SHREE AATH PARAGANA GURJAR PRAJAPATI SAMAJ TRUST,AHMEDABAD V. CIT(EXEMPTION), AHMEDABAD, VEJALPUR, AHMEDABAD

ITA 2025/AHD/2024

AI Insights

The case involves Shree Aath Paragana Gurjar Prajapati Samaj Trust, which appealed against the decision of the CIT(Exemption), Ahmedabad, rejecting its application for registration under section 12AB of the Income Tax Act, 1961, and cancelling its provisional registration. The CIT(Exemption) had found that the trust's activities were confined to a specific community, which could potentially violate section 13(1)(b) of the Act, barring tax exemptions for trusts benefiting particular religious communities or castes. The Tribunal, however, found that the CIT(Exemption) had not adequately considered the trust's broader societal contributions and the financial evidence provided, leading to the decision to set aside the CIT(Exemption)'s order and remand the matter for a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717602 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 29-11-2024
• Other Referred Cases: Collector, Land Acquisition v. Mst. Katiji & Ors., CIT v. Leuva Patel Seva Samaj Trust, CIT v. Dawoodi Bohra Jamat, Patidar Samaj Trust Khajurdi v. CIT(Exemption), Ahmedabad Rana Caste Association, Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana, CIT (E) vs. Jamiatul Bannat Tankaria, Shastri Yagnapurush Dasji vs. Muldas Bhudardas Vaishya
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: PRAKASH D. SHAH
• Keywords: Condonation of delay; Set aside; Transfer pricing; Principle of natural justice; Charitable institution; Procedural lapse
• Section: 11; 12AA; 12A

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘C’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ]BEFORE MS.SUCHITRA R. KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.2025/Ahd/2024 Asstt.Year : - Shree Aath Paragana Gurjar Prajapati Samaj Trust Prajapati Bhavan Chatrala Sola Railway Over bridge Naittar Chede, Sola Ghatlodia. PAN : ABFTS 9086 E Vs. The CIT(Exemption) Vejalpur Ahmedabad. (Applicant) (Responent) Assessee by : Shri Prakash D. Shah, and Shri Saiyam Shah, AR Revenue by : Shri Rignesh Das, CIT-DR सुनवाई क तारीख/Date of Hearing : 30/07/2025 घोषणा क तारीख /Date of Pronouncement: 12/08/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal has been preferred by the assessee against the order passed by the Commissioner of Income-tax (Exemptions), Ahmedabad [hereinafter referred to as “CIT(Exemption)”], dated 30.03.2024 whereby the learned CIT(Exemption) rejected the assessee’s application filed in Form No. 10AB under section 12A(1)(ac)(iii) of the Income-Tax Act, 1961 [hereinafter referred to as “the Act”] for grant of registration under section 12AB and also cancelled the provisional registration earlier granted to the assessee under the said provision. 2. Condonation of Delay Printed from counselvise.com ITA No.2025/Ahd/2024 2 2.1 The appeal in the present case has been filed with a delay of 182 days from the date of the impugned order passed by the learned Commissioner of Income Tax (Exemption), Ahmedabad under section 12AB of the Act, dated 30.03.2024. The Registry has recorded the delay and accordingly, the assessee has filed a petition for condonation of delay, supported by a sworn affidavit of the trustee, and a detailed explanation for the delay. 2.2 In the petition, it has been submitted that upon receipt of the rejection order, the assessee was engaged in the process of consulting multiple Chartered Accountants to seek legal advice in the matter. Subsequently, the appeal preparation was entrusted to a firm of Chartered Accountants in or around September 2024. However, owing to preoccupation with statutory tax audit compliances, return filings, and transfer pricing deadlines, as well as the intervening Diwali holidays, the filing of the appeal was inadvertently delayed. The assessee has specifically affirmed that there was no intention to delay the proceedings or prejudice the interest of the Revenue, and that the delay was neither wilful nor deliberate but occurred due to genuine professional and logistical constraints. In the accompanying affidavit, the trustee has affirmed that the assessee was unable to take timely steps owing to the non-availability of a regular tax representative, and that he himself was not conversant with the technicalities of income tax law and appellate procedures. It has been stated that the delay arose solely due to the absence of professional guidance during the critical period and that the assessee acted in good faith upon receiving assistance. 2.3 On a careful consideration of the condonation petition, affidavit, and accompanying explanation, we are satisfied that the cause shown for the delay is reasonable and bona fide. The delay is attributable to unavoidable professional circumstances and procedural lapses, and not to any malafide intent or neglect. Printed from counselvise.com ITA No.2025/Ahd/2024 3 2.4 It is the well-settled principle as enunciated by the Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Ors. [(1987) 167 ITR 471 (SC)], that a liberal approach is required when there is no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation. 2.5 Following the principle and considering the explanation offered and affidavit on record, we find it appropriate, in the interest of substantial justice, to condone the delay in filing the appeal. Accordingly, the delay of 183 days is hereby condoned, and the appeal is admitted for adjudication on merits. 3. Facts of the Case 3.1 The assessee trust had earlier been granted provisional registration under section 12AB by the CIT(Exemption), Ahmedabad, vide order dated 07.03.2023 issued in Form No. 10AC, for the assessment years 2023–24 to 2025–26. Thereafter, in accordance with clause (iii) of section 12A(1)(ac), the assessee filed an application in Form No. 10AB on 22.09.2023 seeking regular registration under section 12AB. The section code as per the application was 12A(1)(ac)(iii). 3.2 Upon receipt of the said application, the CIT(Exemption) initiated proceedings and issued a notice calling for certain documents and information in order to examine the eligibility of the assessee trust. In response, the assessee submitted its replies enclosing certain details and documents. Upon perusal of the same, the CIT(Exemption) observed that the stated objects and area of operation of the assessee trust were confined to members belonging to “Aath Paragana Gurjar Prajapati Samaj” which, according to the CIT(Exemption), constituted a specific religious community or caste. Printed from counselvise.com ITA No.2025/Ahd/2024 4 3.3 Subsequently, a show cause notice dated 14.03.2024 was issued to the assessee referring to clause 3 of the Trust’s Constitution, which described the area of operation as limited to the families of the registered 131 villages of Aath Paragana Gurjar Prajapati Samaj, including those residing in other cities or villages of Gujarat such as Ahmedabad, Gandhinagar, and Surendranagar. The assessee was required to explain how such restriction did not violate the bar contained in section 13(1)(b) of the Act and why its application should not be rejected. In reply dated 21.03.2024, the assessee submitted that while the area of operation was described with reference to an identifiable group, the charitable activities were open to the general public and not confined to a specific caste or religion. It was contended that the trust worked for development of the society at large and the said samaj did not constitute a “particular religious community or caste”. The assessee placed reliance on decisions of the Hon’ble Gujarat High Court in CIT v. Leuva Patel Seva Samaj Trust [(2014) 221 Taxman 75 (Guj)], to support the contention that the question of applicability of section 13(1)(b) was to be examined only at the stage of assessment and not at the time of grant of registration under section 12AB. 3.4 The CIT(Exemption), however, did not accept the assessee’s submissions. Referring to the decision of the Hon’ble Supreme Court in CIT v. Dawoodi Bohra Jamat [(2014) 364 ITR 31 (SC) / 43 taxmann.com 243], the CIT(Exemption) held that the bar under section 13(1)(b) is applicable even at the stage of registration, since the provision relates to the eligibility of the trust to claim exemption under section 11, and such eligibility is a relevant criterion to be examined at the time of registration under section 12A/12AB. It was further noted that the Constitution of the Trust, in clause 6, provides that members must be from the Aath Paragana Gurjar Prajapati Samaj. The CIT(Exemption) concluded that all the activities and benefits of the trust were confined to members of a specific samaj who are united by the common characteristics of caste and religion. It was therefore held that the assessee’s objectives and area of operation indicated a trust created for Printed from counselvise.com ITA No.2025/Ahd/2024 5 the benefit of a particular religious community or caste. Accordingly, invoking the bar contained in section 13(1)(b), the CIT(Exemption) rejected the application for registration under section 12AB and simultaneously cancelled the provisional registration granted earlier. 3.5 Additionally, the CIT(Exemption) directed the assessee to compute its tax liability under section 115TD read with Rule 17CB of the Income-tax Rules, 1962 and to deposit the same within the time prescribed under section 115TD(5), subject to the benefit of extended limitation in case of an appeal being filed before the ITAT. 4. Aggrieved by the said order, the assessee has filed the present appeal before the Tribunal raising the following grounds: Ground No. 1 That the Ld. CIT(Exemption), Ahmedabad, has erred in law and facts by rejecting the application in Form No.10AB u/s 12A(1)(ac)(iii) of the Act, for the Registration under section 12A of the Act and therefore your Honors are requested to direct the CIT (Exemption) to grant registration under section 12A of the Act. Ground No. 2 That the ld.CIT(Exemption),Ahmedabad has erred in law and facts by giving direction Further, the applicant should compute the tax liability under section 115TD of Income Tax Act,1961 read with Rule 17CB of IT Rules and therefore the said direction is required to quashed. Ground No. 3 That your appellant craves liberty to add, amend, alter and delete any grounds of appeal before the final hearing. 4.1 The learned Authorised Representative (AR) appeared on behalf of the assessee trust and vehemently assailed the impugned order passed by the learned CIT(Exemption), Ahmedabad. The learned AR submitted that the assessee trust is not newly constituted, but an old and established organisation with long-standing charitable activities traceable to the year 2007. In support, the AR placed reliance on documentary evidence such as a bank passbook in the name of the Samaj and records evidencing the organisation of a large-scale event namely, the Silver Jubilee Joint Marriage Ceremony of the Samaj held on 04.02.2007. These documents, forming part Printed from counselvise.com ITA No.2025/Ahd/2024 6 of the paper book (Annexures 1 and 2), were cited to establish the continuity and genuineness of the trust’s existence and operations. 4.2 The AR further submitted that the core charitable objective of the assessee trust is to work for the development of society as a whole, and that its benefits are not intended to be confined to any particular individual, religious group, or caste. It was contended that while the trust constitution describes the area of operation as comprising families belonging to 131 villages of Aath Paragana Gurjar Prajapati Samaj, such reference only denotes an identifiable section of the public and does not imply that the trust is created for the benefit of a “particular religious community or caste” as envisaged under section 13(1)(b) of the Act. It was further contended that the trust’s activities are not exclusionary in nature and are open to all who seek support from it. 4.3 Addressing the core legal issue, the AR submitted that the provisions of section 13(1)(b), which disentitle a charitable trust from exemption where it is created for the benefit of any religious community or caste, are relevant only at the stage of assessment, i.e., when the trust claims exemption under section 11 or 12. Relying upon binding precedents of the jurisdictional High Court, the AR placed strong reliance on the judgement of Hon’ble High Court of Gujarat in case of CIT v. Leuva Patel Seva Samaj Trust [(2014) 221 Taxman 75 (Gujarat)]. It was argued that it is clearly laid down in this judgement that the question whether the trust is for the benefit of a religious community or caste is relevant only at the time of assessment and cannot be used as a ground to deny registration under section 12AA (now section 12AB), especially when the objects are prima facie charitable in nature. 4.4 In further support of the appeal, the learned AR placed reliance on a recent decision of the Coordinate Bench of the Ahmedabad Tribunal in the case of Patidar Samaj Trust Khajurdi v. CIT(Exemption) [ITA No. 1919/Ahd/2024, order dated 12.02.2025], wherein the Tribunal, dealing Printed from counselvise.com ITA No.2025/Ahd/2024 7 with an identical issue involving section 13(1)(b) at the stage of registration under section 12A(1)(ac)(iii), held that the objects of a trust must be evaluated in entirety, and if one or more clauses indicate general public utility or charitable purpose not restricted to any particular caste or creed, then registration cannot be denied merely because the trust emanates from a caste-based community platform. 4.5 On the specific finding recorded in para 7.1 of the CIT(Exemption)’s order, wherein it was observed that the beneficiaries are united by a common characteristic of “caste and religion”, the AR submitted that this observation is factually and legally unsustainable. It was pointed out that the word “Gurjar” is a community/surname used by people of diverse religious backgrounds including Jains, Rajputs, and others, and “Prajapati” refers to a caste or occupational group historically associated with pottery and artisan crafts. Thus, it was submitted that the trust does not represent or cater to a homogenous religious denomination and hence cannot be said to be created for the benefit of a particular religious community or caste. 4.6 Further, the AR specifically pointed out that the assessee has placed on record the audited financial statements for the years ended 31.03.2023 and 31.03.2024, which clearly reflect actual application of income on charitable activities. It was submitted that these statements furnish evidence to verify whether the objectives of the trust have been implemented in practice and whether the funds have been applied for the purposes consistent with the objects of the trust. 4.7 Lastly, it was submitted that the learned CIT(Exemption) failed to appreciate the full set of facts and legal submissions placed on record and erroneously proceeded to invoke section 13(1)(b) without substantiating its applicability in the context of registration under section 12AB. The AR therefore prayed that the impugned order may please be set aside and the matter may be remanded back to the file of the CIT(Exemption) with a direction to re-examine the assessee’s claim in light of the law laid down by Printed from counselvise.com ITA No.2025/Ahd/2024 8 the jurisdictional High Court and after affording a proper opportunity of hearing. 5. We have carefully considered the rival submissions, perused the materials available on record, and gone through the order passed by the learned CIT(Exemption), Ahmedabad, as well as the judicial precedents relied upon by the assessee. The issue for adjudication before us is whether, in the facts and circumstances of the case, the learned CIT(Exemption) was justified in rejecting the assessee’s application for registration under section 12A(1)(ac)(iii) of the Act and in cancelling the provisional registration earlier granted under section 12AB, on the sole ground that the assessee trust is created for the benefit of a particular religious community or caste, thereby attracting the mischief of section 13(1)(b) of the Act. 5.1 We find, from the material placed on record, that the assessee trust is not a newly created institution, but is in existence since prior to 2007. The assessee has placed on record supporting documents evidencing long- standing charitable activities, such as the organisation of a Joint Marriage Function in 2007, and the maintenance of a bank account from the said period. Further, the assessee has furnished audited financial statements for the years ended 31.03.2023 and 31.03.2024, evidencing application of income for charitable purposes. These facts were brought to the notice of the CIT(Exemption) but were not independently verified nor discussed in the impugned order. 5.2 On a plain reading of the trust’s Constitution, it is true that the area of operation is described with reference to “131 villages of Aath Paragana Gurjar Prajapati Samaj”. However, as rightly submitted by the learned AR, the object clauses are not confined to providing benefit to any specified individuals or to any religious activity. There is no clause excluding the general public from availing benefits of the trust. The term “Samaj” is a sociological term and cannot ipso facto be equated with a “religious community or caste” as per section 13(1)(b). Even otherwise, the question Printed from counselvise.com ITA No.2025/Ahd/2024 9 whether section 13(1)(b) is attracted or not is, as held by the Hon’ble Gujarat High Court in CIT v. Leuva Patel Seva Samaj Trust [(2014) 221 Taxman 75 (Guj)], relevant only at the stage of assessment, and not at the stage of registration. 5.3 We also note that in a recent decision of the Coordinate Bench of this Tribunal in the case of Patidar Samaj Trust Khajurdi v. CIT(Exemption) [ITA No. 1919/Ahd/2024, order dated 12.02.2025], a near-identical situation came up for consideration, where the trust was created by the Patidar Samaj and the CIT(Exemption) had rejected registration under section 12A on the ground that some of the objects were for the benefit of a caste. For the sake of clarity we reproduce the operative para of the said decision – “6. We have heard both the parties and perused all the relevant material available on record. Hon’ble Apex Court in the case of Ahmedabad Rana Caste Association (supra) categorically observed that it is sufficient if intention to benefit a section of public as distinguished from a specified individual and that will not go beyond the purview of public connected together and society at large. The reliance on the decision of Tribunal in case of Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana (supra) has also mentioned the decision of CIT vs. Dawoodi Bohara Jamat which was relied upon by the Ld. DR and has categorically mentioned the jurisdictional High Court in the case of CIT (E) vs. Jamiatul Bannat Tankaria (168 taxman.com 35) which has given interpretation of Section 13(1)(b) while issuing registration under section 12A of the Act. Thus, the decision relied by the Ld. DR actually supports the applicant Trust’s case. The Hon’ble Supreme Court in the case of Shastri Yagnapurush Dasji vs. Muldas Bhudardas Vaishya (1966 AIR 1119) has also reiterated the same and thus the CIT (Exemption) should have taken into account these basic principles. The present applicant Trust has categorically mentioned the beneficiaries of the society at large in cl. 7 of the objects. Hence, we direct the CIT (Exemption) to consider these decisions and adjudicate the matter afresh in consonance with the Hon’ble Apex Court’s decision/views. The applicant trust/assessee be given opportunity of hearing by following the principles of natural justice. 7. In the result, appeal filed by the assessee is partly allowed for statistical purpose. 5.4 We find that the ratio of Patidar Samaj Trust Khajurdi (supra) squarely applies to the present case. Merely because the trust has emerged from a specific community platform and its area of operation is defined with reference to members of a Samaj, it cannot be concluded that the trust is Printed from counselvise.com ITA No.2025/Ahd/2024 10 for the benefit of a “particular religious community or caste” without a deeper enquiry into whether such community constitutes a religious denomination under law, and whether the activities are in fact exclusionary in practice. In the absence of any such inquiry, and in the face of financial statements evidencing expenditure on public welfare activities, the summary rejection of registration by invoking section 13(1)(b) is unsustainable in law. 5.5 We also find that the CIT(Exemption) failed to reconcile the distinction between “caste” and “religious community”, and has proceeded on the assumption that the two are interchangeable. The legislative use of the word “or” in section 13(1)(b) indicates that both conditions must be independently tested. Furthermore, there is no categorical finding by the CIT(Exemption) that the trust’s objects are either religious or that its beneficiaries form a homogenous religious denomination. The rejection order, therefore, lacks proper factual and legal foundation. 5.6 It is also pertinent to note that the assessee trust is an existing trust, which claims to have been in operation and has placed on record audited financial statements for the years ended 31.03.2023 and 31.03.2024. In such cases, particularly where the trust was established prior to 01.04.2021 and has applied for registration under clause (iii) of section 12A(1)(ac), the CIT(Exemption) is not only empowered but duty-bound to examine whether the trust has actually incurred expenditure in furtherance of its stated charitable objects. Such verification is an essential component of the statutory inquiry under section 12AB(1)(b)(ii), which requires satisfaction as to both the genuineness of activities and compliance with applicable laws material to the achievement of its objects. Failure to correlate the stated objects with the actual deployment of funds, despite the availability of financial records, results in a truncated inquiry and renders the order vulnerable to judicial correction. Printed from counselvise.com ITA No.2025/Ahd/2024 11 5.7 In view of the above and having regard to the binding precedents of the Hon’ble Gujarat High Court and the Coordinate Bench decision in Patidar Samaj Trust Khajurdi (supra), we are of the considered opinion that the matter requires reconsideration by the CIT(Exemption) in the light of the above discussion and applicable legal principles. The CIT(Exemption) shall verify the financial statements and activities of the trust for the relevant years, assess whether the trust has genuinely engaged in charitable activities without religious or caste-based exclusion, and pass a speaking order after granting due opportunity of hearing to the assessee. 5.8 In view of the foregoing discussion and respectfully following the judicial precedents relied upon, we are of the considered opinion that the impugned order passed by the learned CIT(Exemption), Ahmedabad rejecting the assessee’s application for registration under section 12A(1)(ac)(iii) and cancelling the provisional registration under section 12AB, cannot be sustained in its present form. Accordingly, the impugned order is set aside, and the matter is restored to the file of the learned CIT(Exemption), Ahmedabad, with a direction to re-adjudicate the application of the assessee for registration under section 12AB of the Act afresh, in accordance with law. 6. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Court on 12th August, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 12/08/2025 vk* Printed from counselvise.com "