KSHATRIYA VIKASH SANSTHA,AHMEDABAD vs. CIT(EXEMPTION), AHMEDABAD

ORDER \nPER MAKARAND V. MAHADEOKAR, AM:\nThese appeals have been filed by the assessee against the orders of the\nCommissioner of Income Tax (Exemptions), Ahmedabad [hereinafter\nreferred to as “CIT(E)"], rejecting the application for registration under\nsection 12A and approval under section 80G of the Income Tax Act, 1961\n[hereinafter referred to as “the Act”]. The order under section 12A of the Act\nwas passed vide order dated 30-03-2024, and the order under section 80G of\nthe Act was passed vide order dated 22-03-2024. The CIT(E) rejected the\napplications on the ground that the objectives of the trust were primarily\ndirected towards benefiting the Chauhan community, thereby attracting the\nprovisions of section 13(1)(b) of the Act.\nFacts of the Case:\n2. The assessee, Kshatriya Vikash Sanstha, is a trust engaged in activities\nclaimed to be charitable in nature. The assessee filed applications seeking\nregistration under section 12A of the Act and approval under section 80G of\nthe Act. The CIT(E) rejected both applications on the grounds that the\nobjectives of the trust were primarily directed towards benefiting the\nChauhan community, thereby invoking section 13(1)(b) of the Act. The CIT(E)\nalso noted that the assessee failed to provide sufficient evidence\ndemonstrating that its activities were for the benefit of the general public.\n3. Aggrieved by the order of CIT(E) the assessee is in appeal before us\nwith following grounds of appeal:\nIn - AY 2025-26\n“Id. CIT(Exemption) erred in law as well as on fact in rejecting and not granting\nregistration u/s.12A of the Act on the facts and circumstances of the case.\"\nIn ITA No. 1183/Ahd/2024 - AY 2025-26\n“Id. CIT (Exemption) erred in law as well as on fact in rejecting approval u/s.80G\nof the Act on ground of limitation.\"\n4. During the course of the hearing, the Authorized Representative (AR)\nsubmitted a copy of the trust deed along with an English translation, as well\nas the audited financial statements for the financial years 2018-19 to 2023-24.\n5. The AR contended that these documents establish that the trust is engaged in\ngenuine charitable activities and is not restricted solely to the Chauhan\ncommunity. The AR argued that section 13(1)(b) of the Act should not be\ninvoked at the stage of granting registration under section 12A of the Act, as\nits applicability should be examined only at the assessment stage based on\nthe actual utilization of funds and activities undertaken by the trust. The AR\nemphasized that the CIT(E) erred in rejecting the application without a\nproper factual examination of the trust's operations. In support of the\ncontentions, the AR relied on various judicial precedents, including:\nBhojalram Leuva Patel Seva Samaj Trust (ITA No. 667 & 668/Ahd/2023) and\nShree Naminath Shwetambar Murtipujak Tapagachh Jain Religious Trust\n(ITA No. 874/Ahd/2024).\n6. The AR further submitted that the audited financial statements of the\ntrust indicate that its activities are aimed at public welfare, including\neducation, medical relief, and other charitable objectives. The AR contended\nthat these financial records should have been examined by the CIT(E) before\nconcluding that the trust's benefits are confined to a particular community.\nThe AR requested to restore the matter back to CIT(E). The DR did not object\nto the matter being restored to the CIT(E) for fresh consideration based on the\nfinancial statements and other material placed on record.\n7. We have considered the arguments of both parties and reviewed the\nmaterial placed on record. The key issue is whether the CIT(E) was justified\nin rejecting the assessee's applications for registration and approval under\nsections 12A and 80G of the Act, respectively, by applying section 13(1)(b) of\nthe Act, at the stage of registration.\n6.

1. The Hon'ble Gujarat High Court in the case of CIT v. Bayath Kutchhi\nDasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199 (Guj) held that\nsection 13(1)(b) of the Act should be examined at the assessment stage, not at\nthe time of granting registration under section 12A of the Act. The Co-\nordinate Bench in the case of Bhojalram Leuva Patel Seva Samaj Trust and\nShree Naminath Shwetambar Murtipujak Tapagachh Jain Religious Trust\n(supra) reiterated this position and directed reconsideration of registration\napplications where section 13(1)(b) of the Act was prematurely invoked.\n7. Following the above judicial precedents, we find that the CIT(E) erred\nin rejecting the applications at the registration stage. The CIT(E) is directed to\nre-examine the application for registration under section 12A and approval\nunder section 80G of the Act by considering the financial records and\nactivities of the trust and affording a reasonable opportunity of being heard\nto the assessee.\n8. In light of the foregoing discussion, we set aside the orders of the\nCIT(E) and restore the matter back to the CIT(E) for fresh adjudication.\n9. In the combined result, both the appeals filed by the assessee are\nallowed for statistical purposes.\nOrder pronounced in the Open Court on 12th February, 2025 at Ahmedabad.\nSd/-\n(SUCHITRA KAMBLE)\nJUDICIAL MEMBER\nSd/-\n(MAKARAND V. MAHADEOKAR)\nACCOUNTANT MEMBER\nअहमदाबाद/Ahmedabad, दिनांक/Dated 12/02/2025\nटी.सी.नायर, व.नि. स. / T.C. NAIR, Sr. PS\nआदेश की प्रतिलिपि अग्रेषित/