ORDER
Justice (Retd.) C.V. Bhadang, President. – By this appeal, the appellant-trust is challenging the order dated 31.12.2025 passed by Commissioner of Income Tax (Exemptions), Mumbai (‘CIT (Exemptions)’ for short). By the impugned order, the learned CIT (Exemptions) has cancelled the registration of the appellant-trust in exercise of the powers conferred under Section 12AB(4) of the Income Tax Act, 1961 (‘Act’ for short).
2. The appellant is a trust established and registered in the year 1910 with the object of upkeeping and maintenance of certain immoveable properties as set out in the Trust Deed. According to the appellant, it is one of the objects of the Trust to utilise the income from such properties for the benefit of the community including social, religious and customary needs. Further, according to the appellant, although the primary object is upkeeping and maintenance of properties by utilising income for the benefit of a particular community, the same is incidental to the Trust’s broader public utility function. The Trust has come into existence since prior to the Income Tax Act, 1922 and is an old Trust.
3. It appears that the appellant was granted registration by the competent authority under Section 12A(1)(ac)(i) of the Act on 24.09.2021 for assessment years 2022-23 to 2026-27. The case of the appellant was selected for scrutiny for assessment year 2023-24 under CASS in which the Faceless Assessing Officer (FAO) made a reference under the second proviso to Section 143(3) of the Act for cancellation of the registration of the appellant. The learned CIT (Exemptions) issued a show cause notice seeking production of certain documents, including Income & Expenditure Account, Trust Deed/MoA, a note regarding objects of the Trust and a detailed note on the actual activities conducted since assessment year 2022-23 with supporting evidence. In response, the appellant filed a reply. The learned CIT (Exemptions) on perusal of the submissions made, found that the objects of the Trust are confined solely to maintain, repair and upkeep of three properties purchased in the year 1841. The learned CIT (Exemptions) has further found that the object of maintenance of these properties prima facie does not fall within the definition of “charitable purpose” under Section 2(15) of the Act. Further, no activity or object indicating benefit to the public at large was discernible from the Trust Deed. Therefore, the learned CIT (Exemptions) on 15.12.2025 requested the appellant-trust to explain how the Trust can be said to have been established for charitable purpose and for the benefit of the public at large. In response thereto, a reply was filed by the appellant. The learned CIT (Exemptions) has ultimately found that the activities of the appellant are in violation of Section 2(15) of the Act, which come within the purview of “specified violations” as defined in Explanation to Section 12AB of the Act. In that view of the matter, the learned CIT (Exemptions) found that the appellant was neither established nor is functioning for charitable purposes and by the impugned order the registration came to be cancelled retrospectively from 24.09.2021, which order is subject matter of challenge in this appeal.
4. We have heard parties. Perused record.
5. It is submitted by the learned AR that the provisions of Section 13(1)(b) of the Act would not apply to a trust which was established prior to the commencement of the 1961 Act. For this purpose, reliance is placed on the decision of this Tribunal in Bai Navazbai Faramroze D Mehta Charity Blocks v. CIT (Exemption) 209 ITD 213 (Surat-Trib.) It is further submitted that for the subsequent period, the learned CIT (Exemptions) has granted registration to the appellant under Section 12AB of the Act by order dated 30.03.2026 for assessment years 2027-28 to 2036-37 (page 70 of the Paper Book). He, therefore, submitted that the learned CIT (Exemptions) was not justified in cancelling the registration as impugned in this petition.
6. The learned DR, in all fairness, submitted that appropriate order be passed, particularly in view of the fact that for the subsequent period the learned CIT (Exemptions) has granted the registration.
7. We have considered the circumstances and the submissions made.
8. As noticed earlier, the registration has been cancelled principally on two grounds. First, that the objects of the Trust indicate that it is for the purpose of a particular community and for maintenance and upkeep of certain properties purchased way back in 1841 and secondly, that no other activities of charitable nature were demonstrated.
9. Section 13 of the Act provides for cases where Section 11 of the Act shall not apply. Clause (b) of Sub-section (1) to Section 13 of the Act, in particular, provides that nothing contained in Section 11 or 12 shall apply in the case of a trust for charitable purposes or a charitable institution created or established “after the commencement of this Act” if the trust or institution is created or established for the benefit of any particular religious community or caste. It can thus be seen that the prohibition from applying Section 11 of the Act to a trust/institution established for the benefit of any particular religious community or caste can arise in respect of such trusts/charitable institutions which have been established after the commencement of 1961 Act. It is not in dispute that the appellant-trust has been established much prior thereto in the year 1910.
10. A co-ordinate Bench of this Tribunal in the case of
Bai Navazbai Faramroze D Mehta Charity Blocks (
supra) had an occasion to consider a similar question. The Bench after taking note of the decision of the Andhra Pradesh High Court in case of
CIT v.
Arya Vysya Kalyana Nilaya Sangam [1986] 159 ITR 324 (A.P.) and that of Madhya Pradesh High Court in
CIT v.
Maheshwari Agarwal Marwari Panchayat 136 ITR 556 (M.P.) has held that Section 13(1)(
b) of the Act can apply only to such charitable trusts/institutions which are created or established after the commencement of 1961 Act. We are in respectful agreement with the said decision. Thus, the first ground on which the registration has been cancelled cannot stand.
11. Even so far as the other ground is concerned, the record discloses that even for the subsequent period i.e. assessment year 2027-28 to 2036-37, the learned CIT (Exemptions) has granted the registration. It is necessary to note that registration presupposes that the trust has undertaken certain activities in accordance with the relevant provisions so as to be entitled to the registration. The impugned order discloses that the learned CIT (Exemptions) had principally cancelled the registration on account of the fact that according to the learned CIT (Exemptions), the trust having been created for the benefit of a particular community was not entitled for registration. That aspect we have already considered and found to be incorrect. However, it is necessary for the learned CIT (Exemptions) now to consider the other aspect of the activities carried out by the trust during the relevant period, i.e. assessment year 2022-23 to 2026-27.
12. In that view of the matter, the appeal is allowed. The impugned order is set aside. The learned CIT (Exemptions) shall consider the application on own merits and in accordance with law in light of the observations made in para 11 above and after affording an opportunity of hearing to the appellant.
