Introduction
The Income Tax Appellate Tribunal (ITAT), Chennai Bench “B”, delivered a significant ruling on 7 May 2026 in the case of Max academy for Excellence v. Commissioner of Income Tax (Exemption) (ITA Nos.1874 & 1875/CHNY/2026). The core issue revolved around the denial of renewal of registration under section 12AB and approval under section 80G(5) of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption) [CIT(E)]. The ITAT, comprising Accountant Member Shri Inturi Rama Rao and Judicial Member Shri Manu Kumar Giri, overturned the CIT(E)’s orders, holding that the trust’s activities—providing skill and personality training at nominal fees—constitute a charitable purpose under the “general public utility” limb of section 2(15). This commentary delves into the facts, reasoning, and implications of the decision, emphasizing its relevance for trusts engaged in educational or skill-development activities.
Facts
The appellant trust, Max academy for Excellence, was registered under the Trust Act in 1993 with the objective of imparting skill and personality training to students. It had originally obtained registration under section 12A on 29 January 1997, and received renewal vide order dated 31 December 2021. Subsequently, on 15 July 2025, the trust filed an application in Form 10AB under section 12A(1)(ac)(ii) seeking renewal of registration under section 12AB.
Upon receipt of the application, the CIT(E) called for information and considered the trust’s explanations. However, the CIT(E) concluded that the trust’s activities were not in the nature of “education” as defined by the Supreme Court in Sole Trustee, Lokashikshana Trust v. CIT (1975) 101 ITR 234, and further noted that the trust had not received any voluntary contributions in the preceding three financial years. Based on these observations, the CIT(E) inferred that the activities were not genuine and rejected both the registration under section 12AB and the approval under section 80G(5) vide orders dated 28 March 2026.
Aggrieved, the assessee appealed to the ITAT, raising grounds that the CIT(E) erroneously invoked the proviso to section 2(15), ignored settled precedents, and failed to consider CBDT Circulars No. 11/2008 and No. 1/2009.
Reasoning
The ITAT allowed the appeals through a concise yet legally robust analysis. The reasoning is structured around three key pillars: the nature of the trust’s activities, the application of the “general public utility” test, and the lack of material to prove non-genuineness.
1. Activities Constitute General Public Utility Even if Not “Education”
The CIT(E) had narrowly interpreted “education” to mean systematic instruction and schooling, relying on the Lokashikshana Trust decision. The ITAT acknowledged that while the trust’s skill and personality training might not strictly fall under the conventional definition of education, it undoubtedly fell within the scope of “advancement of any other object of general public utility” under section 2(15). The Tribunal observed that the trust charged only nominal fees to recover costs, and such fee receipt does not automatically render the activity commercial. This principle was fortified by citing four landmark decisions:
– Institute of Chartered Accountants of India v. DGIT(E) (347 ITR 99) (Del)
– Bureau of Indian Standards v. DGIT(E) (358 ITR 78) (Del)
– CIT v. Lucknow Development Authority (219 Taxman 162) (All)
– Sabarmati Ashram Gaushala Trust v. ADIT (25 ITR 70) (Ahd Trib)
These judgments consistently hold that where the dominant object is charitable, incidental income from nominal fees does not change the character of the trust. The ITAT emphatically stated that “mere receipt of nominal fee to recover expenses does not amount to commercial activity.”
2. No Material to Show Lack of Genuineness
The CIT(E) had also questioned the genuineness of the trust’s activities, citing the absence of voluntary contributions. The ITAT found no material on record to support this conclusion. The trust had provided skill and personality training to students in government schools in Tamil Nadu and Andhra Pradesh at nominal fees. The Tribunal noted that the mere absence of voluntary donations does not imply non-genuineness—especially when the trust’s model is fee-based but non-profit. The lack of any adverse evidence led the ITAT to direct the CIT(E) to grant registration under section 12AB from the date of application.
3. Consequential Approval under Section 80G(5)
Since the denial of 80G(5) approval was solely based on the rejection of 12AB registration, the ITAT applied the same reasoning. Upon directing the grant of 12AB registration, it also directed the CIT(E) to approve the trust under section 80G(5) from the date of application. This follows the principle that the two provisions are interlinked; a valid 12AB registration is a prerequisite for 80G approval.
The ITAT’s decision underscores that tax authorities must not mechanically deny registration based on narrow interpretations. The scope of charitable purpose under section 2(15) is broad, and skill development for students at nominal fees qualifies as general public utility. The order serves as a reminder that the proviso to section 2(15)—which excludes activities in the nature of trade, commerce, or business—is triggered only when there is profit motive, not when fees are merely cost-recovery.
Conclusion
The ITAT’s order in Max academy for Excellence is a welcome clarification for charitable trusts engaged in skill-training or personality development. By setting aside the CIT(E)’s rejection, the Tribunal reinforced that the “general public utility” limb covers a wide array of activities beneficial to the public, and that nominal fees do not convert charitable work into a commercial venture. The reliance on precedents from the Delhi High Court and the Allahabad High Court strengthens the legal position. This decision will likely guide future assessment orders and help trusts avoid unnecessary litigation. The ITAT directed the CIT(E) to grant registration under section 12AB and approval under section 80G(5) from the date of application, ensuring that the trust’s charitable status is restored for the relevant assessment year 2026-27.