Dominant charitable activities determine status; incidental agro-receipts aren’t automatically commercial or business income.
The Dispute: GPU Limb vs. Specific Charitable Objects
The Legal Conflict
Under Section 2(15), if a trust falls under the “General Public Utility” (GPU) limb, it loses its exemption if commercial receipts exceed 20% of total receipts.
The Facts
The Rejection: The Commissioner (Exemptions) denied registration under Section 12AB, labeling the trust “commercial” because revenue from rent and Goshala products exceeded the 20% threshold.
The Trust’s Defense: These receipts were not “business” but were incidental to the core mission of animal welfare and agriculture.
The Judicial Verdict
The matter was remanded for fresh verification based on these principles:
Dominant Object Test: The Commissioner cannot categorize a trust under the “GPU” limb just because the deed mentions it. They must examine the actual dominant activity (e.g., animal welfare). If it falls under a specific limb, the 20% cap is irrelevant.
Incidental Receipts: Selling milk from a Goshala or agro-products is often intrinsically connected to the charitable object. Such receipts are ancillary and do not constitute independent “trade or commerce.”
Substance Over Nomenclature: Using terms like “rent” or “sale” doesn’t prove a commercial motive. The Commissioner must check if these are conducted on a “cost-recovery” basis to support the trust’s main goals.
Key Takeaways for Trusts
Avoid the GPU Trap: Map your activities to specific limbs (Education, Animal Welfare, Environment) rather than the “General Public Utility” residuary limb to bypass the 20% cap.
Document Connectivity: Maintain records showing how the sale of products (like manure or milk) directly supports the maintenance of the charitable facility.
Audit Disclosure: Clearly distinguish between “Incidental Business Income” (u/s 11(4A)) and independent commercial ventures in your tax filings.
IN THE ITAT MUMBAI BENCH ‘G’
Govardhan Eco Village Trust
v.
Commissioner of Income-tax (Exemption)*
Smt. Beena Pillai, Judicial Member
and ARUN KHODPIA, Accountant Member
and ARUN KHODPIA, Accountant Member
IT Appeal Nos. 177 & 178 (Mum) of 2026
MARCH 23, 2026
Satyaprakash Singh, C.A. for the Appellant. Arun Kanti Datta, CIT DR for the Respondent.
ORDER
Smt. Beena Pillai, Judicial Member.- The present appeals filed by the assessee arise out of separate orders dated 31/12/2025 passed by the Ld. CIT (Exemptions), Mumbai (hereinafter referred to as “Ld. CIT(E)”) on the following grounds of appeal:
” I.T.A. No. 177/Mum/2026
1. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in rejecting the Appellant’s application for renewal of registration under Section 12AB of the Income-tax Act, 1961, on the erroneous ground that the activities actually carried out by the Trust over the years are not in furtherance of a “charitable purpose” within the meaning of Section 2(15) of the Act and its proviso.
2. The Learned Commissioner of Income Tax (Exemptions) failed to consider that the Appellant Trust’s activities are fully aligned with its objects of education, relief of the poor, and environmental preservation, and are squarely covered under the specified limbs of “charitable purpose” under Section 2(15) of the Act, to which the restrictive proviso has no application.
3. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in failing to appreciate that the Appellant Trust is running a school imparting education from Class I to Class X primarily for the poor and needy, and that the major portion of the Trust’s expenditure has consistently been incurred towards the activity of imparting education, which squarely constitutes a charitable purpose under Section 2(15) of the Income-tax Act, 1961.
4. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in failing to appreciate that the activities undertaken by the Appellant, namely imparting training to farmers for improving their livelihood and enhancing their income through the practice of organic farming, as well as providing training relating to Gaushala and nursery development, squarely fall within the ambit of “relief of the poor” as defined under Section 2(15) of the Income-tax Act, 1961.
5. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in holding that the activities of the Appellant Trust relating to promotion of agriculture and allied activities aimed at creating selfsustenance at the farm level, including processing of farm produce, undertaking cottage-based rural activities, maintenance of Gaushala and nursery operations, and generation of economic opportunities for villagers, do not constitute ecological and sustainability-oriented activities, and therefore do not fall within the scope of “preservation of environment” as contemplated under Section 2(15) of the Income-tax Act, 1961.
6. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in categorising the activities of the Appellant Trust as initiatives towards socio-economic and community development and consequently holding that the same fall under the residual limb, namely “advancement of any other object of general public utility”, without appreciating that the said activities are specifically and substantively covered under the distinct charitable heads of education, relief of the poor, and preservation of environment as defined under Section 2(15) of the Income-tax Act, 1961.
7. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in failing to consider that the income earned from the sale of agricultural and Gaushala products represents only incidental receipts arising from by-products generated in the course of imparting training and providing assistance to farmers, as well as from the maintenance of cattle undertaken for environmental protection and sustainability purposes, and does not detract from the charitable character of the Appellant Trust under Section 2(15) of the Income-tax Act, 1961.
8. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in failing to appreciate that the activities relating to organic farming, sale of Gaushala produce, and rental receipts are incidental and integrally connected to the Appellant Trust’s primary objectives of environmental preservation, community awareness, and rural sustainability, and therefore cannot be treated as independent or commercial ventures so as to disqualify the Appellant from charitable status under the Income-tax Act, 1961.
9. The Learned Commissioner of Income Tax (Exemptions) has wrongly invoked the proviso to Section 2(15) of the Act, ignoring that the Appellant Trust’s objects fall within the enumerated charitable purposes and not within the residual category of “general public utility”.
10. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in holding that the activity of the Appellant Trust in letting out its premises and earning rental income is commercial in nature, without appreciating that such rental income is purely incidental to the Trust’s charitable activities, is entirely applied towards the attainment of its main charitable objects, and therefore cannot be construed as the carrying on of a business activity so as to attract the mischief of Section 2(15) of the Income-tax Act, 1961.
11. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in treating the rental income earned by the Appellant Trust as a commercial activity, without appreciating that rental income is in the nature of passive income arising from ownership of trust property and does not amount to the carrying on of business within the meaning of the proviso to Section 2(15) of the Act.
12. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in wrongly classifying the rental receipts and income from sale of agro and Gaushala products as commercial, without appreciating that such receipts arise from activities incidental and ancillary to the attainment of the Appellant Trust’s main charitable objects, and are intrinsically connected with its objectives of environmental preservation, rural sustainability, and community development, and therefore cannot be treated as independent commercial ventures so as to deny charitable status under the Income-tax Act, 1961.
13. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in failing to consider and apply CBDT Circular No. 21/2016, wherein it has been clarified that registration of a trust cannot be cancelled merely on the ground that receipts from business activities exceed the prescribed monetary thresholds, so long as the objects of the trust are charitable in nature and the activities are carried out in accordance with such objects, a condition which the Appellant Trust duly satisfies.
14. Without prejudice to the above grounds, the Learned CIT(E) erred in not considering that even if activities have a commercial character, the income from incidental business activities does not perse disqualify charitable status if such business is incidental to attainment of charitable aims.
15. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in cancelling the registration of the Appellant Trust, which was validly holding registration under Section 12AB up to 31st March 2025, Without recording any cogent reasons and without establishing any violation of the provisions of the Income-tax Act, 1961 warranting such cancellation.
16. The Learned Commissioner of Income Tax (Exemptions) has erred in law and on facts in failing to appreciate that the restrictive proviso to Section 2(15) of the Income-tax Act, 1961 applies only to trusts falling under the residual limb of “advancement of any other object of general public utility”, and that where the trust’s objects and activities are covered under the specified charitable heads, the test of incidental nature and nexus with the main charitable objects alone is relevant, which test the Appellant Trust clearly satisfies.
17. The Appellant craves leave to add to, alter, amend, modify or withdraw any of the above grounds of appeal.”
I.T.A. No. 178/Mum/2026
“1. The Learned CIT(E) erred in rejecting the application for registration u/s.80G on the ground that the Appellant’s application for renewal of registration u/s.12AB of the Act was rejected and therefore in view of the provisions of Section 80G(5)(i) the application for approval u/s.80G of the Act becomes untenable.
The Learned CIT Exemptions erred in providing an opportunity for hearing before rejecting our application for registration u/s.80G and hence the same against the principles of natural justice and hence our approval u/s.80G ought to be considered.
3. The Appellant craves leave to add, amend, modify the above grounds of appeal at any time, if any.”
2. Brief facts of the case are as under:
The assessee was originally granted registration u/s 12A dated 19/08/1998, which is placed at page 14 of the paper book. Subsequently, under the new provisions of the Act, the assessee was required to file application under the relevant provisions for the period A.Y. 2022-23 to A.Y. 2026-27. The said application was filed by the assessee on 14/05/2021, pursuant to which provisional registration was issued to the assessee on 28/05/2021(placed at pages 20 to 22 of the paper book). The assesse was subsequently granted registration vide order dated 19/11/2024 for the period of 2022-23 to 2026-27(placed at pages163 to 166 of the paper book).
2.1. It was submitted that the Trust Deed was amended vide instrument dated 19/04/2024 (placed at paged 36 to 47 of the paper book) and an additional main object was newly added to the Trust Deed, wherein the following activities were to be carried out by the assessee:
5. B. Additional Main Objects of the Trust:
I. In the field of cultural self-sufficiency, the trust will seek to preserve the distinctive identity of rural communities now facing threat from cultural homogenization and modern technology. The trust will encourage various traditional forms of culture, art, craft, music, drama, etc.
II. In the field of medical self-sufficiency, the trust will seek to:
a Preserve knowledge of bonafide traditional medical sciences, medicinal herbs, and their cultivation and use.
b. Educate and encourage rural communities to practice the art of natural healthy living, avoiding destructive addictions and habits.
III. To delve deep into the ancient science of yoga and Ayurveda and present its holistic outlook through various systematic courses, thereby training people to adopt a more natural and balanced lifestyle and thus become instruments of positive change in society.
IV. To print and publish books, periodicals, journals, magazines and any other articles and literature on topics including spiritual, social, ecological, environment, health, etc., in print or digital format.
V. To arrange for procurement and distribution of water, to dig and construct wells and reservoirs and other sources of water, and undertake all types, means and projects for water resource development, maintenance and improvement of facilities and care, protection, preservation of the Environment in general.
VI. To carry out any other object for the care, welfare and progress of all living beings in general.”
2.2. The assessee thus filed application seeking registration u/s 12AB of the Income-tax Act, 1961 on 12/09/2025 in respect of the amended trust deed. Notices were issued by Ld.CIT(E) on 16/09/2024(placed at paged 48 to 50 of the paper book) the assesse filed reply to the said notice vide submission dated 08/10/2024 (placed at pages 51 to 158 of the paper book).
2.3. Another notice was issued to the assesse on 17/10/2024 seeking further information on the delay in filing form 10AB, which was submitted beyond 30 days from the date of modification of the trust that resulted in violation of the provisions pf section 12A of the Act (placed at page 159 of the paper book). The assesse in response filed its submission on 21/10/2024 seeking condonation of delay in filing the application (placed at page 160-162 of the paper book). The Ld.CIT(E) vide order dated 19/11/2024 condoned the delay and directed the assesse to comply with the requirement as referred to in section 12AB(1) (b) (i) (B) of the Act(placed at pages 163 to 166 of the paper book). The Ld.CIT(E) directed to provide all information regarding the additional objects incorporated in the Trust deed and to furnish application for registration under section 12A(1) (ac)(ii) of the Act. The assesse thus furnished the relevant forms in Form 10AB, placed at paged 167 to 176 of the paper book on 27/09/2025.
2.4. It is submitted that thereafter the assesse received thereafter received notice dated 14/11/2025 calling for various details including a note on the activities carried on by the assesse along with Income and expenditure account for A.Y. 2022-23 to 2024-2025 (placed at pages 177 to 181 of the paper book) The assesse filed its reply in response on 17/11/2025 (placed at page 182-221). Another notice was issued to the assesse on 26/11/2025 calling upon further information including year wise proof of expenditure made towards the activities of the assesse. The assesse replied vide submission dated 02/12/2025(placed at paged 223 of the paper book).
2.5. It is submitted that the assessee filed detailed note regarding the activities conducted by it in support of the additional objects. The assessee further provided year-wise details of income received by way of rent and also furnished details of the property situated in remote rural areas, from where the assessee earned incidental income generated during the course of carrying out its charitable activities. It was submitted that the amendment to the objects of the Trust was not in violation of any of the conditions specified u/s 12AB(4) of the Act.
2.6. The Ld.CIT(E) called for details in respect of the any income that exceeds 20% of the total income for A.Y. 2022 -23 and why the application should not be rejected on this ground (placed at paged 224to 225 of the paper book). The assesse vide reply dated 19/12/2025 (placed at page 226 to 230) submitted that the main object of the assesse is Educational Preservation of environment which involves maintaining an ecological balance in nature by practising, preaching and demonstrating natural organic practices. It was submitted that these activities therefore do not fall under the restrictive proviso to section 2(15) that relates to commercial activities.
2.7. The Ld.CIT(E) thereafter issued notice dated 25/12/2025 (placed at page 231)calling upon year wise details and purpose of income from rent received alongwith copy of rent agreement/MOU etc., from A.Y. 2022-2 to A.Y. 2025-26. The assesse vide reply dated 29/12/2025 wherein it was submitted that the assesse had let out temporarily let out surplus space in its remote rural property on an incidental basis, solely to support local development and facilitate its charitable activities without any profit motives. It was submitted that any rental income earned is purely ancillary to the main objects and is applied wholly towards the main activities of the trust.
The Ld.CIT (E), after considering various submissions made by the assessee, called for the trust deed in order to verify the objects of the assessee. The Ld.CIT(E) observed that the trust deed was established with the following charitable objects in the year 1988:
| (i) | For advancement of educational and social activities &; |
| (ii) | for advancement of any other object of general public utility. |
2.8. The Ld.CIT(E) was of the opinion that the rent receipts and the sale of agro and goshala products were commercial in nature, and that the aggregate of such receipts exceeded 20% of the total receipts of the Trust in each of the concerned assessment years. Accordingly, the Ld.CIT(E) rejected the application for registration u/s 12AB(1)(ac) & (ii) of the Act. Consequently, the application for approval u/s 80G also stood denied.
Aggrieved by the order of Ld.CIT(E), assessee is in appeal before this Tribunal.
3. The Ld.AR submitted that, assessee is an old trust, and in the given circumstances, there was no requirement to issue a provisional registration as per the new provisions inserted u/s 12AB of the Act. He placed reliance on CBDT Circular No. 11 of 2022 dated 03/06/2022, wherein it has been clarified that certain existing trusts would be deemed to be registered under the new regime upon filing the prescribed application. The Ld. AR submitted that, as per the aforesaid circular, the assessee falls within Clause 5, Sub-clause (ii), and therefore ought to have been treated as registered under the new provisions of law.
3.1. The Ld.AR submitted that following are the activities carried on by the assessee during the relevant period:-
“1. Agriculture: Govardhan EcoVillage is a model for sustainable agriculture, promoting organic farming techniques that benefit both the environment and local farmers. By offering training in water conservation, composting, crop rotation, and the use of natural fertilizers like vermicompost and cow dung, it reduces farmers’ dependency on costly chemical inputs. These practices result in healthier soil and better crop yields, directly improving farmers’ incomes. Additionally, this initiative supports rural empowerment by creating a sense of self-reliance among farmers, ensuring long-term food security and ecological balance in the region. A key initiative is the development of indigenous seeds, which are distributed to local Adivasi (tribal) farmers to support traditional farming practices and biodiversity.
2. Govardhan English Medium School (GEMS): GEMS provides high-quality, English-medium education to children in rural areas, giving them access to academic opportunities that were once reserved for urian students. The school emphasizes character building, moral values, and academic excellence, integrating modern education with spiritual teachings. In addition to providing scholarships and subsidized fees for current students, GEMS supports graduates by offering financial assistance or access to better coaching facilities, helping them pursue higher studies or professional careers. This continued support ensures that students can build successful futures, breaking the cycle of poverty in rural areas and empowering entire communities through education.
3. Govardhan Nursery: The nursery plays a vital role in promoting environmental sustainability while creating economic opportunities for local villagers. By growing a wide range of plants, including fruit trees, medicinal herbs, and native species, the nursery contributes to reforestation efforts and biodiversity conservation. Local villagers are trained in plant propagation and nursery management, turning this activity into a livelihood source. The sale of saplings provides a sustainable income for rural farnilies, and the nursery’s role in greening the region enhances the ecological balance, promoting a healthier environment for future generations.
4. Vrindavan Forest: The restoration of the Vrindavan Forest serves as both an ecological and a social empowerment project. Through afforestation, Govardhan EcoVillage is reviving the ancient sacred groves of Vrindavan, which hold significant spiritual and cultural value. The project employs local villagers in tree planting, forest management, and the creation of forest trails, thus providing them with sustainable jobs. Additionally, eco-tourism activities such as educational tours generate income for the community while raising awareness about sustainability and environmental conservation. The initiative also supports biodiversity, helps in soil conservation, and mitigates climate change impacts in the region.
5. BhaktiVedanta Research Center (BVRC): BVRC integrates the spiritual and scientific aspects of Vedic knowledge, offering a platform for rural students and scholars to engage in research that benefits society at large. Through various programs, BVRC conducts studies on sustainable agriculture, natural medicine, and traditional knowledge systems, ensuring that these ancient practices are preserved and promoted. In addition to its academic programs, BVRC teaches and promotes yoga in local government schools, helping students develop physical and mental well-being. The center also encourages intellectual and cultural empowerment in rural areas by providing access to research opportunities that were previously limited to urban institutions, thus creating a bridge between ancient wisdom and modern science for rural communities.
6. Food Distribution: Govardhan EcoVillage’s food distribution program addresses the immediate needs of undernourished rural populations while promoting long-term food security. By distributing wholesome, locally grown, and meals to those in need, especially during crises like COVID-19 pandemic, floods, or lean agricultural periods, the initiative not only alleviates hunger but also fosters a sense of community. Educational campaigns associated with the food distribution also raise awareness about the importance of sustainable agriculture and healthy diets.
7. Goshala: The Goshala at Govardhan EcoVillage is a sanctuary for indigenous cow breeds, emphasizing the importance of cow protection in Vedic culture. It plays a crucial role in empowering rural farmers by teaching them how to use cow-based products such as manure, urine, and biogas in their farming practices, thus promoting organic agriculture. This reduces farmers’ dependence on chemical fertilizers and pesticides, cutting costs and improving soil health. In addition, to offering training in traditional dairy practices, the Goshala supports local farmers by providing free grass for their livestock, reducing feed costs and further enhancing their livelihoods. It helps preserve ecological balance and strengthens rural economies by creating jobs and fostering sustainable agricultural systems.”
3.2. The Ld. AR emphasized that the income from sale of agro and goshala products is incidental in nature and arises during the course of carrying out the main objects of the Trust, such as preservation of environment, protection of cattle, sustainable agriculture, and allied charitable activities. It was further submitted that the agro and goshala products sold are by-products generated while imparting training and assistance to farmers and while maintaining cattle for environmental and religious purposes. The Ld. AR submitted that it was only during F.Y. 2021-22 relevant to A.Y. 2022-23 that the income from sale of agro and goshala products marginally exceeded 20% due to exceptional circumstances. He placed reliance on the financial statements for A.Y. 2022-23 to A.Y. 2024-25, wherein the income from sale of agro and goshala products was well within the 20% limit, the details of which are extracted hereunder:-
| FY | Total Income | Income from Agro and Gaushala products | % of Total Income |
| 2022-23 | 3,55,68,117 | 42,08,888 | 11.83% |
| 2023-24 | 2,09,73,257 | 36,53,074 | 17.42% |
| 2024-25 | 2,91,37,891 | 33,70,092 | 11.57% |
Thus, a single year’s exceptional marginal excess in certain activities while there is an overall deficit/loss, particularly when surplus is fully applied for charitable purposes, should not be treated as violation warranting rejection of registration.
In the Assessment Year 2022-23, which has been specifically referred to in the Show Cause Notice, the Trust has not earned any surplus. On the contrary, in F.Y. 2021-22, the Trust had incurred a deficit of approximately Rs. 72 lakh, clearly demonstrating that the Trust is not driven by any profit motive.
It is further submitted that the income from sale of Agro and Gaushala products amounting to Rs 66,68,940/- during A.Y. 2022-23 was entirely utilised towards the main charitable objects of the Trust, namely education, yoga and preservation of environment, including maintenance of Gaushala and sustainable agricultural activities. The said receipts are only incidental by-products arising during the course of carrying out the charitable activities and do not constitute an independent business or commercial activity.
Accordingly, when viewed across multiple years, it is evident that the Trust’s activities are charitable in substance and intent, and the incidental receipts from Agro and Gaushala products have been fully applied towards the objects of the Trust.
3.3. In respect of the rent income the Ld.AR submitted that the assesse is situated and operates in a remote rural area at P.O. Galtare, Hamarapur, District Palghar, Maharashtra – 421303, where basic infrastructure and residential facilities are not available. The Trust has been carrying on its charitable activities for more than 25 years with the objects of providing education to economically weaker sections and imparting training in eco-friendly and sustainable farming practices.
3.4. The Ld.AR submitted that in order to effectively carry out its charitable objects, the assessee created basic infrastructure and residential facilities for its own staff and students. In the same area, certain other charitable organisations such as ISKCON, Sri Chaitanya Seva Trust, S3 Impact Foundation, etc., are also engaged in charitable activities for the upliftment of poor families. The property of the assessee is situated in a remote rural area where not much development has taken place & facilities are not easily available. The idle or surplus accommodation space, has been given by the assessee for occasions and temporary basis on rent. The Ld.AR submitted that, one small space has been given to a bank to open a rural branch, so that bank services become available to assessee’s own staff as well the local inhabitants. It is submitted that some space is given on rent to provide accommodation to labour/staff of other NGOs operating in that area. The Ld.AR submitted that the said letting out is purely incidental and ancillary to the attainment of the main charitable objects of the assessee.
3.5. The Ld.AR thus submitted that, the rental income so earned is incidental in nature and is generated during the course of carrying out the assessee’s charitable activities, including training and assistance to farmers and maintenance of cattle for environmental and religious purposes. He also submitted that the activity of letting out is not undertaken with a profit motive.
3.6. The Ld.AR further submitted that the accommodation facility and room-renting activity referred to in the notices issued is not carried out by the assesse and that those activities are carried out by ISKCON, which operates from premises located in the neighbourhood of the assessee area. It is submitted that it is ISKCON that named its project/village as “ISKCON GEV Ashram (Govardhan Eco Village)”, which it uses for the fulfilment of its own charitable and religious objectives. That trust set up by ISKCON GEV Ashram is also named as “Govardhan Eco Village Trust” and there is no connection, association, or involvement of the assessee with the room-renting activity conducted by ISKCON. The similarity in name is purely coincidental and has resulted in an incorrect presumption.
3.7. The Ld.AR thus submitted that the assessee is not involved in advancement of any other object of general public utility, nor is it carrying out any commercial activity in excess of 20% of its total receipts. It was submitted that the activities performed by the assessee fall within the specific limb of “charitable purpose” as defined u/s 2(15) of the Act, and, therefore, the restrictive proviso to section 2(15) relating to commercial activities is not applicable to the assessee.
4. On the contrary, the Ld.DR drew our attention to page 109 of the paper book, being the Income and Expenditure Account for the year ended 31/03/2023, which was compared with the Income and Expenditure Account for the year ended 31/03/2024. He submitted that there is a considerable reduction in the expenditure, which does not commensurate with the income reflected in the accounts.
4.1. The Ld. DR further submitted that the rental income received from the premises is also required to be considered as advancement of any other object of general public utility. Accordingly, applying the provisions u/s 2(15) of the Act, the activities of the assessee would not fall within the definition of charitable purpose. The Ld. DR, thus, relied upon the orders passed by the authorities below.
We have perused the submissions advanced by both sides in light of records placed before us.
5. The short controversy arising for our consideration is whether, while examining the assessee’s application under section 12AB(1)(ac)(ii) of the Act, the Ld.CIT(E) was justified in holding that the assessee’s activities were not entitled to registration under the regular regime on the ground that the receipts from rent and sale of agro/goshala products were commercial in nature and exceeded the permissible limit with reference to section 2(15) of the Act.
5.1. It is an admitted position that the assessee had already been granted provisional registration, which remained valid up to A.Y. 2025-26. The present proceedings arise in the context of the assessee’s application for registration under section 12AB(1)(ac)(ii). At this stage, the enquiry is confined to the objects of the trust, the genuineness of its activities, and compliance with the statutory conditions governing registration. Therefore, while examining such application, the Ld.CIT(E) was required to determine, on the basis of the trust deed, the actual activities carried on, and the supporting material, whether the assessee’s objects are charitable in law, whether the activities are genuine and carried out in furtherance of such objects, and whether the statutory scheme disentitles the assessee from grant of registration.
5.2. From the record, we find that the Ld.CIT(E), after calling for yearwise details of rental income, purpose thereof, and copies of rent agreements/MOUs for A.Ys. 2022-23 to 2025-26, noted that the trust deed, as originally settled in 1988, contained, inter alia, the objects of “advancement of educational and social activities” and “advancement of any other object of general public utility”. Proceeding on that basis, the Ld.CIT(E) formed a view that the receipts from rent and sale of agro and goshala products were commercial in nature and that the aggregate of such receipts exceeded 20% of the total receipts in each of the concerned years; accordingly, the application under section 12AB(1)(ac)(ii) came to be rejected and, consequentially, approval under section 80G was also denied.
5.3. The specific case of the assessee, however, is that the learned CIT(E) has not properly appreciated either the true scope of its objects or the real character of its activities. According to the assessee, it is an old trust; its case is required to be examined in the light of CBDT Circular No. 11 of 2022 dated 03/06/2022; its activities substantially fall within the specific charitable limbs under section 2(15), including education, yoga, preservation of environment, sustainable agriculture, and protection/preservation of cattle; and the receipts from sale of agro and goshala products are merely incidental to the carrying out of its principal charitable objects. It is further the case of the assessee that the rental income arose only from temporary letting of surplus space in a remote rural area for purposes connected with or supportive of the charitable ecosystem in which the assessee operates, and that such receipts were wholly applied towards its charitable purposes. The assessee has also taken a specific stand that certain room-renting activities referred to in the proceedings pertain to another entity operating in the vicinity under a similar name and not to the present assessee.
5.4. In our considered view, these contentions required a deeper factual verification and legal examination than is reflected in the impugned order. Merely because one of the objects in the trust deed refers to “advancement of any other object of general public utility”, it would not, by itself, conclude the matter unless the Ld.CIT(E) also examines the dominant and actual activities carried on by the assessee during the relevant period and determines under which limb of section 2(15) such activities properly fall. If, on facts, the activities are found to be in the nature of education, yoga, preservation of environment, or other specific charitable heads, the matter would stand on a footing distinct from a case falling purely under the residuary category of “advancement of any other object of general public utility”. The mere exceedance of the 20% threshold, by itself, could not have been treated as determinative unless the Ld.CIT(E) first came to a clear finding, on the basis of the objects and actual activities of the assessee, that the case falls under the residuary limb of “advancement of any other object of general public utility” as contemplated under section 2(15) of the Act. Likewise, the character of the receipts from agro/goshala products and rent could not have been concluded merely on nomenclature, without examining whether such receipts were intrinsically connected with and incidental to the attainment of the assessee’s stated charitable objects.
5.5. We also find that the assessee’s plea that the provisional registration remained valid up to A.Y. 2025-26, the reliance placed on CBDT Circular No. 11 of 2022, the year-wise explanation regarding receipts, the application of such receipts towards charitable purposes, and the contention regarding mistaken identity vis-a-vis another similarly named entity, all go to the root of the controversy and call for proper verification at the level of primary facts. Equally, the objections raised by the Revenue with regard to the nature and extent of receipts and the applicability of section 2(15) also require due examination on the basis of complete material.
5.6. Having regard to the totality of the facts, we are of the view that the matter requires restoration to the file of the learned CIT(E) for fresh adjudication. We accordingly set aside the impugned order and remit the issue to the file of the Ld.CIT(E) with a direction to examine afresh: whether, having regard to the assessee’s objects, actual activities, and the material on record, the assessee is entitled to registration under section 12AB(1)(ac)(ii); whether the activities carried on by the assessee fall under the specific charitable limbs of section 2(15) or under the residuary limb of general public utility; whether the receipts from rent and sale of agro/goshala products are independent commercial receipts or are merely incidental and ancillary to the attainment of the main charitable objects; whether the reliance placed by the assessee on CBDT Circular No. 11 of 2022 is applicable in the facts of the case; and whether the alleged roomrenting activity is in fact attributable to the assessee itself. The Ld.CIT(E) shall afford adequate opportunity of hearing to the assessee, consider all evidences that may be produced, and thereafter pass a speaking order in accordance with law. Needless to clarify, the provisional registration already granted to the assessee, being stated to be valid up to A.Y. 2025-26, shall remain undisturbed for its stated tenure during the remand proceedings, subject to law, and the present remand shall not be construed as disturbing such provisional registration for its stated period of validity.
Accordingly, the matter is restored to the file of the learned CIT(E) for denovo adjudication, and the grounds raised by the assessee are treated as allowed for statistical purposes.
5.7. Since the rejection of approval under section 80G is consequential to the rejection of registration under section 12AB, that issue being consequential is also remanded for fresh adjudication by the Ld.CIT(E).
Accordingly, the grounds raised by the assesse in both the appeals stands allowed for statistical purposes.
In the result, both the appeals filed by the assesse stands allowed for statistical purposes.