Section 12A Registration Cannot Be Denied to Environment-Focused NGOs Merely on Fee-Based Income: ITAT Delhi Rules in Favour of Sowgood Foundation

Overview of the Dispute

The Delhi Bench of the Income Tax Appellate Tribunal recently delivered a significant ruling in the matter of Sowgood Foundation Vs CIT (Exemption), holding that an organisation dedicated to environmental protection, farming awareness, and sustainability education cannot be denied registration under Section 12A of the Income Tax Act, 1961 solely on the ground that it charges fees from schools for delivering its programmes or that its receipts had been subjected to Tax Deducted at Source (TDS).

The Tribunal's ruling addresses several important questions that frequently arise in the context of charitable registration — particularly regarding the correct classification of activities under Section 2(15), the relevance of TDS deductions and ITR form selection, and whether technical procedural lapses can defeat a substantive claim for registration.

Background and Facts of the Case

Sowgood Foundation is a non-profit company incorporated on 09.01.2020, whose stated objects revolve around promotion of environmental protection, farming education, waste management awareness, and sustainability initiatives targeted at schools and other educational institutions. The assessee filed an online application in Form 10AB on 16.10.2024 before the CIT (Exemptions), Delhi, seeking registration under Section 12A(1)(ac)(iv) of the Income Tax Act, 1961.

The CIT (Exemptions) passed an order in Form 10AD dated 30.05.2025 under Section 12AB(1)(b)(ii)(B), rejecting the application on multiple grounds:

  • The assessee had selected an inapplicable proviso — Section 12A(1)(ac)(iv) is meant for cases where an existing registration has become inoperative under the first proviso to Section 11(7), which did not apply here since there was no prior operative registration.
  • The activities were deemed commercial in nature, as the assessee was providing environmental education programmes to schools against payment of fees.
  • Business receipts of Rs. 16,01,700/- were reported in AY 2024-25, on which TDS was deducted under Section 194JB.
  • The assessee had filed ITR-6 for AY 2023-24 and AY 2024-25, which in the CIT(E)'s view reflected the assessee's own admission that it was engaged in business activity.
  • "Sale of services" receipts of Rs. 24,37,936/- in FY 2023-24 and Rs. 10,22,560/- in FY 2022-23 exceeded the 20% threshold stipulated under the proviso to Section 2(15) for entities engaged in "advancement of any other object of general public utility."

On this collective basis, the CIT (Exemptions) concluded that the assessee had failed to establish the genuineness of charitable activities and accordingly rejected the registration application. The aggrieved assessee appealed before the ITAT Delhi.

Arguments Advanced by the Assessee

The learned Authorised Representative on behalf of the assessee put forward the following contentions: