12A Registration Allowed for Pre-1961 Trust Benefiting Scheduled Caste; Section 13(1)(b) Not Applicable

Issue

Whether the provisions of Section 13(1)(b) (denying exemption to trusts created for a particular religious community or caste) apply to a trust established in 1956, i.e., before the commencement of the Income-tax Act, 1961.
Whether a trust established for the benefit of the “Mahyavanshi Samaj” (a Scheduled Caste) can be denied registration under Section 12A/12AB on the ground that it benefits a specific community, or if such activities constitute a valid charitable purpose.

Facts

Formation: The assessee-trust was formed in 1956 with the objective of working for the welfare of the Mahyavanshi Samaj.
Registration Status: The trust held a provisional registration in Form 10AC valid up to Assessment Year 2024-25.
The Application: Since the trust had commenced activities, it applied for regular registration under Section 12A(1)(ac)(iii) within the prescribed timeline.
Rejection by CIT(E): The Commissioner of Income Tax (Exemption) rejected the application.
- Reasoning: The CIT(E) held that the trust’s activities were directed towards a particular community (“Mahyavanshi Samaj”).
- Legal Basis: This was treated as a violation of Section 13(1)(b) and Clause (d) of the Explanation to Section 12AB(4), which generally disqualify trusts created for the benefit of a specific caste or religious community from tax exemptions.

Decision

The Tribunal ruled in favour of the assessee and directed the CIT(E) to grant the registration.

1. Immunity for Pre-1961 Trusts:

The Tribunal held that the bar under Section 13(1)(b) applies only to a “trust or charitable institution created or established after the commencement of this Act.”

The Income-tax Act, 1961 came into force on 01-04-1962.
Since the assessee-trust was established in 1956, it falls outside the purview of Section 13(1)(b). Therefore, even if it was created for a specific community, the statutory bar does not apply to it due to its pre-Act origin.

2. Welfare of Scheduled Castes is ‘Charitable’:

The Tribunal noted that the “Mahyavanshi Samaj” is notified as a Scheduled Caste under the Scheduled Castes and Scheduled Tribes Orders (Amendment) Act, 1976.

Activities directed toward the upliftment and welfare of Scheduled Castes/Tribes are considered “relief of the poor” and “advancement of any other object of general public utility.”
Such activities serve a constitutional mandate and the weaker sections of society. Therefore, they are inherently “charitable” under Section 2(15) and cannot be rejected merely by labeling the beneficiaries as a “specific caste.”

Key Takeaways

The “Grandfathering” Clause: Section 13(1)(b) contains a specific exception for older trusts. If a trust was created before April 1, 1962, it can continue to benefit a specific religious community or caste without losing its tax-exempt status (Section 11 exemption remains available).
SC/ST Welfare Exception: Even for post-1961 trusts, courts generally interpret the restriction on “caste-based” benefits liberally when the beneficiaries are Scheduled Castes, Scheduled Tribes, women, or children. Under Explanation 2 to Section 13, a trust created for the benefit of SC/STs, backward classes, women, and children is deemed not to be a trust for the benefit of a religious community or caste.
Registration vs. Assessment: The rejection was also procedurally flawed because the specific application of income (violating Section 13) is typically a subject matter of assessment, not a ground to deny entry-level registration if the objects are charitable.

IN THE ITAT MUMBAI BENCH ‘D’

Shree Mahyavanshi Samaj Bombay Trust

Commissioner of Income-tax Exemption^*

Beena Pillai, Judicial Member
and Smt. Renu Jauhri, Accountant Member

IT Appeal No.4920 (Mum) of 2025
[Assessment year 2026-27]

OCTOBER 31, 2025

Ashok Mehta for the Appellant. Umashankar Prasad, CIT DR for the Respondent.

ORDER

Smt. Renu Jauhri, Accountant Member.- These appeal by the assessee are preferred against the orders of the CIT(Exemptions), Mumbai dated 24.06.2025 vide which he rejected the applications for grant of registration u/s. 12A & u/s. 80G of the Act.

2. The grounds of appeal are as follows:

“1. The Learned CIT (Exemption) Mumbai erred in rejecting application for registration filed in form 10AB under section 12A(1)(ac) (iii) on 24-6-2025, based on surmises and conjectures without considering the facts of the assessee trust.

2. The learned CIT(Exemption) Mumbai erred in stating that the assessee had submitted the application late without appreciating that the assessee had submitted the 1″ application on 10-05-2024 which was rejected for being under wrong sub clause of section 12AC(1)(ac) and the honourable ITAT had on 12th March 2025 set aside the said rejection and asked for reconsideration of our application by filling an amended application.

3. The Learned CIT(Exemption) Mumbai erred in stating the order of rejection dated 24-6-2025 that the assessee had violated section 13(1)(b) without appreciating that the said provision is not applicable to assessee trust as it was for the benefit of schedule castes, backward classes and that mayavanshi samaj was a schedule caste and therefore was covered under the exception under explanation 2 of section 13.

4. The learned CIT(Exemption) Mumbai erred in not considering the judgment of the supreme court in the case of Ahmedabad Rana Caste Association v. CIT (1971) 82 ITR 704 where it is held that it is sufficient if the intention to benefit a section of the public as distinguished from a special Individual is present.

5. The assessee craves leave to add alter amend or delete any of the above grounds of appeal.”

3. The brief fact of the case are that the assessee had filed an application in Form 10AB seeking registration u/s. 12AB of the Act. The assessee had obtained provisional registration in Form 10AC dated 01.10.2021 which was valid upto A.Y. 2024-25. Accordingly as per section 12A(1)(ac)(iii), the application for regular registration had to be filed within 6 months of commencement of activities or atleast 6 months prior to expiry of the provisional registration.

Ld. CIT(E) noticed that the application was filed on 11.12.2024 even though the assessee had been carrying out charitable activities since A.Y. 2021-22 and hence the application was delayed.

Further owing to the activities favouring a particular community (i.e Mahyavanshi Samaj) it violated the condition u/s. 13(1)(b) of the Act.Hence, ld. CIT(E) rejected the assessee’s application vide order dated 24.06.2025 with the following observations:

“4.The submission made by the applicant Trust was carefully perused. It is noticed that the applicant Trust has neither offered any comment on delay in filing application in Form 10AB nor did it offer any comments on violation of section 13(1)(b) of the Act and violation as per clause (d) of explanation to section 12AB(4) of the Act owing to the activities favouring a particular community (Mahyavanshi Samaj). In absence of any satisfactory response made by the applicant Trust, the violations raised by the undersigned with respect to the registration u/s 12A of the Act remains unresolved.

5. Since Registration/approval under section 12AB is to be granted in terms of the provisions of section 12AB(1)(b) of the Act after being satisfied about the objects of the trust or institution, the genuineness of activities, compliance of the provisions of section 12A/12AB of the Act and the compliance of any other law for the time being in force as are material for the purposes of achieving its objects. In absence of necessary compliance made by the applicant against the violations raised as above, the undersigned is unable to arrive at a satisfactory conclusion on these parameters. The applicant is not fulfilling the stipulated conditions prescribed for approval of application filed in Form 10AB. As such, the undersigned is left with no other options but to reject the application seeking registration under section 12AB of the Act.”

Aggrieved, the assessee has filed an appeal before the Tribunal.

4. Before us, ld. AR has submitted that the assessee is an old trust which was formed on 06.10.1956 for the welfare of Mahyavanshi Samaj.

The assessee applied for re-registration u/s. 12A on 21.09.2021 and u/s. 80G on 28.09.2021. Provisional registration was granted for 3 years upto A.Y. 2024-25. Thereafter the assessee applied for regular registration on 10.05.2024. This application was rejected by ld. CIT(E) vide order dated 09.11.2024 as the application had been made under a wrong subclause (ii) instead of (iii).

The assessee filed an appeal apart the order of ld. CIT(E) and vide ITAT order dated 12.03.2025, the matter was set aside with direction to ld. CIT(E) to consider the application on merits.

4.1 Ld. CIT(E) issued notices regarding activities of the assessee to which requisite reply was submitted. On the issue of violation section 13(1)(b) of the Act, ld. AR has made the following written submission:

“13. The above two paras will indicate that the application was rejected due to use of funds for a specific community. We have to draw your attention towards the section 13(1)(b) and clause (d) of explanation to section 12AB(4) reproduced hereunder

“13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-

(a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public;

(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;

Explanation 2 below sub-section (11) is also reproduced hereunder “Explanation 2.-A trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1)”.

Section 12AB (4)

[(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,

(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year, or

(b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to subsection (3) of section 143 for any previous year; or

(c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year,

the Principal Commissioner or Commissioner shall,-

(i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation,

(ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place;

(iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations,

(iv) forward a copy of the order under clause (ii) or clause

(iii), as the case may be, to the Assessing Officer and such trust or institution.

Explanation. For the purposes of this sub-section, the following shall mean “specified violation”,-

(a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or

(b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives, or

(c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or

(d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or

(e) any activity being carried out by the trust or institution,-

(i) is not genuine; or

(ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or

the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality [; or]

[(g) the application referred to in clause (ac) of sub-section (1) of section 12A is not complete or it contains false or incorrect information.]

14. We have to point out that Mayavanshi Samaj is Scheduled Caste as per the The Scheduled Castes and Scheduled Tribes Orders(Amendment) Act 1976. (Copy attached, entry 18 in the said order) It is explained to me that the trustees had gone and tried to meet the CIT exemption and were directed to meet the ITO head quarters who was orally explained that there was a Scheduled caste and were given a specific exemption under section 13(1)(b) the relevant portion is marked above.

15. We have to further point out that the said restriction applies only if the “trust or institution established for charitable purpose created or established after the commencement of this Act”. The trust has been formed on 06-101956, before the Income Tax Act 1961. The said issue is completely ignored by the learned CIT exemption.

16. We have to point out that the trust is a Scheduled Cast trust which has a specific exemption from the applicability of section 13(1)(b) and the section 12AB(4) would be governed by the said exemption granted for Scheduled Caste.”

4.2 On the other hand, ld. DR has relied on the order of ld. CIT(E).

5. We have considered the rival submissions and perused the material placed on record. We are of the considered view that provisions of section 13(1)(b) are not applicable in the case of the assessee, since it had been formed in 1956, i.e before the commencement of the Income Tax Act 1961. The section clearly provides that trusts formed prior to the commencement of the Act are not covered therein. The assessee has placed on record, a copy of the registration dated 29.06.1957 issued by the Charity Commissioner, Maharashtra.

5.1 Moreover, the activities of the trust are for the benefit of Mahyavanshi Samaj which is a scheduled caste under the Scheduled Castes and Scheduled Tribes orders (Amendment) Act, 1976 and is listed at S. No. 38 of the Annexure, a copy of which has also been placed on record. Accordingly, ld. CIT(E) has wrongly rejected the assessee’s application citing violation of section 13(1)(b) of the Act. We, therefore, set aside the order of ld. CIT(E) and direct him to allow registration to the assessee u/s. 12A of the Act.

6. In the result, assessee’s appeal is allowed.