12AB Registration Cannot Be Denied Solely on Commercial Receipts Without Examining Charitable Nexus - ITAT

Case: Govardhan Eco Village Trust v. Commissioner of Income-tax (Exemptions)

Court: ITAT Mumbai

ITA Nos.: 177 & 178 (Mum) of 2026 

Date of Order: 23 March 2026

Brief Facts:

• The assessee, Govardhan Eco Village Trust, was an existing charitable trust registered under section 12A and subsequently granted provisional/regular registration under section 12AB. 

• Following an amendment to its trust deed by addition of new objects, the assessee filed a fresh application for registration under section 12AB.

• The Commissioner (Exemptions) rejected the application on the ground that:

• The trust earned rental income and income from sale of agro and goshala products, 

• Such receipts were treated as commercial in nature, and 

• The aggregate of such receipts exceeded the 20% threshold under the proviso to section 2(15).

• Consequently, registration under section 12AB and approval under section 80G were denied.

• Aggrieved, the assessee filed an appeal before the ITAT contending that such receipts were incidental to its main charitable activities including education, environmental preservation, sustainable agriculture and cow protection. 

Observations:

The Tribunal observed that:

• While examining an application under section 12AB, the Commissioner must restrict enquiry to:

• The objects of the trust, 

• The genuineness of activities, and 

• Compliance with statutory conditions. 

• The Tribunal further observed that mere reference to “general public utility” in the trust deed does not conclude the issue unless dominant and actual activities are examined. 

• The Commissioner failed to determine whether the assessee’s activities fall under specific charitable limbs such as education, preservation of environment, etc., or under the residual category of general public utility. 

• Exceeding the 20% threshold is not conclusive unless it is first established that the case falls within the residuary limb of section 2(15). 

• The nature of receipts from rent and sale of agro/goshala products cannot be decided merely by nomenclature; it must be examined whether such receipts are: 

• Independent commercial activities, or 

• Incidental and intrinsically linked to the charitable objects. 

• Accordingly, the Tribunal found that the Commissioner had not conducted a complete and proper examination of facts and law.

Hence, the ITAT held that rejection of registration under section 12AB solely on the basis of quantum and nature of receipts, without examining the dominant activities and their nexus with charitable objects, was unsustainable. The impugned order was set aside, and the matter was remanded to the Commissioner (Exemptions) for fresh adjudication.