ITAT Can't Grant Tax Benefits To Charitable Institution Without Proper Inquiry Delhi HC

The Delhi High Court has held that a tax appellate tribunal cannot directly grant tax exemption benefits to a charitable trust without first ensuring that a proper inquiry into its activities has been carried out.

A division bench of Justices Dinesh Mehta and Vinod Kumar passed the ruling while setting aside an order of the Income Tax Appellate Tribunal (ITAT), which had directed the grant of registration and approval to Sukoon SP Foundation, a charitable trust.

The trust had applied for registration under Section 12A(1)(ac)(iii) and approval under Section 80G of the Income Tax Act. Registration under Section 12A/12AB is required for a charitable trust to claim exemption from paying income tax on its earnings. Approval under Section 80G allows donors who contribute to such a trust to claim tax deductions on their donations.

The Commissioner of Income Tax (Exemption) rejected the application on the ground that the trust had failed to furnish necessary details, including information about beneficiaries and supporting documents to establish the genuineness of its activities.

On appeal, the ITAT allowed the trust's plea, holding that the Commissioner's order was non-speaking and that sufficient material existed to establish the trust's genuineness. It proceeded to direct grant of registration and approval.

Aggrieved, the Revenue approached the High Court.

The High Court held that the Tribunal had committed a legal error in directly granting registration instead of remanding the matter for proper examination.

“The view taken by the Tribunal that at the time of registration, the Commissioner is required to examine the genuineness and not whether the Income of the Trust is spent towards charitable/religious purposes is ex-facie erroneous,” it said.

The court clarified that the Commissioner is required to conduct an inquiry to satisfy himself about the genuineness of the trust's activities and compliance with applicable laws relevant to its objectives.

Such an inquiry had not been properly undertaken in the present case, the Court noted.

Reliance was placed on Commissioner of Income Tax – Exemption v. Kush Innovative Foundation (2026) where the High Court held that ITAT cannot direct the grant of registration under Sections 12AB (which grants income tax exemption to charitable trusts) and 80G (which allows donors to claim tax deductions on donations) of the Income Tax Act, 1961 without a proper inquiry into the genuineness of the charitable activities of the applicant trust.

As such, the Court held that ITAT ought to have remanded the matter to the Commissioner to examine the case afresh.

It directed that the exercise be completed within three months and clarified that it had not expressed any opinion on the merits of the trust's entitlement.

For Appellant: Senior Standing Counsel Gaurav Gupta; Junior Standing Counsel Shivendra Singh and Yojit Pareek; Advocates Surya Jindal and Sanya Jindal.

For Respondent: Advocate Anil Kumar Jain.