Rental Income From Unused Premises Doesn’t Bar Section 12AB Renewal: ITAT Delhi

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.