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Facts
Hatkeshwar Mahadev Trust, having provisional approval, applied for final registration under Section 12AB of the Income Tax Act. The CIT(E) rejected the application, citing that the trust's objects were restricted to the benefit of the "Lunawada Nagar Caste," thus constituting a "specified violation" under the Explanation to Section 12AB(4).
Held
The Tribunal found that the CIT(E) erred by rejecting the application based solely on the trust's objects without conducting an inquiry into whether the trust's income was actually "applied" for the benefit of the specific community. It clarified that a "specified violation" under Section 12AB(4)(d) requires the application of income for such benefit. Consequently, the denial was deemed incorrect, and the CIT(E) was directed to grant registration.
Key Issues
Can registration under Section 12AB be rejected solely based on the objects of a trust benefiting a specific religious community, without any inquiry into the actual application of its income?
Sections Cited
12A, 12AB, 12AB(4), 13(1)(b)
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
O R D E R PER: ANNAPURNA GUPTA - AM: The present appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (hereinafter referred to as “CIT(E)”), Ahmedabad dated 20.12.2023 rejecting assessee’s application seeking registration of the Trust under Section 12AB of the Act.
Grounds raised by the assessee are as under:
“1. In law and in the facts and circumstances of the appellant’s case, the order passed by the ld. CIT(Exemption), Ahmedabad Rejecting application for registration of the trust u/s. 12AB of the Income Tax Act, 1961 is ab initio void being bad in law.
2. In law and on the facts and circumstances of the case of appellant, the ld. CIT(Exemption), Ahmedabad has erred in holding that objects of the appellant are restricted to benefit of a particular religious community or caste i.e., “Lunawada Nagar caste” even when the provisions of section 13(1)(b) of the Act will be applicable to the appellant.
In law and on the facts and in the circumstances of the case of appellant, the ld. CIT (Exemption), Ahmedabad has erred in Rejecting application for registration of the trust u/s. 12AB of the Income Tax Act, 1961.
Hatkeshwar Mahadev Trust vs. CIT(E) Asst.Year –N.A. - 2 - 4. In law and on the facts and in the circumstances of the case of appellant, the ld. CIT (Exemption), Ahmedabad has erred in no granting registration u/s 12A of the Act to the appellant. 5. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”
3. As per facts noted in the order of the Ld. CIT(E), the assessee had been granted provisional approval for registration u/s 12A of the Act in Form 10AC dated 27.05.2021. The assessee had applied for final registration in Form 10AB under Section 12A(1)(ac)(iii) of the Act dated 30.06.2023. This application filed by the assessee seeking registration under Section 12AB of the Act in Form 10AB was rejected by the Ld. CIT(E).
The order of the Ld. CIT(E) reveals that the registration was denied noting that the objects of the assessee trust catered to the benefit of a particular religious caste or community and therefore, it qualified as “specified violation” as defined in the Explanation to Section 12AB(4) of the Act. The objects of the Trust which were noted to benefit a particular religious community or caste are noted in Page 7 of the order as under:
“(1) Hatkareshwar Mahadev Temple, Lunawada will be open for darshan to Nagar brothers. To perform Sevapuja in the temple and to take care of the temple and its related properties. (2) To keep necessity utensils for marriage ceremony and caste food on auspicious and inauspicious occasions and to let them use on rent without payment, repairing the house for Dandi-Sanyasis and sagihin works for the descent of Dandi- Sanyasis. (Municipal survey no. 1407). 3) Physical, mental, spiritual, economic, social, religious moral etc. improvement of Vishnagara Nagar caste of Lunavada (4) To provide financial assistance to Lunawada Nagar caste students for educational purposes.”
Hatkeshwar Mahadev Trust vs. CIT(E) Asst.Year –N.A. - 3 - 4. The Ld. CIT(E) has noted these objectives to be for the benefit of the Lunawada Nagar Caste and noting that as per Explanation to Section 12AB(4) they qualified as specific violation he rejected assesses application seeking registration u/s 12A of the Act.
Since the Ld. CIT(E) has invoked Explanation to section 12AB(4) of the Act, it is pertinent to reproduce the same for better understanding of the issue:
“12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,— (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) 94[or item (B) of sub-clause (vi)] of the said clause,— (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),— (A) pass an order in writing registering the trust or institution for a period of five years; or 95[(B) if he is not so satisfied, pass an order in writing,-- (I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;] Hatkeshwar Mahadev Trust vs. CIT(E) Asst.Year –N.A. - 4 - 95[(c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,] and send a copy of such order to the trust or institution: 96[Provided that where an application is made under sub-clauses (i) to (v) of the said clause, and the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed rupees five crores during each of the two previous years, preceding the previous year in which such application is made, the provisions of this sub-section shall have effect as if for the words "five years", the words "ten years" had been substituted.] (2) All applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of sub-section (1) of section 12AA before the date on which this section has come into force, shall be deemed to be applications made under sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date. 97[(3) The order under sub-section (1) shall be passed, in such form and manner as may be prescribed, within a period of,— (i) three months calculated from the end of the month in which the application was received in case of clause (a); (ii) six months calculated from the end of the quarter in which the application was received in case of sub-clause (ii) of clause (b); and (iii) one month calculated from the end of the month in which the application was received in case of clause (c).] (4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,— (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall,— (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; Hatkeshwar Mahadev Trust vs. CIT(E) Asst.Year –N.A. - 5 - (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution. Explanation.—For the purposes of this sub-section, the following shall mean "specified violation",— (a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or (d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or (e) any activity being carried out by the trust or institution,— (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or (f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non- compliance has occurred, has either not been disputed or has attained finality 98[; or] 98[(g) the application referred to in clause (ac) of sub-section (1) of section 12A 99[***] contains false or incorrect information.] (5) The order under clause (ii) or clause (iii) of sub-section (4), as the case may be, shall be passed before the expiry of a period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of sub-section (4).”
As is evident from a bare reading of Section 12AB(4) of the Act, where a trust which has been granted registration in terms of Section 12AA of the Act or has been granted provisional registration and it is subsequently found that a specified violation has occurred, then in terms of the provisions Hatkeshwar Mahadev Trust vs. CIT(E) Asst.Year –N.A. - 6 - of the Section 12AB(4) of the Act ,the PCIT/CIT after verifying the occurrence of such specified violation can cancel the registration/provisional registration granted to the trust. The specified violation defined in the Explanation 2 to Section 12AB(4) mentions six violations. The violation which has been invoked in the present case is Clause (d). On reading Clause (d) of the Explanation what emerges is that the specified violation occurs only when the income of the trust is “applied” for the benefit for a particular religious caste or community. It is pertinent to note that the specified violations in Clause (d) uses the word “ applied “,which means that only when a trust is found to have utilized its income for the benefit of particular religious caste or community, then only it can be said that there is a specified violation which has occurred for cancelling the provisional registration/registration of the Trust. Section 12AB(4) of the Act requires the Ld. PCIT/CIT to verify the occurrence of such violation by calling for necessary records/details from the assesee and after granting necessary opportunity of hearing to the assessee to pass order cancelling registration/provisional registration granted.
In the facts of the present case, the Ld. CIT(E), we find, has not found any application of income of the trust for the benefit of any particular religious case or community. In fact, no inquiry has been conducted by him regarding the occurrence of the specified violation of application of income for benefit of specific caste /community. He has only noted the objects of the trust to benefit a particular religious caste or community. Therefore his finding of there being a specified violation occurred in the case of the assessee, in terms of Explanation to section 12AB(4) of the Act , is we hold, Hatkeshwar Mahadev Trust vs. CIT(E) Asst.Year –N.A. - 7 - incorrect. The LD. CIT(E)’s denial of registration on account of the occurrence of specified violation, is therefore, we hold, incorrect and not in accordance with law.
In the light of the same, with no other reason for denying grant of registration to the assessee trust u/s 12A of the Act, we hold that the assessee is entitled to grant of registration and direct the Ld. CIT(E) to grant the same.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 09/09/2025