO also denied Section 11 exemption, alleging that the trust’s receipts from medical services exceeded 20% of total receipts, thereby triggering the proviso to Section 2(15) (treating it as a commercial activity).
Records showed the assessee had applied 87.87% of its total receipts (including the corpus) towards its objects.

Decision

The Tribunal/Court ruled in favour of the assessee.
On Corpus: Since the assessee had applied more than 85% of its total receipts (even if corpus was treated as income) towards charitable purposes, there was no taxable surplus. The addition was unjustified.
On Proviso to 2(15): The court found that the receipts from medical services were not commercial in nature and, factually, constituted less than 20% of total receipts. Therefore, the proviso to Section 2(15) was not attracted, and the charitable status remained intact.

Key Takeaways

Interlinked Approvals: A Section 80G certificate is valid circumstantial evidence of the existence of a Section 12A registration, as the former cannot exist without the latter.
Application of Income Shield: Even if a specific receipt (like a corpus donation) is disputed by the AO, demonstrating that >85% of total receipts were actually applied to charitable objects can protect the trust from tax liability.
Medical Relief vs. GPU: While this case discussed the 20% limit (applicable to General Public Utility), it is important to note that “Medical Relief” is generally a specific charitable object separate from GPU. However, even under the GPU test, keeping commercial receipts below 20% preserves the exemption.

IN THE ITAT JAIPUR BENCH ‘SMC’

Agrasen Medical Relief & Research Society

Income-tax Officer (Exemption)^*

Dr. S. Seethalakshmi, Judicial Member
and RATHOD KAMLESH JAYANTBHAi, Accountant Member

IT Appeal No. 1026 (JPR) of 2025
[Assessment year 2016-17]

OCTOBER 30, 2025

P.C. Parwal, CA for the Appellant. Gautam Singh Choudhary, JCIT-DR for the Respondent.

ORDER

Rathod Kamlesh Jayantbhai, Accountant Member. –This appeal filed by the assessee is directed against the order of Id. AddI/JCIT(A)-6, Mumbai dated16-06-2025 for the assessment year 201617 raising therein following grounds of appeal;

‘’1. The Ld. Addl. CIT(A) has erred on facts & in law in upholding the order of AO in denying exemption u/s 11 for the reason that for the year under consideration assessee has not furnished copy of certificate of registration u/s 12A of the Act and fresh registration certificate submitted by the assessee is for the period AY 2022-23 to 2026-27 ignoring that (i) assessee has furnished sufficient documentary evidences to establish that it is registered u/s 12AA of the Act (ii) fresh registration u/s 12A(1)(ac)(i) of the Act could be granted only when the trust or institution is registered u/s 12AA of the Act and (iii) Hon’ble ITAT in assessee’s own for AY 2017-18 where also exemption u/s 11 was denied for similar reason has allowed the appeal of assessee.

2. The Ld. Addl. CIT(A) has erred on facts & in law in upholding the action of AO in treating the corpus donation received by the assessee as voluntary donation and thereby confirming the addition of Rs.30,19,100/-. It has further erred in not accepting the alternate contention of assessee that even if corpus donation is considered as voluntary donation, then also no addition can be made as assessee is eligible for exemption u/s 11 of the Act by holding that since the assessee is not registered u/s 12A of the Act, it is not eligible for claiming exemption u/s 11 of the Act.

2.1 Brief facts of the case are that the assessee is a charitable society registered under Societies Registration Act vide order no.500/JP/89-90 dt. 30.09.1990. It is engaged in providing medical facility and is running a hospital in the name of Maharaja Agrasen Hospital Jaipur. It is registered u/s 12A of the Act vide registration no.37/4 dt. 04.09.2008 and also approved u/s 80G of the Act vide approval no.49/26 of even date. It is also granted fresh registration u/s 12A(1)(ac)(i) of IT Act vide registration dt. 24.09.2021 for AY 2022-23 to AY 2026-27. The income of assessee for AY 2011-12 was assessed u/s 143(3) of the Act considering that it is registered u/s 12AA of the Act. It is noted that the assessee filed the return declaring Nil income after claiming exemption u/s 11 of the Act. The AO at Pg 2, Para 3 of the order observed that assessee has not submitted evidence regarding registration u/s 12A of the Act. He further observed that assessee received donation of Rs.30,19,100/- which is directly credited to corpus fund account. The donation receipt provided by the assessee are manipulated by inserting the word corpus fund at a later stage and therefore he considered amount of Rs.30,19,100/- as voluntary donation. Further by referring to section 2(15) of the Act it is observed that assessee declared receipt of Rs.16,45,911/- out of total receipt of Rs.64,80,355/- as received for professional services rendered to M/s Sigma Electric Manufacturing Corp. Pvt. Ltd. on which TCS u/s 194J was deducted by the creditor and such receipt is more than 20% of the total receipt. Accordingly, by not allowing exemption u/s 11& 12 of I.T, Act, AO assessed the total income at Rs.26,35,660/- computed as under: –

Net deficit as per Income & expenditure A/c (-) 3,83,440
Less: Voluntary donation received as earmarked exp. 30,19,100
Total income 26,35,660

2.2 Before ld. CIT(A), the assessee claimed that even if corpus donation is considered as voluntary donation, still the application of income is more than 85% of the receipt (refer Pg 7 & 8 of CIT(A) order). The receipt of Rs.16,45,911/- is on account of medical services provided to the workers of M/s Sigma Electrical Manufacturing Corp. Pvt. Ltd. by organizing medical camps and health checkup camps on payment of nominal fees without any profit making and if corpus donation of Rs.30,19,100/- is considered, the receipt from Sigma Electric Manufacturing Pvt. Ltd. will be below 20% of the total income, hence proviso to section 2(15) would not apply. Further it is stated that though the assessee could not furnish copy of registration certificate u/s 12A but registration certificate u/s 80G was furnished, for AY 2011-12 it is stated that assessee is registered u/s 12AA of the Act and subsequently assessee is also granted registration u/s 12AB of the Act. The Ld. CIT(A), however, at Pg 16-19, Para 6 to 6.4 after reproducing the observation of the AO and applying the decision of Hon’ble Supreme Court in case of Goetze India Ltd. v. CIT (SC) dismissed the appeal of the assessee.

2.3 During the course of hearing, the ld. AR of the assessee filed the following written submission with the prayer to allow exemption u/s 11 of the Act and also submitted that receipt of Rs.16,45,911/- is for medical services rendered to M/s.Sigma Electric Manufacturing Co. Pvt Ltd. and it is not a commercial receipt.

”1. At the outset it is submitted that though the assessee could not place on record the registration certificate issued u/s 12AA of the Act but it has placed on record the approval certificate u/s 80G of the Act which was issued on the same date on which registration u/s 12AA of the Act was granted by the CIT-II, Jaipur. It may be noted that approval u/s 80G cannot be granted unless a trust or institution or society is registered u/s 12AA of the Act as mandated by sub-clause (i) of sub-section 5 of section 80G. It may also be noted that the AO in the assessment order passed u/s 143(3) dt. 10.2.2014 for AY 2011-12 has accepted that assessee is registered u/s 12AA of the Act. The assessee has subsequently been granted fresh registration u/s 12A(1)(ac)(i) of the Act, the precondition of which is that the trust or institution is registered u/s 12AA of the Act. In these circumstances, only because assessee could not place on record registration certificate issued u/s 12AA of the Act, the benefit of exemption u/s 11 cannot be denied unless the revenue place on records any evidence that registration granted u/s 12AA of the Act is not inforce for AY 2016-17. It may be noted that similar issue was raised by AO in AY 2017-18 but the Hon’ble ITAT in Agrasen Medical Relief & Research Society v. ITO (E) [IT Appeal No. 115/JPR/2025, dated 26-5-2025] vide order dt. 26.05.2025 (copy enclosed) held that considering the facts of the case, only because assessee could not place on record registration certificate u/s 12AA of the Act, the benefit of exemption u/s 11 cannot be denied and thus allow the appeal of the assessee. Hence the AO be directed to compute the income after allowing exemption u/s 11 of the Act.

2. It is submitted that even if the corpus donation is considered as voluntary donation, the assessee has applied more than 85% of its receipt for charitable purpose calculated as under:-

(Amount in Rs.)

Total receipts as per Income & Expenditure Account		64,80,355
Corpus donation		30,19,100
Total receipts available for application		94,99,455
Application of income: – . Revenue expenses as per l&E A/c excluding depreciation i. Capital expenditure as per Fixed assets schedule	62,37,417 21,09,490
Total application		83,46,907
Percentage of application		87.87%

From the above it can be noted that assessee has applied 87.87% of its receipt for charitable purpose and therefore after considering the exemption u/s 11, the total income of the assessee would be Nil. The Ld. CIT(A) has relied on the decision of Hon’ble Supreme Court in case of Goetze India Ltd. v. CIT but this decision is not applicable on facts as assessee is making an alternate claim that even if corpus donation is considered as voluntary donation, its income would be Nil after allowing exemption u/s 11 of the Act. Otherwise also, Hon’ble Supreme Court in its decision though held that a claim cannot be entertained by the AO without the revised return filled by the assessee, it further held that this does not imping upon the power of the appellate authority to entertain a new claim. Hence the Ld. CIT(A) has incorrectly applied the decision of Hon’ble Supreme Court in upholding the order of the AO.

3. So far as receipt of Rs.16,45,911/- for medical services rendered to M/s Sigma Electric Manufacturing Corp. Pvt. Ltd. is concerned, the same is not a commercial receipt and otherwise also such receipt is less than 20% of the total receipt of Rs.94,99,455/-. Hence proviso to section 2(15) of the Act is not applicable in the present case.

In view of above, AO be directed to recompute the income by allowing exemption u/s 11 of the Act.”

2.3.1 Further the Id.AR of the assessee has relied upon the order of the ITAT dated 26-11-2025 in the case of the assessee in Agrasen Medical Relief & Research Society v. ITO (E) [IT Appeal No. 115/JPR/2025, dated 26-5-2025] for the assessment year 2017-18 wherein the appeal of the assessee was allowed giving exemption u/s 11 of the Act.

2.4 On the other hand, the ld. DR supported the order of the ld. CIT (A).

2.5 We have heard both the parties and perused the materials available on record. In this case, it is noted that the issue raised in the above mentioned appeal is almost similar to the appeal of the assessee in ITA No.115/JPR/20225 for the assessment year 2017-18 wherein the bench has given allowed the appeal of the asseessee by giving following observations.

”5. We have heard the rival submissions, perused the material on record and gone through the orders of the lower authorities. We note that AO has denied exemption u/s 11 to the assessee for the reason that it has not submitted registration certificate u/s 12AA of the Act and thus computed the total income Rs.7,69,088/- by considering the corpus donation as part of gross receipt and disallowing the claim of application on account of capital expenditure. The Ld. CIT(A) has upheld the order of AO for the reason that assessee could not establish whether it is approved for exemption and if so, whether the same was inforce for the year under consideration. We find that assessee could not place on record the registration certificate issued u/s 12AA of the Act but it has placed on record the approval certificate u/s 80G of the Act. Approval u/s 80G cannot be granted unless a trust or institution or society is registered u/s 12AA of the Act as mandated by sub-clause (i) of sub-section 5 of section 80G. We also find that AO in the assessment order passed u/s 143(3) dated 10.2.2014 for AY 2011-12 has accepted that assessee is registered u/s 12AA of the Act. The assessee has subsequently been granted fresh registration u/s 12A(1)(ac)(i) of the Act, the precondition of which is that the trust or institution is registered u/s 12AA of the Act. Thus, there is no doubt that the assessee is registered under section 12AA of the IT Act, 1961. In these circumstances, only because assessee could not place on record registration certificate issued u/s 12AA of the Act, the benefit of exemption u/s 11 cannot be denied. Further, Rs.1,58,000/- is paid by the assessee is fee for late filing of TDS return u/s 234E of the Act. It is not a penalty hence this amount has to be considered as application of income in view of decision of Hon’ble Andhra Pradesh High Court (supra). In view of above facts, the AO is directed to compute the income of the assessee by allowing exemption u/s 11 of the Act. ”

2.5.1 As regards the corpus donation received by the assessee as voluntary donation and thereby confirming the addition to the tune of Rs.30,19,100/- by the lower authorities, the ld. AR submitted that even if the corpus donation is considered as voluntary donation, the assesse has applied more than 85% of its receipt for charitable purpose whose details are as under:-

Total receipts as per Income & Expenditure Account		64,80,355
Corpus donation		30,19,100
Total receipts available for application		94,99,455
Application of income: – i. Revenue expenses as per I&E A/c excluding depreciation r. Capital expenditure as per Fixed assets schedule	62,37,417 21,09,490
Total application		83,46,907
Percentage of application		87.87%

This shows that the assessee has applied 87.87% of its receipt for charitable purposes. So far as receipt of Rs.16,45,911/- for medical services rendered to M/s Sigma Electric Manufacturing Corp. Pvt. Ltd. is concerned, the same is not a commercial receipt and otherwise also such receipt is less than 20% of the total receipt of Rs.94,99,455/-. Hence proviso to section 2(15) of the Act is not applicable in the present case. Hence, in this view of the matter, we do not concur with the findings of the ld CIT(A). Thus the appeal of the assessee is allowed.

3. In the result, the appeal of the assessee is allowed.