SHREE DIGAMBER JAIN UDASIN SHRAVIKA ASHRAM TRUST,UDAIPUR vs. CIT EXEMPTION, JAIPUR, JAIPUR

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ITA 315/JODH/2024Status: DisposedITAT Jodhpur06 August 2026AY 2024-2514 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the absence of a dissolution clause and the objects benefiting a specific community cannot, by themselves, be grounds for rejecting registration. The matter was restored to the CIT(E) for fresh adjudication, considering all documents and evidence.

What were the facts?

The assessee's application for regular registration under Section 12AB was rejected by the CIT(E) due to alleged incomplete documentation, absence of a dissolution clause, objects benefiting a specific community, and failure to establish genuineness of activities. The provisional registration was also cancelled.

What were the issues?

Whether the absence of a dissolution clause and objects benefiting a specific community are valid grounds for rejecting registration under Section 12AB, and whether the CIT(E) properly considered the submitted documents.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 13(1)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR

For Appellant: Shri Rajendra Jain (Advocate) and Smt. Raksha Birla CA
For Respondent: Ms. Shivani Bansal CIT-DR

PER: SHRI MAKARAND VASANT MAHADEOKAR :

This appeal by the assessee is directed against the order dated 29.02.2024 passed by the learned Commissioner of Income Tax (Exemptions), Jaipur [“CIT(E)”], in Form No. 10AD under section 12AB(1)(b)(ii)(B) of the Income Tax Act, 1961 [“the Act”]. By the impugned order, the learned CIT(E) rejected the application filed by the

2 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) assessee in Form No. 10AB seeking regular registration under section 12AB of the Act and also cancelled the provisional registration granted to the assessee on 03.08.2022.

2.

The assessee has raised the following grounds of appeal, which are reproduced verbatim: 1. The Ld. CIT (Exemptions ), Jaipur erred in Law, Facts and Circumstances of the case in cancelling/ refusing registration under Section 12AB/12AA to the Appellant. The Same Deserves to be allowed. 2. That without Prejudice to the aforesaid the Ld. CIT (Exemption) erred in Law Facts & Circumstances of the case in cancelling the 12AB registration from retrospective date i.e. 03.08.2022 though the order cancelling the same was passed on 29.02.2024. As per many case laws and as held in case of Pacific Academy of Higher Education and Research Society Vs PCIT (ITAT Jodhpur) and Indian Medical Trust Versus the Principal Commissioner of Income Tax (414 ITR 296) (Hon’ble High Court of Rajasthan) and by supreme court in case of State of Rajasthan and others vs Basant Agrotech India Ltd. and others 388 ITR 81(SC) retrospective cancellation is unjustified and same deserves to be maintained for Period before the date of cancellation. 3. The Appellant requests its right to add amend or alter all or any of the grounds of appeal on or before hearing. 3. The relevant facts emerging from the impugned order are that the assessee filed an online application in Form No. 10AB on 29.09.2023 seeking registration under section 12AB of the Act. The learned CIT(E) issued a notice dated 09.12.2023 calling upon the assessee to furnish the documents and explanations specified therein by 20.12.2023. The assessee sought an adjournment. Thereafter, a further notice dated 02.01.2024 was issued fixing the matter for compliance on

3 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) 17.01.2024. The impugned order records that a part reply dated 20.12.2023 was available on record. On examination thereof, the learned CIT(E) considered that the details and documents called for had not been fully furnished. A further opportunity was, therefore, afforded vide notice dated 29.01.2024 requiring compliance by 09.02.2024. According to the learned CIT(E), no further compliance was made and, therefore, the application was decided on the basis of the material available on record.

4.

The learned CIT(E), on examination of Form No. 10AB, observed that the application was incomplete as the assessee had allegedly not furnished the existing registration order under section 12A, the final accounts for the financial years 2020-21 and 2021-22, and a note on the activities undertaken by it.

5.

The learned CIT(E) further observed that the constitutional document of the assessee did not contain a dissolution clause specifying the manner in which the assets would be dealt with upon dissolution. According to the learned CIT(E), in the absence of such a clause, it could not be ensured that the assets and income of the assessee would continue to be applied only for charitable or religious purposes.

4 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) 6. The learned CIT(E) also referred to certain clauses in the objects of the assessee and concluded that the activities were intended to be carried out wholly or substantially for the benefit of the Jain community. By referring to section 13(1)(b) of the Act and clause (d) of the Explanation below section 12AB(4), the learned CIT(E) held that a trust making a distinction on the basis of religion or caste could not be regarded as eligible for registration under section 12AB of the Act.

7.

The learned CIT(E) further observed that the assessee had failed to furnish complete accounts, bank statements, supporting bills and vouchers, a note on its activities, details of receipts and expenditure, particulars of beneficiaries and the other information called for through the notices. The learned CIT(E), therefore, held that the genuineness of the activities of the assessee could not be verified.

8.

On the basis of the aforesaid observations, the learned CIT(E) rejected the application on the following four grounds: i. Incomplete Form No. 10AB; ii. absence of a dissolution clause; iii. the objects being meant for the benefit of Jain Samaj; and iv. failure to establish the genuineness of activities and non-compliance with the notices.

5 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) 9. The learned CIT(E) also cancelled the provisional registration granted to the assessee on 03.08.2022.

10.

Before us, the learned Authorised Representative (AR) submitted that the assessee had made the requisite compliance and furnished the details and supporting documents called for by the learned CIT(E). He invited our attention to the documents placed at pages 9 to 16 of the paper book and submitted that the rejection of the application on the ground of non-compliance and non-furnishing of documents was not justified.

11.

The learned AR further submitted that the absence of a dissolution clause could not constitute a valid ground for refusing registration. In support of this contention, he relied upon the judgment of the Hon’ble jurisdictional Rajasthan High Court in Commissioner of Income Tax (Exemption) v. Shri Narsinghji Ka Mandir, D.B. Income Tax Appeal No.171/2018, order dated 05.09.2019.

12.

Regarding the objection that the objects were intended for the benefit of the Jain community, the learned AR relied upon the decision of the Ahmedabad Bench of the Tribunal in Shree Naminath Shwetamber Murtipujak Tapagachh Jain Religious Trust v. CIT(E), ITA

6 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) No.874/Ahd/2024, order dated 30.09.2024. He submitted that the provisions of section 13(1)(b) of the Act could not be invoked at the stage of considering the application for registration under section 12AB and that the applicability of section 13 was required to be examined by the Assessing Officer at the stage of assessment on the basis of the activities actually undertaken by the assessee.

13.

The learned Departmental Representative, on the other hand, relied upon the findings recorded in the impugned order.

14.

We have considered the rival submissions and perused the material placed on record. The application of the assessee has been rejected on four grounds, namely, incomplete Form No. 10AB, absence of a dissolution clause, the objects allegedly being intended for the benefit of Jain Samaj, and failure to establish the genuineness of activities on account of non-compliance.

15.

As regards the absence of a dissolution clause, the controversy stands concluded by the judgment of the Hon’ble jurisdictional Rajasthan High Court in CIT(E) v. Shri Narsinghji Ka Mandir (supra). The relevant observations of the Hon’ble High Court are reproduced as under:

7 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) “This Court is of the opinion that the absence of dissolution clause or condition – as rightly contended by the assessee, is an uncertain future event. Further-more, given that the property is vested in a public charitable trust, it is always open to the concerned party – including the Revenue, to approach the Civil Court for a remedy under Section 91-92 of the Code of Civil Procedure. In these circumstances, the question of law, as framed, is answered in favour of the assessee and against the Revenue.” 16. The Hon’ble High Court also noticed that the eventuality of failure by a registered trust to transfer its assets to another eligible institution upon dissolution is specifically dealt with by section 115TD(1)(c) of the Act. In view of the binding judgment of the Hon’ble jurisdictional High Court, the absence of a dissolution clause, by itself, could not have constituted a valid ground for rejecting the application of the assessee.

17.

The next objection of the learned CIT(E) is that certain objects of the assessee are intended for the benefit of Jain Samaj and, therefore, the provisions of section 13(1)(b) are attracted. On this issue, the Ahmedabad Bench of the Tribunal in Shree Naminath Shwetamber Murtipujak Tapagachh Jain Religious Trust v. CIT(E) (supra), while considering a substantially similar objection, held in paragraphs 9 and 10 as under:

8 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) “9. Looking into the judicial precedents on the subject, in our considered view, provisions of Section 13(1)(b) of the Act can be invoked at the time of assessment, on the basis of material that may be brought on record. However, grant of registration under Section 12A of the Act cannot be denied to the assessee by invoking the provisions of Section 13(1)(b) of the Act at the time of grant of registration. 10. In the result, in view of the above observations, the matter is restored to the file of CIT (Exemptions), for de-novo consideration, after giving due opportunity of being heard and with the direction not to disentitle the assessee for grant of registration only on the grounds as mentioned in its order for rejecting the application filed by the assessee trust.” 18. We further find that the aforesaid decision of the Ahmedabad Bench of the Tribunal was carried in appeal by the Revenue before the Hon’ble Gujarat High Court in Principal Commissioner of Income Tax (Exemption), Ahmedabad v. Shree Naminath Shwetamber Murtipujak Tapagachh Jain Religious Trust, R/Tax Appeal No.257 of 2025, order dated 06.07.2026. The substantial questions proposed by the Revenue specifically raised the effect of the amendment made by the Finance Act, 2022 with effect from 01.04.2022, whereby section 12AB(4) was inserted and the application of income for the benefit of a particular religious community or caste was included as a “specified violation” under clause (d) of the Explanation thereto. Thus, the effect of the amended statutory

9 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) provisions was specifically placed for consideration before the Hon’ble High Court.

19.

The Hon’ble High Court noted that the learned Senior Standing Counsel appearing for the Revenue had fairly conceded that the issue was no longer res integra and stood covered by the decisions of the Hon’ble Supreme Court and the Hon’ble Gujarat High Court. The relevant findings recorded in paragraphs 4 and 4.1 are reproduced as under:

“4. At the outset, learned Senior Standing Counsel Mr. Aman Mir appearing for the appellant has conceded to the fact that this issue is no more res-integra and is covered by the decision of the Hon'ble Apex Court in the case of CIT v. Dawoodi Bohara Jamat [2014] 43 taxmann.com 243/222 Taxman 228/364 ITR 31 (SC) as well as the decision of this Court in case of CIT (Exemption) v. Jamiatul Bannat Tankaria rendered [2024] 168 taxmann.com 35 (Gujarat)/ [Tax Appeal No. 968 of 2024 dated 09-10-2024]. Further, it was submitted by learned Senior Standing Counsel Mr. Aman Mir that the order passed by this Court in Tax Appeal No. 968 of 2024 was challenged before the Hon'ble Apex Court by way of CIT (Exemption) v. Jamiatul Banaat Tankaria Madressa [Special Leave Petition (Civil) Diary No. 38594 of 2025, dated 22-8-2025] which came to be dismissed on the ground of delay as well as on merits.

10 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) 4.1. Lastly, learned Senior Standing Counsel Mr. Aman Mir has submitted that the issue involved in the present matter stands concluded by the decision of this Court in CIT v. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust, (2017) 8 ITR-OL 493 (Guj.). In the said decision, while considering the question of denial of registration under Section 12A of the Act by invoking the provisions of Section 13(1)(b) of the Act, this Court categorically held that the provisions of Section 13 of the Act would come into operation only at the stage of assessment and not at the stage of grant of registration under Section 12A of the Act. The relevant observations contained in paragraph 8 of the said judgment read thus: ‘8. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community, is incorrect. Thereafter to suggest that the activities were earned out only for such purposes would be entering in the realm of granting exemptions in terms of section 13 of the Act, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record.’” 20. After considering the findings of the Tribunal and the aforesaid judicial precedents, the Hon’ble Gujarat High Court recorded its conclusion in paragraphs 5 to 7 as under:

“5. In view of the findings recorded by the Tribunal and supported by the decision of the Hon'ble Apex Court in case of Dawoodi Bohara Jamat (supra) as well as decisions of this Court in case of Bayath Kutchhi Dasa

11 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) Oswal Jain Mahajan Trust (supra) and in case of CIT v. Anjuman E Nusratul Muslimin Tankaria [Tax Appeal No. 1052 of 2024 dated 15-04- 2026], for the purpose of granting registration under Section 12A of the Act, the provisions of Section 13(1)(b) of the Act cannot be referred to. The provisions of Section 13(1) is to be applied while granting exemption to the Trust. 6. In view of the findings of fact recorded by the Tribunal and settled position of law, we are of the view that no question of law much less any substantial question of law arises from the impugned order passed by the Tribunal in the present Tax Appeal. 7. Therefore, this Tax Appeal is accordingly dismissed. No order as to costs.” 21. The aforesaid judgment is of direct relevance because the Revenue had specifically questioned the correctness of the Tribunal’s view in the light of section 12AB(4), as inserted by the Finance Act, 2022 with effect from 01.04.2022. Notwithstanding the said amendment, the Hon’ble Gujarat High Court upheld the order of the Tribunal and reiterated that, for the purpose of granting registration under section 12A, the provisions of section 13(1)(b) cannot be invoked and that such provisions fall for application while examining the claim for exemption. Consequently, the objection founded exclusively upon section 13(1)(b) of

12 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) the Act cannot, by itself, sustain the rejection of the assessee’s application for registration under section 12AB of the Act.

22.

Insofar as the remaining objections regarding incomplete compliance and absence of sufficient material to verify the genuineness of activities are concerned, the learned AR has submitted that the requisite details and documents are placed at pages 9 to 16 of the paper book. These documents require examination by the learned CIT(E), since the impugned order proceeds on the basis that the required documents and explanations had not been furnished. The satisfaction concerning the genuineness of the activities and compliance with the requirements of section 12AB has to be recorded by the prescribed authority after considering the complete material. It would, therefore, be appropriate to restore the application to the learned CIT(E) for this limited factual examination.

23.

Accordingly, the impugned order dated 29.02.2024 is set aside in its entirety and the application of the assessee is restored to the file of the learned CIT(E) for fresh adjudication. The learned CIT(E) shall take into consideration the documents placed at pages 9 to 16 of the paper book and any further evidence or explanation that may be furnished by the

13 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) assessee. The learned CIT(E) shall not reject the application merely on the ground that the constitutional document does not contain a dissolution clause, in view of the binding judgment of the Hon’ble jurisdictional Rajasthan High Court in Shri Narsinghji Ka Mandir (supra). The applicability of section 13(1)(b) shall also not, by itself, be treated as a ground for refusing registration at this stage.

24.

Since the cancellation of the provisional registration dated 03.08.2022 forms part of the same composite exercise and is consequential to the rejection of the application for regular registration, the said cancellation is also set aside. The learned CIT(E) shall decide the application for regular registration and all consequential aspects together, in accordance with law, by passing a speaking order after affording reasonable opportunity of hearing to the assessee. The assessee is directed to furnish the requisite details and extend full cooperation in the proceedings.

25.

Ground Nos.1 and 2 are accordingly allowed for statistical purposes. Ground No.3 is general in nature and does not call for separate adjudication.

14 ITA No. 315/Jodh/2024 (Assessment Year: 2024-25) 26. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in open court on 06 / 08 / 2026.

Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) ACCOUNTANT MEMBER VICE PRESIDENT Dated : 06 / 08 / 2026. Pritesh Vaishnav PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,

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