ACIT(EXEMPTIONS), CIRCLE-2, AHMEDABAD, AHMEDABAD vs. SHRI KHODAL DHAM TRUST KAGVAD, RAJKOT

The Department has raised the following grounds of appeal:

During the course of assessment proceedings, the Assessing Officer examined the activities carried out by the trust and mainly focused on the construction of a structure described by the assessee as a “prayer hall.” Based on the nature of the structure and the activities conducted therein, such as “Pran Pratistha” and “Havan,” the Assessing Officer was of the opinion that the said structure was in fact a temple dedicated to “Khodal Maa” and that the activities of the trust were predominantly religious in nature. The Assessing Officer further was of the view that such activities were not in line with the objects stated in the trust deed and could also be construed as being for the benefit of a particular religious community.

Proceeding on this basis, the Assessing Officer held that the assessee was not eligible for exemption under sections 11 and 12 of the Act. Accordingly, the Assessing Officer denied the exemption claimed in respect of corpus donations amounting to Rs. 29,31,60,032/- under section 11(1)(d) of the Act, treating the same as taxable income of the assessee. Further, while examining the expenditure claimed by the trust, the Assessing Officer allowed only a part of the total revenue expenditure and disallowed expenses relating to activities such as “Pran Pratistha,” “Havan Kund,” and “Ann Kshetralay,” on the ground that these were connected with religious activities and not in accordance with the charitable objects of the trust. The Assessing Officer thus assessed the total income at Rs. 31,26,13,761/- as against the returned income of Nil.

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals) and filed written submissions challenging the

The CIT(Appeals), after considering the assessment order, written submissions and material available on record, examined the issues in a detailed manner. At the outset, the CIT(Appeals) noted that the additions made by the Assessing Officer were substantially similar to those made in earlier years and that in the assessee’s own case for earlier assessment year, the CIT(Appeals) had allowed the benefit of sections 11 and 12 of the Act. The CIT(Appeals) observed that the facts for the year under

On the issue of denial of exemption, the CIT(Appeals) analyzed the reasoning of the Assessing Officer and the submissions of the assessee. The CIT(Appeals) noted that the Assessing Officer had primarily relied on the characterization of the prayer hall as a temple and the presence of certain religious rituals to conclude that the trust was not carrying out charitable activities. However, the CIT(Appeals) considered the objects and activities of the trust and the fact that the trust was registered under section 12A of the Act, which had not been cancelled. The CIT(Appeals) observed that the existence of some religious elements in activities does not automatically negate the charitable character of a trust, especially when the activities are not shown to be confined to a specific religious community.

The CIT(Appeals) further held that the Assessing Officer had not established that the trust’s activities were exclusively or predominantly for the benefit of a particular community so as to attract disallowance under section 13 of the Act. In absence of such finding, the denial of exemption under sections 11 and 12 of the Act was held to be not justified.

With regard to corpus donations, the CIT(Appeals) held that once the trust is eligible for exemption under section 11 of the Act, the corpus donations received with specific direction are not includible in income under section 11(1)(d) of the Act. The denial of such exemption by the Assessing Officer was therefore considered to be consequential to the primary denial of section 11 benefits and could not be sustained independently.

An important factor in the decision of the CIT(Appeals) was the reliance on earlier appellate orders in the assessee’s own case, wherein similar issues had been decided in favour of the assessee. The CIT(Appeals) followed the principle of consistency and held that in absence of any change in facts or law, a different view could not be taken for the year under consideration.

In light of the above analysis, the CIT(Appeals) held that the Assessing Officer was not justified in denying exemption under sections 11 and 12 of the Act, in rejecting corpus donation exemption under section 11(1)(d) of the Act, and in disallowing a substantial portion of expenditure. Accordingly, the additions made in the assessment order were deleted and the appeal of the assessee was allowed.

The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record. The controversy before us arises out of the action of the Assessing Officer in denying the benefit of exemption under sections

On a careful consideration of the factual matrix, we find that the assessee is a duly registered public charitable trust under the Bombay Public Trust Act, 1950 and is also registered under section 12A of the Act, which registration admittedly continues to be in force. The objects of the trust, as borne out from the record, include education, medical relief, financial assistance and activities of general public utility. During the year under consideration, the assessee carried out various activities including construction of a prayer hall and running of “Ann Kshetralay” for distribution of food to the public at large. The Assessing Officer, however, proceeded to draw an adverse inference primarily on the basis that the said prayer hall was in the nature of a temple dedicated to “Khodal Maa” and that certain religious ceremonies were conducted therein, and on that basis concluded that the activities of the trust were not charitable.

The learned CIT(Appeals), after examining these very facts in detail, has recorded a categorical finding that the Assessing Officer has not brought any material on record to demonstrate that the activities of the trust are confined to any particular religious community or caste. It has further been noted that the activities of the trust, including food distribution and other welfare measures, are open to the general public and are in consonance with its stated objects. The learned CIT(Appeals) has also taken note of the fact that similar additions were made by the Assessing Officer in earlier years on identical reasoning.

In such circumstances, we are of the considered view that the learned CIT(Appeals) was justified in following the earlier appellate order and granting relief to the assessee. Judicial discipline demands that when an issue has been decided by the Coordinate Bench on identical facts in the assessee’s own case, the same view should be followed in subsequent years unless there is a material change in facts or law, which is not the case here.

Even on an independent evaluation of the findings of the Assessing Officer, we find that the denial of exemption is based on presumptions rather than on cogent evidence. The mere existence of a prayer hall or performance of certain rituals cannot lead to the conclusion that the trust is not carrying on charitable activities, particularly when the predominant activities such as education, medical relief and food distribution are not disputed. Further, there is no finding that the benefits of the trust are

Once the assessee is held to be eligible for exemption under section 11, the exemption in respect of corpus donations received with specific direction under section 11(1)(d) cannot be denied. Similarly, the disallowance of expenditure relating to “Ann Kshetralay” and other activities has rightly been deleted by the learned CIT(Appeals), as such activities are inherently charitable and the Assessing Officer has not established that the expenditure was incurred for non-charitable purposes.

In view of the aforesaid detailed factual position and respectfully following the decision of the Coordinate Bench of the Tribunal in the assessee’s own case for assessment year 2014–15 on identical facts, we find no infirmity in the order of the learned CIT(Appeals) in allowing the claim of the assessee.

Accordingly, the appeal filed by the Department is dismissed. This Order pronounced in Open Court on 23/04/2026