In a significant decision pronounced on 08 June 2026, the Income Tax Appellate Tribunal (ITAT), Cochin Bench, restored the matter of registration under Section 12AB of the Income-tax Act, 1961 to the Commissioner of Income Tax (Exemption), holding that a withdrawal of the registration application under a mistaken belief should not deprive an assessee of an opportunity to establish its eligibility for charitable registration.
Background of the Case
The assessee, Trichur Tennis Trust, a sports club registered as a society, was engaged in promoting sports and games. The Trust contended that its activities fell within the ambit of “advancement of any other object of general public utility” under Section 2(15) of the Income-tax Act.
The Trust had applied for renewal of registration under Section 12AB by filing Form No. 10AB. During the course of proceedings, the Commissioner of Income Tax (Exemption) raised several objections, including:
-Non-production of certified constitutional documents.
-Insufficient explanation regarding charitable activities and beneficiaries.
-Income generated from the sale of liquor, food and beverages to members.
The Commissioner viewed the income from such activities as commercial in nature and proposed rejection of the application as well as cancellation of the provisional registration.
Faced with these observations, the Trust withdrew its application. Consequently, the Commissioner rejected the application on the ground that it had been withdrawn.
Assessee’s Contentions Before the Tribunal
Before the Tribunal, the assessee argued that:
The withdrawal was made under a bona fide but mistaken belief that it would avoid immediate adverse consequences and provide time to rectify documentation deficiencies.
The Commissioner had not examined the merits of the case.
Reliance was placed on CBDT Circular No. 395 dated 24 September 1984 and the decision in Chandigarh Golf Club v. CIT (2015) 64 taxmann.com 278, which recognised that clubs promoting sports could, under appropriate circumstances, qualify for charitable status.
Tribunal’s Findings
The Tribunal observed that the assessee had indeed withdrawn the application. However, it also noted that the withdrawal occurred in the backdrop of adverse observations made by the Commissioner.
Importantly, the Tribunal found that the authorities relied upon by the assessee, including the CBDT Circular and judicial precedent, had not been considered by the Commissioner while dealing with the matter.
Accordingly, the Tribunal restored the issue to the file of the Commissioner of Income Tax (Exemption) with directions to examine the claim afresh on merits.
The Tribunal clarified that:
-The burden of proving entitlement to registration continues to remain with the assessee.
-The assessee must demonstrate how its activities satisfy the conditions for charitable registration.
-The Commissioner must provide a proper opportunity of hearing and issue a show-cause notice before arriving at any adverse conclusion.
Key Takeaways
Withdrawal is not always fatal – Where an application is withdrawn under a mistaken belief, appellate authorities may permit reconsideration on merits.
Substantive justice over technicalities – Tax authorities and appellate forums are expected to examine genuine claims rather than dispose of matters solely on procedural grounds.
Importance of supporting precedents – Relevant CBDT Circulars and judicial decisions should be specifically brought on record during registration proceedings.
Sports promotion and charitable purpose – Institutions engaged in promotion of sports may still qualify for charitable registration, subject to satisfying statutory requirements and demonstrating that ancillary activities do not overshadow the primary charitable object.
Conclusion
The decision serves as a reminder that registration proceedings under Section 12AB should focus on the real nature of an institution’s activities and objects. While procedural lapses and withdrawals can complicate matters, they should not automatically defeat a potentially valid claim for charitable registration. The ruling reinforces the principle that genuine charitable institutions deserve a fair opportunity to present their case and have it adjudicated on merits.
Author: Cheeran Varghese & Co., Chartered Accountants