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Facts
The assessee-trust applied for final registration under section 12A(1)(ac)(iii) and provisional approval under section 80G(5)(iii) of the Income Tax Act. The Ld. CIT(E) rejected both applications, alleging that the trust's objects were confined to the 'Jain community' and not the public at large, and that certain activities (box cricket, arbitration) were commercial, thus not purely charitable.
Held
The Tribunal found that the trust's objects were for general public benefit and no expenses were incurred solely for the Jain community, and no arbitration services were actually provided. However, noting that the assessee failed to submit comprehensive documentary evidence during the original proceedings, the Tribunal set aside the CIT(E)'s orders and remitted both issues back to the CIT(E) for fresh adjudication after allowing the assessee a further opportunity to furnish all required documents and evidence.
Key Issues
Whether the trust's objects were for the benefit of a particular community or the public at large; whether its activities were commercial or charitable; and if sufficient documentary evidence was provided for registration and approval.
Sections Cited
12A(1)(ac)(iii), 80G(5)(iii), 12AA, 12AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
O R D E R Per, Dr. Arjun Lal Saini, Accountant Member: Captioned two appeals filed by the same assessee, against the separate orders passed by the Learned Commissioner of Income-tax(Exemption), Ahmedabad [in short ‘Ld.CIT(E)’ dated 22.11.2024 and 25.11.2024 wherein the Ld.CIT(E) has denied the registration under section 12A(1)(ac)(iii) of the Income-tax Act, 1961(hereinafter referred to as ‘the Act’) holding that assessee’s objects are solely confined to a particular caste and community, that is, “Jain community” and the Ld. CIT(E) also denied the approval u/s 80G(5) (iii) of the Act, holding that assessee has violated the main condition of sub- clause(5) of section 80G(5) of the Act, that is, the assessee-trust is not a purely charitable trust. Therefore, Ld.CIT(E) rejected application of assessee-trust, in .89 & 91/Rjt/2025 (A.Y.24-25) Jito Gandhidham Chapter 2 Form-10AB, u/s 80G(5)(iii) of the Act and provisional approval, of the assessee-trust, was also cancelled.
First, we shall take assessee’s appeal CIT (Exemption) erred on facts as also in law, in rejecting the application for final registration under section 12AA of the Act, alleging that the trust is created by and for the benefit of the members of the “Jain community” and not for the benefit of public at large.
Succinctly, the factual panorama of the case is that assessee before us is a Trust. The assessee-trust filed an application in Form-10AB, before learned CIT( E ) for registration under section 12A(1)(ac)(iii) of the Income-tax Act, 1961. Therefore, the assessee-trust was requested to submit certain details/documents vide notice dated 25.07.2024. In response to the said notice, the assessee- trust has submitted certain details. On perusal of objects/objectives of the applicant/assessee, as stipulated in the “Memorandum of Association”, it was observed by ld CIT (E ) that certain objectives/objects of the assessee- trust was found to be confined for the benefit of “Jain Community” and are not for the benefit of public at large. In view of the above, a further show -cause notice was issued by Ld.CIT(E), on 09.10.2024, to the assessee, to explain the objectives of the trust, the relevant part of the show-cause notice is reproduced by learned CIT (E ) in his order, vide page No. 6 to 8. The ld CIT(E ) stated in the notice that following objects are for the benefit of particular religious community or caste i.e. “Jain Community”
Therefore, ld.CIT(E ) asked the assessee to furnish necessary evidence to satisfy that assessee has not incurred any expenditure for the benefit of any particular .89 & 91/Rjt/2025 (A.Y.24-25) Jito Gandhidham Chapter 3 religious community/caste on above referred objects or any other object. The ld.CIT(E ) also noted that transaction involving box cricket collection & expenses are in nature of commercial income and expenditure. Therefore, assessee is indulging in commercial activity and not in charitable activity.
In reference to the above show cause notice dated 09.10.2024, the applicant- trust has submitted its reply dated 14.10.2024, the relevant portion of the same is reproduced hereunder: “1. With reference from the copy of trust deed/MOA, it may observed that the activities of the trust are for the benefit of particular caste but in the general application of objects no such preferences are given. The application is towards welfare of general public at large and there is no inclination towards Jain communities particularly. 2. It is brought to your notice that no expenditure has ben incurred for any particular community and the evidence of the same is attached as per Annexure-
1. 1.
3. With reference to the transaction involving box cricket collection and expenses in the income & expenditure it is brought to your notice that these were conducted to promote physical well being of people which leads to increase in physical, emotional and mental upliftment. In today’s rapidly changing environment rising stress levels, lifestyle related diseases are becoming common. Therefore to promote a healthy life style through indulgence in sprots and other physical activities is upraised which is also the motto of the Government in the face of pandemic. Therefore, the activities of the trust are not for any commercial purposes and no specific violation has been made.”
5. The Ld.CIT(E) rejected the above contention of the assessee and observed that trust is created for the benefit of the members/families of “Jain community”, and not for the benefit of public at large. Also the box cricket expenses from substantial part of expending of assessee as on 31.03.2024 (Rs.6,12,800) out of total expenditure of Rs.14,87,841/-). There is no evidence that general public is involved in so-called health activities. Thus, the activity involving box cricket collection and box cricket expenses is commercial in nature and not charitable activity. Besides, the arbitration services that too with the aid of expert for resolution of trade/business disputes are highly trade specific and costly affair rather a niche services. Such provision of services .89 & 91/Rjt/2025 (A.Y.24-25) Jito Gandhidham Chapter 4 cannot be and are not charitable by any standards. Therefore, it was concluded by ld CIT(E ) that the applicant is having a non-charitable object therefore, it cannot be granted registration u/s 12A(1)(ac)(iii) of the Act. Hence, application of the assessee, for registration, u/s 12A(1)(ac)(iii) of the Act, was rejected by the learned CIT( E ).
Aggrieved by the order of Ld.CIT(E), the assessee is in appeal before us.
Shri Mehul Ranpura, Learned Counsel for the assessee, argued that assessee is not confined to the benefit of “Jain community”, however it has so many other objects which are for the general- purpose benefit. No expenses have been incurred on Jain community. Apart from this the “Jain community” is not a small community, within this community, there are poor persons and needy persons which fall in the definition of general public. The box cricket expenses are for the benefit of public health and promotion of sports, which is beneficial for public health, hence charitable in nature. Besides, the assessee-trust has not rendered services for arbitration, hence all the objects of the trust are charitable in nature, therefore, registration should be granted to the assessee.
On the other hand, Ld. CIT-DR for the Revenue submitted that “Jain community” is a particular community/caste and hence there is specified violation, as per explanation of section 12AB of the Act. Apart from this, box, cricket, expenses, and arbitration activities are commercial in nature, therefore, registration should not be granted to the assessee, as the assessee-trust does not focus on charitable activities.
We have carefully considered the facts of the case, the submissions of the ld. Counsel for the assessee and ld.CT-DR for the Revenue and evidences on record. After going through the objects of the assessee-trust, we find that trust is not created for the benefit of “Jain community”, however, its activities are for .89 & 91/Rjt/2025 (A.Y.24-25) Jito Gandhidham Chapter 5 the benefit of general public. We note that majority of the objects of the trust are for general public benefit, however, a few objects which are noted by Ld.CIT(E) for “Jain Community” were not carried out/executed by the trust. For the benefit of “Jain Community” no any expenses were incurred by the assessee- trust. Hence, assessee-trust did not commit any violation of explanation of section 12AB of the Act. Thus, we note that no expenditure were incurred by the assessee-trust for the benefit of particular community. Besides, transactions pertaining to box cricket collection and expenses were incurred to promote the sports, therefore, to promote a healthy life style through indulgence in sports and other physical activities, are for the general public benefit. As per learned Counsel, no arbitration services were provided by the assessee- trust.
However, we note that during the proceedings before the Ld.CIT(E), the assessee could not submit many documentary evidences, such as, bills, vouchers, ledgers in support of the income and expenditure account. Therefore, we are of the view that one more opportunity should be provided to the assessee to furnish required documents and evidences, as called by the Ld.CIT(E). We note that assessee submitted before us the copy of books of accounts and major expenses incurred by the assessee-trust and the donation received by the assessee-trust and copy of undertaking of the various trustees etc. Therefore, considering these facts, we are of the view that one more opportunity should be given to the assessee to file the required details and documents before the Ld. CIT(E). Therefore, we set aside the order of the ld. CIT(E) and remit the issue back to the file of the ld.CIT(E) to adjudicate the assessee`s application for registration under section 12AB of the Act, afresh.
.89 & 91/Rjt/2025 (A.Y.24-25) Jito Gandhidham Chapter 6 12. Since, we have remitted the assessee`s appeal relating to registration in 12AB of the Act, therefore, we direct the Ld. CIT(E) to examine the documents and evidences relating to approval u/s 80G(5)(iii) of the Act, relating to assessee’s appeal in and examine the conditions of section 80G(5) (iii) of the Act, and if the assessee is eligible, then approval u/s. 80G(5) (iii) of the Act, may be granted to the assessee- trust, in accordance with law.