12A Registration Does Not Mean 80G Approval: Delhi HC Upholds 12A, Remands 80G for Foundation

A trust or Section 8 company that clears the test for registration under Section 12A does not, for that reason alone, earn approval under Section 80G. The Delhi High Court said so in a judgment dated 15 October 2026 in Principal Commissioner of Income Tax (Exemptions), Delhi v. Orientals Ardaas Foundation Delhi (ITA 225/2026 and ITA 226/2026), heard with two writ petitions filed by the foundation. The bench of Justice Dinesh Mehta and Justice Aditi Choudhary upheld the foundation's 12A registration, but set aside the Tribunal's direction to grant 80G approval and sent that application back to the Commissioner of Income Tax (Exemptions) for a fresh decision.

The ruling has two halves that pull in different directions, and both matter to anyone advising a charitable organisation. On 12A, the court rejected the Revenue's view that an entity planning to charge for its services is running a commercial operation. On 80G, it rejected the Tribunal's view that approval can follow automatically once 12A is cleared. The judgment was uploaded on 27 October 2026 and deals with applications made, and decided, under the Income Tax Act, 1961.

Facts: a Section 8 company refused both 12A registration and 80G approval

Orientals Ardaas Foundation Delhi is a company incorporated under Section 8 of the Companies Act, 2013. It applied to the Commissioner of Income Tax (Exemptions), Delhi, for registration under Section 12A(1)(ac)(iii) and for approval under Section 80G(5)(iii). On 28 September 2024 the Commissioner rejected both applications. The reasoning was that the foundation proposed to charge rent for accommodation and might sell units outright to occupants, so its activity looked commercial rather than charitable.

The foundation appealed. By its order dated 20 August 2025 in ITA 5078/Del/2024 and ITA 5079/Del/2024, the Income Tax Appellate Tribunal held that the Commissioner had erred. Operations had not yet begun, so it was too early to conclude that they would be commercial. The Tribunal directed the Commissioner to approve both applications. The Revenue then appealed to the High Court under Section 260A, and the foundation filed writ petitions of its own.

Before the High Court, Senior Standing Counsel Shlok Chandra argued for the Revenue that charging rent for accommodation, together with the possibility of outright sale, justified the finding of commercial activity, and that charitable purpose could not be assured while the project was still under way. Senior Advocate Ajay Vohra, for the foundation, argued that an organisation's objects are judged from its memorandum, constitution and project, that projects take years to materialise, and that the absence of fixed charges did not justify an inference of commercial operation. The foundation also filed an undertaking before the court that it would not sell units outright to occupants.

Section 12A registration: subsidised charges can still be charitable

The court held that at the registration stage the authority must first look at the objects, the project report and the purpose of the proposed trust or company. At that point the Commissioner cannot say with certainty whether a non-profit will carry on commercial activity, and the recovery of some charges does not by itself make the operation commercial. The line that will be quoted most often from paragraph 11 of the judgment is this: "Charging a partial, subsidised or concessional amount is also a kind of charitable activity."

Applying that, the bench found that the Commissioner had erred in rejecting the 12A application, particularly once the foundation had given its undertaking not to sell units outright. The Revenue's appeal on 12A was dismissed, and the Commissioner was directed to grant registration under Section 12A(1)(ac)(iii) forthwith.

For advisers, the useful point is the order of inquiry the court lays down. An application for registration of an entity whose activities have not started is to be tested against its constitution, project report and stated purpose. A rejection built on a forecast that charges will be levied, or on a speculative possibility of sale, is open to challenge, and an undertaking on the specific concern raised by the Commissioner can carry weight, as it did here.

Section 80G approval needs its own inquiry by the Commissioner

On 80G the court accepted the Revenue's appeal. Its reasoning runs through paragraphs 14 to 19. Registration under Section 12A involves a preliminary examination of the objects. The inquiry under Section 80G is deeper, because approval lets donors claim a deduction for what they give. The Tribunal, as the fact-finding body, had relied only on the project proposal and had no material on which to direct 80G approval.

The bench put the relationship between the two provisions this way: a rejection under Section 12A logically leads to a rejection under Section 80G, but acceptance under Section 12A does not automatically entitle the organisation to 80G approval. The applicant must satisfy the prerequisites in the third proviso to Section 80G(5), and whether it does is a matter for inquiry by the Commissioner.

The Tribunal's order of 20 August 2025 was therefore set aside so far as it concerned Section 80G, and the 80G application was restored to the Commissioner of Income Tax (Exemptions). The foundation may place a certified copy of the High Court's order before the Commissioner along with a detailed representation and any further material it wants to rely on. The Commissioner must decide the 80G application within 30 days of receiving the certified copy.

What the ruling changes for trusts and their advisers

The practical lesson sits in the split outcome. An organisation whose activities have not started can defend its 12A application on its documents and purpose, and a plan to recover partial or concessional charges is not, by itself, a ground for refusal. The same organisation cannot treat the 80G application as a formality that follows 12A. The Commissioner is entitled to look more closely before allowing donors a deduction, and an appellate body that directs approval without that inquiry having been done risks being reversed, as the Tribunal was here.

That has a bearing on how both applications are prepared and argued. Where 12A and 80G applications are filed together, the 80G file needs its own material addressed to the conditions in the third proviso to Section 80G(5), rather than resting on the same project report. Where an appeal against a joint rejection is being argued before the Tribunal, the 80G limb needs an evidentiary basis of its own if the relief sought is a direction to approve rather than a remand.

Organisations with pending 80G applications or appeals where the Commissioner's ground was the same as in this case, that charges for services make the activity commercial, now have a Delhi High Court statement that subsidised or concessional charges can be charitable. They should expect, however, that the 80G question will be sent back for a proper inquiry rather than decided on appeal, and should be ready with the representation and supporting material the court allowed this foundation to file. The judgment cites no earlier decisions; it rests on the statutory provisions and the record, and the LiveLaw report of 28 October 2026 carries the counsel line-up and the bench's key observations.

For Orientals Ardaas Foundation Delhi, the next date runs from the day it files the certified copy: the Commissioner of Income Tax (Exemptions) then has 30 days to decide the 80G application afresh.

Official source: View the official source document