Nai Disha Education Society Vs CIT Exemptions (ITAT Delhi)
The appeal arose from the order dated 20.01.2026 passed by the Commissioner of Income Tax (Exemptions), Chandigarh, refusing renewal of registration under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961. The assessee, a society predominantly engaged in imparting education and registered with the District Registrar of Societies, Rohtak, had applied for registration under Section 12AB by filing Form No. 10AB on 27.09.2025. During verification, the CIT(E) noted that the assessee had earned rental income and sought an explanation as to how such income was incidental to its charitable activities. The assessee explained that its unused premises had been leased to Global Security Solutions Private Limited for conducting a residential skill development programme under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) of the Government of India. It submitted that the rental income was applied towards its educational objects, was not business income, and that the premises were rented only to utilise unused space efficiently. The tenant also used the premises for educational purposes. The assessee relied on judicial precedents supporting the proposition that letting out property for efficient utilisation does not disentitle a charitable institution from exemption or registration.
The Tribunal noted that the assessee had placed on record its provisional registration under Section 12A(1)(ac)(i), its earlier registration under Section 12AA, the lease deed, financial statements, and the Memorandum of Association. It observed that the assessee’s predominant object was education, which falls within the definition of “charitable purpose” under Section 2(15), and that the genuineness of its educational activities had never been questioned by the CIT(E). The only objection was that rental income from the unused portion of the premises amounted to commercial exploitation.
The Tribunal held that there was nothing improper in a society renting out unused premises to earn rental income, particularly when such income was utilised for advancing its charitable educational objects. It also noted that the tenant had used the premises only for educational purposes under the DDU-GKY project of the Ministry of Rural Development, Government of India. Examining the financial statements, the Tribunal found that the assessee’s predominant activity continued to be imparting education and earning tuition and assessment fees for its charitable purposes. It concluded that there was no commercial element in the transactions and held that the CIT(E) had erred in denying renewal without appreciating the purpose of the lease arrangement and the provisions of the Income-tax Act. Since the application was only for renewal of registration already granted under the new regime, the Tribunal directed the CIT(E) to grant renewal of registration within one month from receipt of the order. The appeal was accordingly allowed.
Cases Discussed
- DIT (Exemptions) vs Sahu Jain Trust (Calcutta High Court), 56 DTR 402
- Bharati Vidyapeeth, ITA No. 1916/PN/2010 for assessment year 1999-2000 dated 23-01-2012
- ACIT vs Swami Omkarananda Saraswati, 43 ITD 214
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No. 2671/Del/2026, arises out of the order of the ld ld. Commissioner of Income Tax (Exemptions), Chandigarh [hereinafter referred to as ‘ld. CIT(E)’, in short] dated 20.01.2026 for registration of u/s 12A(1)(ac)(ii) of the Income Tax Act, 1961.
2. The assessee has raised the following grounds of appeal before us:-
“1. That on the facts and in the circumstances of the Appellant Society case, the order passed by the Learned Commissioner of Income Tax (Exemptions), Chandigarh cancelling the registration granted to the appellant society under Section 12A of the Income tax Act the action of the learned CIT(E) is not only wrong and arbitrary but also illegal and contrary to the facts and law applicable to the case.
2. That on the facts and in the circumstances of the Appellant case, Learned CIT (Exemptions) has erred in cancelling the registration merely on the ground that the appellant society has received rental income, without appreciating that earning rental income does not disentitle a charitable institution from registration under Section 12A when the income is undisputedly applied towards its charitable objects.
3. That on the facts and in the circumstances of the Appellant case, the Learned CIT (Exemptions) failed to appreciate that the appellant is primarily engaged in educational activities which fall within the definition of “charitable purpose” under Section 2(15) of the Income Tax Act, 1961 and the activities of the appellant are genuine and in accordance with its objects.
4. That the appellant craves leave to add, amend, alter or withdraw any of the grounds of appeal before or at the time of hearing.”
3. We have heard the rival submissions and perused the materials available on record. The Assessee is a society having the predominant activity of imparting education. The Assessee is registered with the District Registrar of Societies, Rohtak. Considering its charitable objects, the Assessee filed an application in Form No. 10AB on 27-09-2025 seeking registration of the Assessee under section 12AB of the Act. The learned CIT (Exemptions) Chandigarh resorted to verify the genuineness of activities and compliance with statutory requirements for the Assessee. The Assessee furnished the income and expenditure accounts before the learned CIT (Exemptions). On perusal of the same, the learned CIT (Exemptions) noted that Assessee had received rent every year. The Assessee was asked to explain as to how earning rental income would be considered as incidental to charitable activities. The Assessee responded that its premises have been rented out to Global Security Solutions Private Limited for running a residential skill development program under Deen Dayal Upadhyaya Grammen Kaushalya Yojana (DDU-GKY) Scheme of Government of India and that the rental income is utilized for educational purposes of the Assessee. The entire reply given by the Assessee in this regard is reproduced in page 4 of the order of the Learned CIT (Exemptions), Chandigarh. The Assessee also enclosed the copy of rent agreement before the Learned CIT (Exemptions). It was submitted that DDU-GKY is a scheme of Ministry of Rural Development, Skill Training and Placement Programme of Government of India, focusing on rural youth from poor families to provide them with globally benchmarked skills, IT training, soft skills and placement support for sustainable wage employment aiming to uplift them from poverty to economic independence. Launched in 2014, it is part of the National Rural Livelihood Mission (NRLM) and supports campaigns like Skill India and Make in India. It was specifically stated that rental income received has been applied towards the charitable objects of the society and neither the rent received is a business income of the society nor the business activities as defined in Proviso to section 2(15) of the Act. There was no motive to earn the business income by letting out the premises of the society. It was rented only because of efficient use of the unused part of the building as it is fulfilling the criteria of the Ministry of Rural Development for DDU-GKY project and utilizing the rentals for fulfilling and meeting out the expenses towards the main educational objectives of the society. The tenant has also used the premises for educational purpose only. The Assessee also placed reliance on the Coordinate Bench decision of Delhi Tribunal in the case of ACIT vs Swami Omkarananda Saraswati reported in 43 ITD 214 in support of its contentions. The Assessee also placed reliance on the decision of Hon’ble Calcutta High Court in the case of DIT (Exemptions) vs Sahu Jain Trust reported in 56 DTR 402 wherein it was held that exemption under section 11 cannot be denied on the ground that trust had let out the property for efficient utilization of its proper assets. Further, the Coordinate Bench of Pune Tribunal in the case of Bharati Vidyapeeth in ITA No. 1916/PN/2010 for assessment year 1999-2000 dated 23-01-2012 had held that there is no prohibition in section 11 of the Act that a charitable trust cannot give its properties on rent. The Learned CIT (Exemptions) merely concluded that earning rental income out of property given on rent would tantamount to commercial activity carried by the Assessee Society and accordingly denied the registration of Assessee as a charitable society. Aggrieved, the Assessee is in appeal before us.
4. At the outset, we find that the Assessee had placed on record the following documents before the Learned CIT(Exemptions):-
a. Copy of provisional registration granted under section 12A(1)(ac)(i) of the Act dated 10-06-2023 for AYs 2022-23 to 2026-27. The present application is only seeking renewal of the registration.
b. Copy of initial registration granted under section 12AA of the Act dated 1-3-2019 as per the erstwhile provisions of the Act from Assessment Year 2019-20.
c. Copy of lease deed dated 10-03-2022 for 3 years
d. Copy of Income and Expenditure Account and Balance Sheet for financial years 2023-24 and 2024-25.
e. Memorandum of Association of Assessee Society
5. We find that on perusal of the objects of the Assessee Society, it is formed only to carry out the education activity predominantly. This activity would certainly fall within the definition of charitable purpose under section 2(15) of the Act. There is absolutely no dispute that the activity carried out by the Assessee (i.e. imparting education) is doubtful or ingenuine. This fact of Assessee’s activity has not been disputed by the Learned CIT(Exemptions). The only grievance of the revenue is that rental income earned on unused portion of the premises would amount to commercial exploitation of the property which in turn would be detrimental to the charitable purpose of the Assessee Society. In this regard, we hold that there is absolutely nothing wrong in a society giving its premises on rent which is left unused, to a third party and earn rental income thereon. It is not in dispute that the rental income earned by the Assessee Society had been utilized for advancing the charitable objects of imparting education of the Assessee Society. Further even the tenant i.e. Globe Security Solutions Pvt Ltd had utilized the property only for educational purpose to advance the skill and training development programme of DDU-JKY project of Ministry of Rural Development of Government of India. All these facts are not in dispute before us. Even from the financials of the Assessee Society, we find that predominant activity is only imparting education, receipt of tuition fees and assessment fees and utilizing the same for charitable objects of the Assessee Society. Hence in our considered opinion, there is nothing commercial element involved in the entire gamut of transactions and we have no hesitation to hold that the Learned CIT(Exemptions) grossly erred without understanding the purpose of letting out the property and without understanding the provisions of the Income Tax Act. Moreover, we find that the Assessee had only sought renewal of registration in the present application as it is already granted registration from AYs 2022-23 to 2026-27 under the new tax regime. Hence we direct the Learned CIT (Exemptions) to grant renewal of registration to the Assessee Society within one month from the date of receipt of this order. Accordingly, the grounds raised by the Assessee are allowed.
6. In the result, the appeal of the Assessee is allowed.
Order pronounced in the open court on 08/07/2026.
