KALABHARTI CHARITABLE FOUNDATION,VADODARA vs. CIT(EXEMPTION), AHMEDABAD, AHMEDABAD

The order passed by the Ld. CIT(E) is legally flawed and contrary to both the provisions of the law and the facts of the case. It grossly disregards and violates the precedent set by the Honourable Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT (1971) 82 ITR 704. Recently, the same is also held by Hon’ble ITAT, Ahmedabad, in case of AR Rahman Educational & Cultural Society (ITA 1579/AHD/2024). It is therefore submittedthat the same be held now.

Your appellant craves leave to add, alter, and/or to amend all or any of the grounds before the final hearing of the appeal.”

The brief facts of the case are that the assessee, Kalabharti Charitable Foundation, filed an application in Form No. 10AB seeking approval under clause (iii) of the first proviso to sub-section (5) of section 80G of the Income- tax Act, 1961 ("the Act"). The Commissioner of Income-tax (Exemptions) upon examination of the application filed by the assessee/applicant, issued notices calling for details and documents as prescribed under Rule 11AA(2) of the Rules and examined the trust deed and objects of the assessee trust. On perusal of the objects clause, the Commissioner of Income-tax (Exemptions) observed that one of the stated objects of the assessee trust was “to carry out programs for promotion of science, education, research, sports, religion, charity, environment, entrepreneurship, heritage protection and restoration, healthcare, wellness, recreation, music, performing arts, art & craft and literature”. According to the Commissioner of Income-tax (Exemptions), inclusion of “religion” as one of the objects of the assessee trust rendered the trust as a “religious-cum-charitable” or composite trust. The Commissioner of Income-tax (Exemptions) held that section 80G(5) of the Act applies only to institutions or funds established in India for charitable purposes and held Kalabharti Charitable Foundation vs. CIT(E) Asst.Year –N.A. - 3– that Explanation 3 to section 80G of the Act specifically excludes institutions whose objects are wholly or substantially religious in nature from the ambit of “charitable purpose” for the purposes of section 80G of the Act. The CIT (Exemptions) placed reliance on the definition of “charitable purpose” under section 2(15) of the Act and on Explanation 3 to section 80G of the Act, as well as on the judgment of the Hon’ble Supreme Court in Upper Ganges Sugar Mills Ltd. v. CIT [1997] 93 Taxman 645 (SC) to hold that even the presence of a single religious object is sufficient to disentitle an institution from approval under section 80G.

Before us, the ld. counsel for the assessee submitted that the Commissioner of Income-tax (Exemptions) has grossly erred in construing the objects of the trust as religious in nature. It was contended that the reference to “religion” in the objects clause is general and inclusive in nature and does not pertain to propagation of any particular religion or religious faith. The ld. counsel submitted that the dominant purpose of the trust is charitable and for advancement of objects of general public utility and that mere use of the word “religion” in a composite clause does not render the trust religious or religious-cum-charitable. It was further submitted that the Commissioner of Income-tax (Exemptions) passed the impugned order without properly considering the submissions made by the assessee and without granting an effective opportunity of being heard, thereby violating the principles of natural justice. The ld. counsel for the assessee placed reliance on the judgment of the Hon’ble Supreme Court in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) to contend that a trust established for the benefit of a section of the public is a charitable trust even if its objects have social or cultural overtones. The ld. counsel for the assessee also placed reliance on the decision of the Ahmedabad Bench of the Tribunal in AR Rahman Educational & Cultural Society (ITA No. 1579/Ahd/2024), wherein it was held that broad and inclusive objects do not ipso facto disentitle an institution from approval under section 80G of the Act. The ld. counsel thus prayed that the impugned order be set aside and the matter be Kalabharti Charitable Foundation vs. CIT(E) Asst.Year –N.A. - 5– restored to the file of the Commissioner of Income-tax (Exemptions) for fresh consideration after granting proper opportunity to the assessee.

We have heard the rival submissions and perused the material available on record. From a careful reading of the impugned order, it is evident that the Commissioner of Income-tax (Exemptions) has rejected the application primarily on the basis of interpretation of the objects clause of the trust deed and on the ground that the assessee did not respond to the show cause notice dated 11.11.2024. At the same time, it is also apparent that the issue as to whether the objects of the assessee trust are predominantly charitable or religious requires a deeper and holistic examination of the trust deed, the manner of actual activities carried out and the intent underlying the objects, particularly in the light of the judicial precedents relied upon by the assessee.

We are of the considered view that in the present case, the assessee has raised specific contentions that the objects are general in nature and not confined to religious purposes and has also relied upon binding judicial precedents which have not been examined in detail by the Commissioner of Income-tax (Exemptions). In the interest of justice and fair play, we deem it appropriate to set aside the impugned order and restore the matter to the file of the Commissioner of Income-tax (Exemptions) for de-novo consideration. In view of our decision to set aside the impugned order and restore the matter to the file of the Commissioner of Income-tax (Exemptions) for de-novo consideration, we deem it appropriate to observe that, during the course of fresh proceedings, the assessee may also consider revising or suitably amending its objects clause so as to bring the same in line with the actual Kalabharti Charitable Foundation vs. CIT(E) Asst.Year –N.A. - 6– charitable activities being carried out by it. The Commissioner of Income-tax (Exemptions) shall examine the application afresh in accordance with law after taking into consideration the revised objects, if any, and after affording due and reasonable opportunity of being heard to the assessee. The Commissioner of Income-tax (Exemptions) shall re-examine the objects of the trust, the applicability of sections 80G(5) and 80G(5B) of the Act, and the judicial precedents cited by the assessee, after granting a reasonable and effective opportunity of being heard to the assessee and after considering any explanations, clarifications or amendments, if permissible in law, that may be placed on record.

Accordingly, the impugned order is set aside and the matter is restored to the file of the Commissioner of Income-tax (Exemptions) for fresh adjudication in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 25/02/2026