21 GAM CHAROTAR KADVA PATIDAR SAMAJ,ANAND V. THE DY.CIT, CIRCLE-2(EXEMPTION), AHMEDABAD

ITA 1008/AHD/2023

AI Insights

The case involves the 21 Gam Charotar Kadva Patidar Samaj (Trust), which appealed against the decision of the Commissioner of Income Tax (Exemption), Ahmedabad, rejecting their application for registration under section 12A of the Income-tax Act, 1961. The CIT(Exemptions) had initially granted provisional registration but later found that the trust's benefits were restricted to a specific community, which could disqualify it from certain tax exemptions under section 13(1)(b) of the Act. The tribunal found that the CIT(Exemptions) had not adequately considered the trust's response to the show-cause notice and restored the matter for a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396280 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHESH R REWAR
• Assessee Lawyers: PARIN S SHAH
• Keywords: Charitable institution
• Section: 11; 12A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1008/Ahd/2023 (Assessment Year: N.A.) 21 Gam Charotar Kadva Patidar Samaj (Trust), Umiya Vadi, Undel Khambhai, Anand, Gujarat-388640 Vs. Deputy Commissioner of Income Tax, Circle-2(Exemption), Ahmedabad [PAN No.AAATZ1146Q] (Appellant) .. (Respondent) Appellant by : Shri Parin S Shah, A.R. Respondent by: Shri Ashesh R Rewar, CIT DR Date of Hearing 15.05.2025 Date of Pronouncement 26.05.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (in short “Ld. CIT(E)”), Ahmedabad vide order dated 23.08.2023. 2. The Assessee has taken the following grounds of appeal:- “1. The order passed by CIT (Exemption) is bad in law and required to be quashed. 2. Ld. CIT (Exemption) erred in law and on facts in rejecting registration application filed in Form 10AB of the Act by observing that objects are restricted to benefit of particular religious community by invoking section 13(1)9b) of the Act. 3. Ld. CIT( Exemption) ought to have considered fact that trust deed does not restrict the membership to particular caste but same is open for all and ought to have granted registration.” ITA No. 1008/Ahd/2023 21 Gam Charotar Kadva Patidar Samaj (Trust) vs. DCIT(E) Asst.Year –N.A. - 2– 3. At the outset, we observe that the appeal is time barred by 45 days. The delay of 45 days is condoned on due consideration of facts and owing to smallness of delay causing no perceptible prejudice to other side. 4. The brief facts of the case are that the applicant trust filed application in Form 10AB for grant of approval under section 12A(1)(ac)(iii) of the Income-tax Act, 1961 (Act). The applicant trust had earlier been granted provisional registration in Form 10AC on 24/09/2021 under section 12A(1)(ac)(vi), valid from Assessment Year 2022-23 to Assessment Year 2024-25. Upon examining the “Objects” of the trust, CIT(Exemptions) observed that although charitable in nature, the objects appeared to be specifically directed toward the benefit of a particular community or caste—namely, the “Patidar Samaj for 21 villages.” In light of this observation, a show-cause notice was issued to the applicant trust highlighting the issue and requesting clarification as to why the provisions of section 13(1)(b) of the Act should not be invoked and why registration under section 12A(1)(ac)(iii) should not be denied. In the said notice, CIT(Exemptions) specifically drew attention to various “Objects” from the trust's constitution-such as educational and financial support, mass marriages, health-related services, and publication of directories-being limited to the “Samaj,” suggesting that the trust’s benefits were restricted to a particular community only. However, CIT(Exemptions) noted that the applicant trust did not submit any response to the show-cause notice. Given the absence of a reply, CIT(Exemptions) proceeded to examine whether section 13(1)(b) applied in this case. CIT(Exemptions) ITA No. 1008/Ahd/2023 21 Gam Charotar Kadva Patidar Samaj (Trust) vs. DCIT(E) Asst.Year –N.A. - 3– noted that as per this provision, trusts or institutions established after the commencement of the Act that are intended to benefit any particular religious community or caste are not eligible for exemptions under sections 11 and 12. Since the trust in question was created on 21/02/2014 and declared itself a charitable trust, CIT(Exemptions) noted that even composite trusts (charitable-cum-religious) could be denied exemption under section 11 if their benefits were confined to a specific community or caste. Applying the principles from the above judgments, the Commissioner concluded that the applicant, was a charitable trust but whose benefits were restricted to a particular caste/community-namely, the Patidar Samaj from 21 villages. Therefore, the applicant trust attracted the restriction under section 13(1)(b), making it ineligible for exemption under section 11. Accordingly, the application filed in Form 10AB under section 12A(1)(ac)(iii) was rejected, and the provisional registration earlier granted under section 12A was also cancelled. 5. Before us, the Counsel for the assessee submitted that the assessee/applicant trust has not been formed the benefit of any particular religious community, and accordingly the application for grant of approval has been rejected by CIT(Exemptions) on an incorrect appreciation of facts of the assessee’s case. Further, the counsel for the assessee placed reliance on several judicial precedents which have held that where the objects of the assessee/applicant trust are both religious and charitable (to public at large) in nature, it could not be denied registration under section 12AB by invoking the provisions of section 13(1)(b) of the Act. The Counsel for ITA No. 1008/Ahd/2023 21 Gam Charotar Kadva Patidar Samaj (Trust) vs. DCIT(E) Asst.Year –N.A. - 4– the assessee also placed reliance on judicial precedents which have held that provisions of section 13(1)(b) of the Act could be attracted only at the time of assessment and not at the time of grant of registration under section 12A(1) of the Act. 6. On going to the facts of the instant case, we observe that at the time of hearing before CIT(Exemptions), despite issuance of notices of hearing, none appeared on behalf of the assessee/applicant trust. Before us, the counsel for the assessee submitted that the application for grant of approval under section 12AB has been rejected by CIT(Exemptions), without giving adequate opportunity of hearing and without appreciating the facts of the assessee/applicant trust’s case, wherein on going through the objects, it would be evident that the activities of the assessee/applicant trust are of a charitable nature and not aimed for benefit of any particular community. Further, it was submitted before us that CIT(Exemptions) in his order rejecting grant of approval has itself noted specifically that from the reading of the “objects” of the trust, it is evident that the trust has been formed for charitable purposes, though its activities are restricted for the benefit of a particular religious community. Accordingly, looking into the instant facts and in the interest of justice, the matter is hereby restored to the file of CIT(Exemptions) for de novo consideration, after giving due opportunity of assessee/applicant trust to file response to specific queries raised by Ld. CIT (Exemptions) regarding the “objects” of the trust and their applicability to a particular community. However, we make it clear that in case there is any further non-compliance by the assessee/applicant ITA No. 1008/Ahd/2023 21 Gam Charotar Kadva Patidar Samaj (Trust) vs. DCIT(E) Asst.Year –N.A. - 5– trust in response to notices issued by CIT(Exemptions), then he would be at liberty to pass appropriate order is in accordance with law, on the basis of material available on record. 7. In the result, the appeal of the assessee/applicant trust is allowed for statistical purposes. This Order pronounced in Open Court on 26/05/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 26/05/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 19.05.2025(Dictated by Hon’ble Member over his dragon software) 2. Date on which the typed draft is placed before the Dictating Member 19.05.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 20.05.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement .05.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 26.05.2025 7. Date on which the file goes to the Bench Clerk 26.05.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "