ITAT Restores Section 12A Registration; Holds Authorities Must Focus Only on Objects, Not Business Activities

ITAT Delhi allowed the assessee’s appeal by restoring the Section 12A/12AB charitable registration. It ruled that authorities should only check charitable objects, not detailed activities.

Electric Lamp and Component Manufacturers Association of India has filed an appeal in the ITAT Delhi, challenging an order dated June 30, 2025, passed by the CIT(Exemptions) under Section 12AB(1)(b) of the Income Tax Act, 1961. The impugned order had rejected the assessee’s application for charitable registration under Section 12A/12AB and cancelled its provisional registration for Assessment Years 2021-22 to 2025-26.

The assessee argued that it had been in existence since 1970 and had already been granted charitable registration earlier. It further flagged that the income tax department had accepted its charitable status and permitted tax exemptions in previous assessments. The assessee further claimed that its aims, like promoting cooperation among manufacturers, sharing industry knowledge, and supporting trade development, are all charitable in nature. Hence, the lower authority wrongly rejected its registration application. However, the tax department argued that most of the assessee’s objectives benefit its members commercially, like organising seminars funded by sponsorships, and therefore rejection of the Section 12A/12AB registration application was justified.

When the tribunal analysed the facts of the case, it held that while deciding on the Section 12A/12AB registration application, the authority’s role is just to check if the objectives mentioned are charitably suitable and not to judge actual business activities thoroughly. The tribunal further noted that the tax department had previously accepted the assessee’s charitable status for assessment years 2013-14, 2014-15, and 2015-16 and permitted registration under Section 12A of the Act.

In conclusion, citing Supreme Court rulings, the Tribunal held that the present activities of the assessee are found to be falling under the status of charity; if in the future the assessee’s activities are found to be non-charitable, the AO is allowed to take legal action against the assessee. As of now, since the objects are charitable, the Tribunal quashed the impugned order, restored the association’s charitable registration and exemption under Section 12A and allowed the assessee’s appeal.