#Charitable Trust

Bank deposits, including current-account balances, are deemed ‘another capital asset’ under Section 11(1A) of the Income-Tax Act. This allows charitable trusts to claim full exemption on capital-gain income reinvested in such deposits, expanding the range of tax-free investment options for trusts.

The ITAT Jodhpur set aside the CIT(E)’s refusal to register a charitable trust under Section 12AB, ruling that the absence of a dissolution clause and alleged Section 13(1)(b) violations do not prevent registration. This clarifies that such procedural deficiencies are not fatal at the grant stage, benefitting existing and prospective charitable trusts seeking tax-exempt status.

ITAT Delhi rules sale of milk by a gaushala trust is incidental to its charitable purpose under Section 2(15) proviso, affirming Section 12A registration. The ruling clarifies that receipts from milk sales do not disqualify trusts from tax exemptions if aligned with primary charitable objectives.

The ITAT Delhi has ruled that returning excess CSR funds to the original donor does not violate Section 13(1)(c)(ii) of the Income Tax Act, as it lacks the element of benefit to a prohibited person. This clarifies that charitable trusts can return unutilized corporate donations without forfeiting their tax exemption under Section 11, providing critical relief to NGOs managing CSR compliance.

The ITAT Delhi has ruled that tax authorities cannot cancel a charitable trust’s registration or deny 80G approval based on undisclosed field enquiry reports, violating the fundamental right to be heard. This sets a critical precedent for all trusts and NGOs facing tax scrutiny, ensuring procedural fairness in exemption decisions grounded in secret evidence.

The ITAT Pune has ruled that a mistaken selection of clause in Form 10AB under Section 80G-such as filing under clause (ii) instead of (iii)-does not invalidate the application if the error is inadvertent. This sets a vital precedent for charitable trusts and NGOs, ensuring administrative oversights don't derail tax exemptions when substance and intent are intact.

Kerala High Court reinforces that plaintiffs under Section 92 CPC must establish both locus standi and a prima facie case to sue religious or charitable trusts. The ruling bars frivolous litigation against public trusts by setting a strict threshold for maintainability, impacting trustees, beneficiaries, and litigants in property disputes involving charitable organizations.

The ITAT Delhi has ruled that a charitable trust’s exemption under Section 11 cannot be entirely revoked merely due to transactions with specified concerns; the disallowance must be confined strictly to the actual diverted funds. This clarifies a critical safeguard for trusts, ensuring proportionality in tax scrutiny and preventing punitive overreach under Section 13.

ITAT Delhi clarifies that scholarships disbursed in India for overseas education do not violate Section 11(1)(c) of the Income Tax Act, preserving tax exemption for charitable trusts. The ruling underscores that the 'application of income' test is met where funds are released domestically, even if utilized abroad, offering critical relief for educational trusts.

ITAT Mumbai rules that denial of exemption under Sections 11/12 of the Income Tax Act does not permit taxation of gross receipts; allowable expenses must be computed under normal provisions. The ruling reinforces that technical defaults like delayed filings cannot justify taxing gross income without deducting legitimate expenses for charitable trusts.

ITAT Delhi rules that charitable trusts not claiming benefits under Section 11 are not subject to the Maximum Marginal Rate, even if structured as AOPs, and must be taxed at individual slab rates - affirming CBDT Circular No. 320 of 1982. This clarifies a critical tax liability distinction for non-exempt trusts receiving dividend income, impacting compliance strategies for trusts with substantial passive earnings.

ITAT Mumbai rules that the lack of an express irrevocability or dissolution clause in a trust deed does not justify rejection of registration under Section 12AB. The tribunal emphasizes substantive compliance over technical omissions, ensuring charitable trusts are not penalized for procedural gaps without statutory backing.

The ITAT Delhi has ruled that charitable hospitals receiving payments from insurance companies remain eligible for tax exemption under Section 2(15) if their primary purpose is medical relief. This clarifies a critical ambiguity for nonprofit healthcare providers relying on third-party reimbursements, affirming that revenue source does not override charitable intent when services remain non-profit and publicly oriented.

ITAT Delhi has ruled that technical rejection of a charitable trust’s registration under Section 12AA and 80G due to manual filing - before electronic submission became mandatory - cannot deny retroactive exemption if the trust’s charitable objects are unchanged. This sets a critical precedent for trusts facing procedural hurdles, ensuring substantive charitable intent overrides bureaucratic non-compliance.

ITAT Delhi rules that delayed filing of Form 10 for income accumulation under Section 11(2) of the Income Tax Act does not invalidate the claim if submitted before assessment completion, provided substantive conditions are met. The decision clarifies that procedural compliance, when fulfilled before final assessment, suffices for tax exemption eligibility, offering relief to charitable trusts facing similar timelines.