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Facts
The assessee, a public charitable trust, was granted provisional registration under Section 12AB. The CIT(E) rejected its application for final registration and cancelled the provisional registration, citing that the trust was created for the benefit of a particular religious community (Leuva Patidar Samaj) and thus invoked Section 13(1)(b). The trust was constituted before April 1, 2021.
Held
The Tribunal held that for trusts created before April 1, 2021, the provisions of Section 13(1)(b) are attracted only at the time of assessment, not at the stage of granting registration. The CIT(E)'s reliance on the dominant object clause and a Supreme Court judgment was considered misplaced and premature.
Key Issues
Whether the CIT(E) was justified in rejecting the assessee's application for registration under Section 12AB based on the trust's objects clause, without examining actual application of income or conduct for a trust created prior to April 1, 2021.
Sections Cited
12A(1)(ac)(iii), 12AB, 13(1)(b), 11, 12AB(4), 12A(1)
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
This appeal has been preferred by the assessee against the order dated 30.03.2024 passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(E)”], whereby the application filed by the assessee trust under section 12A(1)(ac)(iii) read with section 12AB of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] was rejected, and the earlier provisional registration was also cancelled.
2 Facts of the Case
The assessee is a public charitable trust registered vide Certificate No. A/1641 dated 26.02.2019. It was granted provisional registration under section 12AB(1)(ac)(vi) by the CIT(E) on 29.11.2021 for the period covering A.Ys. 2022–23 to 2024–25. Subsequently, the assessee filed an application in Form No. 10AB on 30.09.2023 seeking final registration under section 12AB(1)(ac)(iii). The CIT(E) issued show-cause notices dated 22.11.2023 and 14.03.2024. After examining the objects of the trust, the CIT(E) concluded that the trust was created for the benefit of a particular religious community or caste—viz., “Leuva Patidar Samaj”—and therefore invoked section 13(1)(b) to reject the application. The CIT(E) also cancelled the provisional registration, stating that the trust was not created for the general public and that its activities were confined to a specific community.
Aggrieved by the order of CIT(E), the assessee is in appeal before us raising following grounds of appeal:
1. Whether, on facts and in circumstances of the case and in law, Ld. CIT (Exemption) has erred in rejecting the application for registration u/s 12AB(ac)(iii) of the Act"? 2. Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal
4. During the course of hearing, the learned Authorised Representative (AR) submitted that the assessee is an existing trust created prior to 1st April 2021 and had been granted provisional registration under section 12AB of the Income-tax
3 Act. It was pointed out that the objects of the trust are mixed in nature, encompassing various charitable purposes such as education, healthcare, women empowerment, and social upliftment. In support of this, the AR referred to one of the key objects relating to Education, which reads: “For the overall development and for the establishment of human dignity institutes like Kindergarten, Primary Schools, Secondary School, Higher Secondary school, Colleges, Technical institutes, Hostels, Mess, Library, Research Centre, etc. shall be established and to affiliate with such institutes and can make necessary expenses for administration of such institutes.”
According to the AR, this object and some other objects clearly demonstrates the inclusive and public-oriented character of the trust’s mandate. The AR placed on record a written synopsis and relied upon binding judicial precedents, including CIT (Exemption) v. Jamiatul Banaat Tankaria [(2024) 168 taxmann.com 35 (Guj.)] and CIT (Exemption) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [(2016) 74 taxmann.com 199 (Guj.)], to submit that the provisions of section 13(1)(b) of the Act are not applicable at the stage of granting registration under section 12AB, and that such issues may only be examined during assessment when it is established that the benefit of the trust’s activities is in fact conferred exclusively upon a particular religious community or caste. The AR further placed reliance on the decision of the Co-ordinate Bench in the case of Gohilwad Vankar Samaj Seva Trust [(2025) 173 taxmann.com 263 (Ahmedabad - Trib.)], wherein, under substantially similar facts, the Co-ordinate Bench had restored the matter to the file of the 4 CIT(Exemption) with a direction to grant registration after due opportunity of hearing.
The learned DR supported the order of the CIT(E) and submitted that the dominant character of the trust is targeted at the benefit of “Leuva Patidar Samaj”, which is a specific caste and the use of caste-specific terminology in the trust’s object clauses indicates exclusive benefit, attracting the bar under section 13(1)(b). Hence, the DR submitted that the rejection of registration and cancellation of provisional approval was in accordance with law.
We have carefully considered the rival submissions of both parties and perused the material available on record, including the judicial precedents relied upon by the learned AR. The central issue arising for adjudication is whether, in the facts of the present case, the CIT(Exemption) was justified in rejecting the assessee’s application for registration under section 12AB(1)(ac)(iii) on the basis that the trust is established for the benefit of a particular caste, thereby attracting the bar under section 13(1)(b) of the Act.
It is undisputed that the assessee trust was constituted on 26.02.2019 and therefore falls under the category of trusts created prior to 1st April 2021 and had been granted provisional registration. The application filed for regular registration has been denied primarily on the ground that the trust’s objects and 5 activities are confined to “Leuva Patidar Samaj,” and hence, the bar under section 13(1)(b) was invoked.
In this context, the Co-ordinate Bench in the case of Gohilwad Vankar Samaj Seva Trust v. CIT (Exemption) [(2025) 173 taxmann.com 263 had occasion to consider an identical issue. After analysing the issue in light of the jurisdictional High Court’s judgment in CIT (Exemption) v. Jamiatul Banaat Tankaria [(2024) 168 taxmann.com 35 (Guj.)], the Co-ordinate Bench laid down the principle that for a trust created before 1-4-2021, the provisions of section 13(1)(b) would be attracted only at the time of assessment, since the quantum of expenses made for religious and common purposes can be determined from the Profit and Loss Account only and not at the time of granting registration under section 12A.
In the present case, the trust’s objects, though referring to “Leuva Patidar Samaj,” also include charitable objects of education, healthcare, women empowerment, social development, and research, and are not confined solely to the benefit of a particular community. The educational object in particular is inclusive in nature.
The learned CIT (Exemption), in the impugned order, has placed specific reliance on paragraph 45 of the judgement of the Hon’ble Supreme Court in CIT v. Dawoodi Bohara Jamat reported in 43 taxamann.com 243, wherein it was observed:
6 “45. From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste.”
The CIT(Exemption) has cited the above observation to conclude that since the assessee trust refers to “Leuva Patidar Samaj” in its objects, it must be presumed to be established for the benefit of a particular religious community or caste and hence barred from registration. However, upon a complete reading of the said judgment and evaluation of its ratio in the correct legal context, it becomes evident that the CIT(E)’s reliance is partial, incomplete, and misplaced. The principles laid down in the said decision, when examined holistically, do not support the rejection of registration in the present case. The CIT(E)’s selective citation of para 45, without engaging with the facts or the stage of proceedings, has resulted in a fundamental misapplication of the binding precedent. The assessee’s case was never examined through the lens of dominant object, actual activity, or genuine application of income, which was the core of the Hon’ble Supreme Court’s reasoning. Accordingly, the reliance placed on Dawoodi Bohara Jamat is factually distinguishable, legally inappropriate, and procedurally premature in the context of an application for registration under section 12AB by a trust created prior to 1.4.2021 with mixed and public-oriented objects.
7 13. It is in this backdrop that the scheme and purpose of the Explanation to section 12AB must be appreciated. The Explanation enumerates what shall constitute a “specified violation,” and therefore forms the substantive basis for refusal or cancellation of registration under section 12AB(4). A careful reading of its clauses reveals that each category of violation refers either to post-registration conduct or to established contraventions, such as misapplication of income, non- genuineness of activities, or failure to comply with other statutory obligations. The clause most relevant in the present context - clause (d) which pertains to cases where a trust “created or established after the commencement of this Act” has applied income for the benefit of any particular religious community or caste. The legislative focus is clearly on “application of income,” not merely on the wording of the object clause. Furthermore, this provision is couched in the context of monitoring compliance after registration, consistent with the statutory design that registration assesses the genuineness of the objects and activities in principle, while section 13 operates at the stage of exemption, based on facts found during assessment. Thus, the Explanation to section 12AB serves as a compliance filter, not a tool of pre-emptive exclusion. It ensures that registration once granted is not misused, by permitting its withdrawal upon detection of specified violations through verifiable facts. It does not override or bypass the settled legal position that section 13(1)(b) is not applicable at the threshold stage of granting registration, particularly in the case of trusts created prior to 8 1.4.2021 under clause (ac)(iii) of section 12A(1). Any interpretation to the contrary would not only render the assessment mechanism under sections 11 to 13 redundant but would also violate the principle of staged statutory inquiry embedded in the Act, as consistently recognised by courts.
Therefore, in the case of a trust already in existence and created prior to 1.4.2021, it becomes imperative for the CIT(Exemption) to examine the application of income, if at all, through the lens of financial statements and conduct, rather than solely relying on the language of the object clause. This flows naturally from the statutory architecture under section 13(1)(b) and the Explanation to section 12AB, both of which focus on actual application of income, not presumptive or hypothetical benefit to a particular religious community or caste. In the present case, the CIT(Exemption) has categorically recorded that the trust was registered on 26.02.2019, thus falling squarely within the category of pre-existing institutions governed by clause (ac)(iii) of section 12A(1). However, the Commissioner has failed to undertake any examination of the assessee’s financial statements, or to demonstrate, even prima facie, that income has been applied in a manner that would attract the mischief of section 13(1)(b). This procedural lapse is not merely technical but goes to the root of the matter, as the decision to reject registration rests upon an assumption of exclusive benefit to a religious community, without any supporting financial or factual material. Such action is contrary to both the letter and spirit of the law,
9 and undermines the staged mechanism of registration, assessment, and exemption envisaged under the Act.
Accordingly, it cannot be laid down as a blanket proposition that merely because a trust was registered prior to 1st April 2021, its application under clause (ac)(iii) of section 12A(1) must invariably be accepted without scrutiny. While judicial precedents do emphasize that section 13(1)(b) is not to be applied at the stage of registration for such existing trusts, this does not render the statutory safeguards under section 12AB ineffective. The Explanation to section 12AB, particularly the specified violations enumerated therein, continues to provide the framework for evaluating whether the registration ought to be granted or not. However, the satisfaction of the CIT(Exemption) must rest on concrete findings relating to the genuineness of activities, the application of income, or other violations as defined, and not solely on the nomenclature or historical orientation of the trust.
In the present case, the CIT(Exemption) has neither examined the assessee’s financial statements nor recorded any findings on the actual application of income in support of the alleged violation under clause (d) of the Explanation to section 12AB. As discussed, the trust was created prior to 1.4.2021 and had already obtained provisional registration, and thus the correct approach would have been to evaluate the conduct of the trust through the lens of the statutory mechanism and the financial record available. This assumes greater significance in 10 light of the fact that no assessment has been framed in the case of the assessee after the grant of provisional registration and before consideration of the present application for final registration. In such a situation, the rejection of registration based purely on the wording of the trust deed, without verifying the nature and application of income, is neither statutorily justified nor judicially sustainable.
Therefore, after careful consideration of the statutory provisions, the Explanation to section 12AB, and the judicial principles enunciated in binding precedents, we are of the considered view that the impugned order passed by the CIT(Exemption) suffers from legal infirmity and procedural inadequacy. The same is accordingly set aside, and the matter is restored to the file of the CIT(Exemption) with a direction to decide the issue de novo, after duly examining the assessee’s submissions, financial statements, and the applicable statutory framework, in accordance with law.
In the result the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 6th June, 2025 at Ahmedabad.