Income Tax Appellate Tribunal Mumbai on the Use of AI for Charitable Purposes

In an appeal against a decision of the Commissioner of Income Tax (Exemptions) Mumbai, (CIT(E)) the Income Tax Appellate Tribunal, Mumbai (ITAT) held that the provision of Artificial Intelligence (AI) tools to streamline judicial processes can be considered to be charitable activities. The order in Legsys AI Technology Foundation vs. Commissioner of Income Tax (Exemptions), Mumbai dated 21 November 2025, provides further clarity on the use of advanced tools such as AI in the non-profit world. 

Background of the Case

Legsys AI (“the assessee”), a Section 8 company, provides pro bono access to District Courts for AI-based technical support and training, facilitating judges of District Courts in speedy disposal of cases. The assessee had filed a Form 10 AB application under Sec.12(1)(AC)(iii) before the CIT(E). The application was rejected by the CIT(E), stating that the assessee’s activities are not charitable in nature, as they violate Sec.2(15) of the Income Tax Act (“the Act”). Aggrieved by this decision, the assessee appealed to the ITAT.

Legal Issues

The crux of this case revolved around the question of whether the assessee’s activities could be regarded as charitable in nature. It was the assessee’s contention that the services aid in promoting social welfare, by enhancing access to justice for the public through the use of AI technology. The assessee had not engaged in any commercial activity and had entered into memoranda of understanding (MoUs) with no financial component with certain High Courts. On the other hand, it was argued on behalf of the Revenue Department that the assessee was engaged in providing technical services to judicial forums, which would not be tantamount to charitable activity.

Reasoning of the Tribunal

The Tribunal, in order to examine if the activities of the assessee could be considered to be charitable in nature, examined the memorandum of association (MoA) of the company as well as the MoUs it had entered into with various High Courts and District Courts. The Tribunal then observed that the objectives of the assessee in its MoA includes providing technical support and training to Court staff for enhancing speedy disposal of pending litigation. Further, the MoUs were also seen to not have any fees involved in the activities, making it clear that these were pro bono services provided to the judiciary.

In order to examine if the activities undertaken by the assessee, i.e., providing AI tools to provide text-to-speech transcription on a pro bono basis to various Courts, would fall under the definition of charitable activities, the Tribunal examined the definition provided under Sec.2(15) of the Act. The Tribunal observed that supporting the judiciary for speedy disposal of cases must fall under the definition of “charitable purpose”, which includes “the advancement of any other object of public utility”, as long as the assessee’s services are provided pro bono and without any compensation.

Key Takeaways from the Ruling

The ITAT in this case has examined the objectives clause of the assessee’s MoA, as well as the MoUs it had entered into with various High Courts to provide its services to come to the conclusion that the assessee was indeed working towards charitable purposes. By ensuring that the activities were undertaken pro bono, and were aligned with the objectives mentioned in the MoA, the ITAT was convinced that the assessee was only engaged in charitable activities. Based on the above reasoning, the assessee’s appeal was allowed, and the CIT(E) was directed to grant registration to the assessee.

This judgment finds that activities leveraging technology for public benefit can qualify under "advancement of any other object of general public utility" for the purposes of charitable exemptions.  Non-profits should note that this finding was only possible since the assessee’s objects as reflected in their charter documents aligned with their work as reflected in their agreements and activity report.