NATIONAL COUNCIL FOR CEMENT AND BUILDING MATERIALS,BALLABGARH, HARYANA vs. CIT, EXEMPTIONS, CHANDIGARH

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ITA 1307/CHANDI/2026Status: DisposedITAT Chandigarh05 August 2026AY 2026-2712 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's predominant activities were rendering specialized technical and research services for consideration to commercial entities, not pursuing an independent charitable object. Therefore, the assessee did not satisfy the conditions for registration under section 12AB.

What were the facts?

The assessee, a society engaged in research and development for the cement industry, applied for registration under section 12AB. The CIT (Exemptions) rejected the application, holding that the assessee's activities were predominantly commercial and not for charitable purposes.

What were the issues?

Whether the assessee's activities, which involve providing research, consultancy, and testing services for consideration to commercial entities, qualify as charitable purposes under Section 2(15) for registration under Section 12AB. Whether the CIT (Exemptions) has the power to examine the genuineness and charitable character of activities at the stage of granting registration.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 2(15)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH

Before: SHRI LALIET KUMAR & SHRI VIJAY VARMA

For Appellant: Shri S. Krishnan, Advocate
For Respondent: Smt. Kusum Bansal, Pr. CIT, DR
Hearing: 04.08.2026Pronounced: 05.08.2026

PER LALIET KUMAR, JM

This is an appeal filed by the assessee feeling aggrieved by the order passed by the ld. Commissioner of Income Tax (Exemptions) [in short ‘the CIT (E)’] dated 16.03.2026 passed for assessment year 2026-27, whereby the application filed by the assessee seeking registration under section 12AB of the Income-tax Act, 1961, came to be rejected.

ITA 1307/CHD/2026 A.Y. 2026-27 2 2. The facts of the case are that the assessee, National Council for Cement and Building Materials (NCCBM), is a society engaged in research, development, testing, standardisation and dissemination of technology in the field of cement and building materials. The assessee filed an application in Form No.10AB seeking registration under section 12AB of the Income-tax Act. The learned CIT(Exemptions), after examining the Memorandum of Association, inspection report and financial statements, held that the activities of the assessee were predominantly in the nature of research, consultancy, testing and technical support rendered to cement manufacturers and other industrial entities for consideration. According to the learned CIT(E), the primary beneficiaries of these activities were commercial entities and, therefore, the assessee could not be regarded as pursuing charitable purposes within the meaning of section 2(15) of the Act. Consequently, the application seeking registration under section 12AB was rejected.

3.

Aggrieved by the aforesaid order, the assessee is in appeal before us.

4.

The learned Authorised Representative (AR) submitted that the learned CIT(E) has proceeded on an erroneous appreciation of the objects and activities of the assessee. Drawing our attention to the Memorandum of Association, it was submitted that the

ITA 1307/CHD/2026 A.Y. 2026-27 3 principal object of the assessee society is to undertake research and development relating to the cement and construction industry, promote scientific advancement, standardisation, quality assurance and dissemination of technology, which squarely falls within the expression "advancement of any other object of general public utility" under section 2(15) of the Act. The learned AR further invited our attention to the financial statements appearing at page 41 of the Paper Book and submitted that the assessee is substantially funded by the Government of India. It was pointed out that during the relevant period, the assessee received Grant- in-Aid from the Ministry of Commerce and Industry amounting to ₹17,05,00,000. Besides the said grant, income from research and development contribution amounted to ₹23,85,45,149.

5.

Referring to Schedule-H of the financial statements, the learned AR submitted that the receipts under the heads Sponsored Research and Development Contribution, Standardisation and Calibration, Symposium and Seminar, and NCB Proficiency Test Programme, aggregating to ₹23,85,45,149, merely represent receipts generated in the course of carrying out the principal research activities of the institution. Merely because consideration is received for undertaking scientific research would not convert the activities into commercial activities. The learned AR further submitted that under section 12AB, the Commissioner's jurisdiction is confined to examining the objects of the institution

ITA 1307/CHD/2026 A.Y. 2026-27 4 and the genuineness of its activities. The Commissioner cannot, at the stage of granting registration, adjudicate upon the ultimate applicability of the proviso to section 2(15), which is an issue within the domain of the Assessing Officer while framing the assessment.

6.

The learned AR thereafter drew our attention to paragraph 5.1 of the impugned order, wherein the learned CIT(E) has relied upon the judgment of the Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency for refusing registration to the assessee. It was submitted that the entire foundation of the impugned order rests upon the aforesaid judgment. However, the learned AR submitted that the said judgment has subsequently been considered and overruled by the Hon'ble Supreme Court in Ahmedabad Urban Development Authority. Inviting our attention to paragraph 190 of the judgment of the Hon'ble Supreme Court, it was submitted that the Hon'ble Apex Court has specifically dealt with the appeal arising from the judgment of the Andhra Pradesh High Court and held that the said decision no longer lays down the correct proposition of law. It was, therefore, submitted that the very basis adopted by the learned CIT(E) for refusing registration has ceased to exist in the eyes of law. Accordingly, it was prayed that the impugned order deserves to be set aside and registration under section 12AB be directed to be granted.

ITA 1307/CHD/2026 A.Y. 2026-27 5 7. Per contra, the learned Departmental Representative (DR) strongly supported the impugned order passed by the learned CIT(Exemptions). Referring to section 2(15) of the Act, the learned DR submitted that the actual activities carried on by the assessee are in the nature of trade, commerce and business. The assessee renders specialised research, consultancy, testing, calibration, standardisation and technical services to cement manufacturers and other commercial organisations for consideration. The beneficiaries of such activities are identified industrial entities and not the public at large. The learned DR further relied upon the decision dated 23.07.2026 of the Coordinate Bench in the case of International Will Trust (ITA No. 1425/CHD/2025) and submitted that where specialised services are rendered to commercial organisations for consideration, the institution cannot claim to be engaged in charitable activities.

8.

It was further argued that no element of charity is involved in the assessee's activities. Merely because the research undertaken by the assessee may indirectly benefit society cannot by itself confer charitable character upon the institution. If such reasoning is accepted, every commercial activity would ultimately benefit the public in some way. Running airlines, railways, buses or other commercial enterprises also indirectly benefits the public. Such an interpretation would render the restrictions contained in

ITA 1307/CHD/2026 A.Y. 2026-27 6 section 2(15) meaningless. It was, therefore, prayed that the order of the learned CIT(E) deserves to be set aside.

9.

We have heard the rival submissions and carefully perused the material available on record. We have also gone through the Memorandum of Association, the financial statements of the assessee and the impugned order passed by the learned CIT(Exemptions). The undisputed factual position emerging from the record is that the assessee society is engaged in research, development, testing, consultancy, standardisation, calibration and other technical services relating to the cement and building materials industry. The financial statements placed before us reveal that during the relevant period the assessee received Grant- in-Aid from the Ministry of Commerce and Industry amounting to ₹17.05 crore, whereas its total revenue receipts were approximately ₹51.87 crore, of which a substantial portion comprised receipts from sponsored research and development projects, consultancy, testing, standardization, calibration, symposiums, seminars and proficiency testing programmes. Thus, the predominant source of the assessee's revenue is the rendering of specialised technical and research services for consideration.

10.

The principal contention of the learned AR is that the objects of the assessee fall within the expression "advancement of any other object of general public utility" under section 2(15) of the Act

ITA 1307/CHD/2026 A.Y. 2026-27 7 and that the learned CIT(E) was not justified in refusing registration under section 12AB. It has also been argued that the learned CIT(E), while passing the impugned order, has relied upon the judgment of the Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency, as noticed in paragraph 5.1 of the impugned order, and that the said judgment has subsequently been considered and overruled by the Hon'ble Supreme Court in paragraph 190 of its decision in Ahmedabad Urban Development Authority. We are unable to persuade ourselves to accept the aforesaid submissions. No doubt, the Hon'ble Supreme Court in Ahmedabad Urban Development Authority has examined the correctness of the judgment rendered by the Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency. However, in our considered opinion, the observations contained in paragraph 190 of the judgment cannot be read divorced from the factual matrix before the Hon'ble Supreme Court. The principles laid down therein have to be applied to the facts of each case independently.

11.

In the present case, even if the reasoning adopted by the Hon'ble Supreme Court in the context of institutions seeking exemption under section 10(23C)(iv) is applied, the assessee does not derive any assistance therefrom. The financial statements clearly demonstrate that the assessee is not predominantly funded by the Government. Against total revenue receipts of

ITA 1307/CHD/2026 A.Y. 2026-27 8 approximately ₹51.87 crore, the Grant-in-Aid received from the Ministry of Commerce and Industry is only ₹17.05 crore, which constitutes substantially less than fifty per cent of the total receipts. The overwhelming source of revenue is generated from sponsored research, consultancy, testing, calibration, standardisation and allied technical services rendered to participants in the cement industry for consideration. Thus, the financial profile of the assessee itself demonstrates that its activities are principally sustained through commercial receipts generated from rendering specialised services to identified industrial and commercial organisations. The relationship between the assessee and the beneficiaries is contractual, with technical services rendered for consideration and are in the nature of trade and commerce. The fact that such research may ultimately contribute to technological advancement or indirectly benefit society cannot, by itself, convert the predominant activity into a charitable activity within the meaning of section 2(15). At this stage, we also find considerable force in the reasoning adopted by the Coordinate Bench of this Tribunal in International Will Trust v. CIT(Exemptions). The Coordinate Bench has held that the decisive test is not whether an activity incidentally or indirectly facilitates a recognised charitable purpose but whether the institution itself exists for carrying out the charitable purpose. It has been further held that if every activity remotely connected with

ITA 1307/CHD/2026 A.Y. 2026-27 9 a charitable object were to be regarded as charitable, the distinction between a charitable institution and a commercial enterprise would stand obliterated. The Tribunal observed that every ancillary service provider cannot claim registration merely because its services facilitate another charitable activity. The same reasoning, in our considered opinion, squarely applies to the facts of the present case. Merely because the research undertaken by the assessee may improve the quality of cement, enhance construction standards or indirectly benefit infrastructure development does not ipso facto establish that the assessee itself exists for charitable purposes. If such an interpretation is accepted, every industrial research laboratory, engineering consultancy, testing agency, certification body or technological service provider would become entitled to registration under section 12AB merely because their services ultimately benefit society. Such an interpretation would render the restrictions incorporated by Parliament in section 2(15) wholly redundant.

12.

We also do not find merit in the submission that the impugned order deserves to be set aside merely because one of the authorities relied upon by the learned CIT(E) has subsequently been considered by the Hon'ble Supreme Court. It is a settled proposition that where the ultimate conclusion is otherwise sustainable on the facts and in law, the order cannot be interfered with merely because one of the reasons assigned therein has

ITA 1307/CHD/2026 A.Y. 2026-27 10 undergone a subsequent change in legal position. Independently examining the material available on record, we are satisfied that the predominant activities of the assessee consist of rendering specialised research, consultancy, testing, and technical services for consideration, and not of pursuing an independent charitable object for the benefit of the general public.

13.

Lastly, we also do not find any merit in the contention advanced by the learned AR that, at the stage of grant of registration under section 12AB, the learned CIT(Exemptions) was only required to examine the objects of the institution and the genuineness of its activities and, therefore, could not have examined the true nature of the activities carried on by the assessee. In our considered opinion, the aforesaid submission deserves to be rejected. The statutory mandate under section 12AB requires the Commissioner to satisfy himself not only of the objects of the institution but also of the genuineness of its activities. These two conditions are cumulative and constitute the sine qua non for grant of registration. The expression "genuineness of activities" cannot be interpreted in a narrow or mechanical sense so as to confine the enquiry merely to whether the activities are actually being carried on. Such an interpretation would render the statutory requirement largely redundant. The Commissioner is necessarily required to examine whether the activities undertaken are in furtherance of the stated charitable objects and whether, in

ITA 1307/CHD/2026 A.Y. 2026-27 11 substance, they possess the essential character of a charitable activity as contemplated under the Act. If, upon examination of the material placed before him, the learned CIT(Exemptions) finds that the activities are, on their face, predominantly commercial in nature and are not directed towards achieving a charitable purpose, he cannot be expected to shut his eyes to such material merely because the proceedings relate to grant of registration under section 12AB. To hold otherwise would reduce the statutory enquiry contemplated under section 12AB to a mere formality and compel the Commissioner to grant registration even where the activities ex facie demonstrate a commercial character. Such an interpretation would defeat the very object for which Parliament has entrusted the Commissioner with the responsibility of examining the genuineness of the activities before granting registration.

14.

In the present case, the learned CIT(Exemptions), upon examining the objects, the financial statements and the actual activities undertaken by the assessee, arrived at a categorical finding that the predominant activities consisted of rendering specialised research, consultancy, testing and allied technical services for consideration to commercial entities engaged in the cement industry. In our considered opinion, the learned CIT(Exemptions) was fully justified in undertaking such an enquiry, as the same was intrinsically connected with the statutory

ITA 1307/CHD/2026 A.Y. 2026-27 12 requirement of satisfying himself regarding the genuineness and charitable character of the activities. We, therefore, find no infirmity in the approach adopted by the learned CIT(Exemptions) while rejecting the application for registration under section 12AB of the Act. In these circumstances, we find no infirmity in the conclusion reached by the learned CIT(Exemptions) that the assessee does not satisfy the conditions for grant of registration under section 12AB of the Act. Accordingly, respectfully following the ratio laid down by the Coordinate Bench in International Will Trust, we uphold the impugned order passed by the learned CIT(Exemptions).

15.

In the result, appeal of the assessee is dismissed.

Order pronounced on 05th August,2026.

Sd/- Sd/-

(VIJAY VARMA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�/ CIT 3. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 4. गाड� फाईल/ Guard File 5.

सहायक पंजीकार/ Assistant Registrar

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