A trust with main objects benefiting the general public qualifies

A trust with main objects benefiting the general public qualifies as charitable under Section 12AB.

Issue

Whether a Section 8 company whose main objects benefit the public at large qualifies for registration under Section 12AB, even if certain incidental or ancillary objects involve welfare activities for its members.

Facts

The respondent-trust, incorporated as a Section 8 company, applied to the CIT (Exemption) for registration under Section 12AB, citing charitable objects like educational, medical, social, and welfare activities for the general public.
The CIT (Exemption) rejected the application, observing that certain objects primarily benefited the trust’s members and their families, functioning as a welfare association/union that collected membership fees.
The CIT (Exemption) concluded that the activities constituted services rendered to members rather than charitable acts for the public.
The Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal, holding that registration under Section 12AB should be granted when numerous objects exist for the benefit of the general public.
The Revenue challenged the ITAT’s decision before the High Court.

Decision

The High Court affirmed the Tribunal’s decision, noting that none of the main objects of the trust referred to religious activities.
It held that the incidental and ancillary objects also did not involve religious activities and clearly aimed at benefiting the public at large.
Consequently, the rejection of Section 12AB registration was unjustified, and the Tribunal’s order was upheld. (In favour of assessee)

Key Takeaways

Dominant Object Test: The primary test for charitable status under Section 2(15) is whether the main objects benefit the public at large, rather than the presence of incidental member-centric activities.
Incidental Activities Do Not Oust Charitable Nature: So long as the core purpose remains non-religious, non-private, and dedicated to general public utility, minor ancillary objects focusing on member welfare will not disqualify an entity from Section 12AB registration.

HIGH COURT OF GUJARAT

Commissioner of Income-tax (Exemptions)

Salej Rotary Seva Foundation^*

BHARGAV D. KARIA and Pranav Trivedi, JJ.

R/TAX APPEAL NO. 791 of 2025^†

JUNE 29, 2026

Aman Mir, Sr. Standing Counsel for the Appellant. Parimalsinh Parmar for the Respondent.

ORDER

Bhargav D. Karia, J. – Heard learned Senior Standing Counsel Mr. Aman Mir appearing for the appellant and learned advocate Mr. Parimalsinh Parmar appearing for the respondent.

2. By this appeal under Section 260A of the Income Tax Act (for short “the Act”), 1961, the appellant – Revenue has proposed the following substantial questions of law arising out of the order dated 16.12.2024 passed by the Income Tax Appellate Tribunal (for short “the Tribunal”), ‘C’ Bench, Ahmedabad, in ITA No. 1061/Ahd/2024.

“(i) Whether on the facts and circumstances of the case and in law, Hon’ble Tribunal has erred in deciding the case on the issue of “benefit of a particular religious community or caste” whereas exemption was denied to the assessee trust on the basis that objects of the assessee trust are not for the benefit of public at large and hence do not fall under the definition of charitable activities u/s 2(15) of the Income Tax Act, 1961.?

(ii) Whether on the facts and in the circumstances of the case and in law, Hon’ble Tribunal has erred in deciding the case while relying on judgement of Hon’ble High Court of Gujarat in the case of CIT v. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust, (2016) (Guj), which pertains to denial of registration u/s 12A of the Income-tax Act, 1961 by invoking section 13(1)(b) of the Act on the issue of benefit to a particular religious community or caste wherein in the present case registration u/s 12A was denied to the assessee on account of the activities being restricted to the benefit of members only?”

Brief facts of the case are that:

2.1 The respondent – Trust filed an application before the Commissioner of Income Tax, Exemption (for short ‘C.I.T’ Exemption) for grant of registration under Section 12AB of the Act.

2.2 The Commissioner of Income Tax (Exemption), rejected the application for registration under Section 12AB of the Act filed by the respondent – Trust on perusal of the objects of the Trust. The CIT (Exemption) was of the view that on a reading of some of the objects of the Trust it was evident that the same were not for the benefit of the public at large and were primarily for the benefit of the members of the applicant-Trust and their family members. Therefore, considering the objects of the Trust, the CIT(Exemption) was of the view that such objects are to protect the business interest and welfare of the members of the Trust, and therefore, the same cannot be considered for charitable purpose.

2.3 The CIT (Exemption) also observed that the applicant -Trust is established and functioning as a welfare association union and is also collecting fee from its members and such welfare activities adopted by the Trust for its members are in the nature of services being rendered to the members, and therefore, only because the objects refers to the charitable activities, registration cannot be granted under Section 12AB of the Act.

2.4 Being aggrieved by the order of the CIT (Exemption) rejecting the registration under Section 12AB of the Act, the respondent – assessee preferred an appeal before the Tribunal. The Tribunal, after considering the submissions and the settled legal position, allowed the appeal filed by the respondent – Trust by following the decision of this Court in the case of CIT (Exemptions) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (Gujarat)., wherein it is held that where large number of other objects which were for the benefit of general public apart from objects for benefit of religious community, registration under Section 12AB is required to be granted. The Tribunal allowed the appeal with the following observation:

“6. We have heard both the parties and perused the material available on record. On going through the contents of the order passed by the Ld.CIT(E), we observe that the Ld.CIT(E), out of various Objects submitted by the assessee, only hand picked a few Objects to deny registration to the applicant trust on the ground that the trust was primarily found for the benefit of the Members of the trust along with their family members. However, we observe that the Objects which were selected/picked up by the Ld.CIT(E) were only incidental Objects, which were only aimed at providing administrative support to the main Objects of the trust, which in our view, are charitable in nature. We also observe that all details of expenses incurred by the assessment were submitted before the Ld.CIT(E) and no specific finding has been given that the said expenses were not charitable in nature. We further observe that for the past three years, the Objects of the trust have not been challenged by the Tax Authorities and even on the principle of consistency, unless any new facts comes on record, registration cannot be denied to the assessee, on the basis of same set of facts. Accordingly, looking to the instant facts, we are of the considered view that the Ld.CIT(E) has erred in facts and law in denying granting of registration to the applicant – trust u/s.12AB of the Act. In the case of CIT (Exemption) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (supra), the Hon’ble Jurisdictional High Court has held that where apart from Objects which were for the benefit of religious community, the assessee – trust had large number of other objects which were for benefit of general public, the Tribunal was correct in allowing registration to the assessee. Respectfully following the aforesaid judgement of the Hon’ble Gujarat High Court and looking into the assessee’s particular set of facts, the appeal of the assessee is allowed.”

3. Learned Senior Standing Counsel Mr. Aman Mir, tried to distinguish the decision of this Court in the case of Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (supra), by referring to the objects incidental or ancilliary to the attainment of the main objects of the Trust and more particularly object No.13, which is to form and establish various committees for promotion of Land Development, Construction and Infrastructure Industry, Member’s Personal Relations etc., and Object 25 which refers to the construction of Public Roads, Parks, Gardens etc., for the use of members and public. Referring to these objects, it was submitted that the CIT (Exemption) was justified in rejecting the registration under Section 12AB of the Act.

3.1 Reliance was also placed on the finding of the CIT (Exemption) in para 8 and 9 of the order. The same read as under:

“8. The objects/activities of the applicant need to be analyzed as to whether they are charitable in nature. The litmus test of a charitable institution is that it should primarily carry on charitable activities. Charity is the noble cause meant for the benefit and upliftment of the down trodden, poor and the needy. Charity is not a technical concept safeguarded by legal jargons. Charity is not an edifice built on logical deliberations. Charity is a divine reflection of human civilization which finds ways and means to help the needy, to protect the helpless, to support the poor and to work for the betterment of the society and mankind. So what is necessary is actual work of charity, howsoever humble it might be.

From perusal of above referred objects of the applicant/assessee, it is evident that these objects are to protect the business interest and welfare of its members and that hardly can be considered as charitable in nature, particularly when the essence of altruism is absent from the same and these are not for the benefit of public at large as discussed above. The applicant/assessee is established and functioning as welfare association or union and also collecting fee from its members. Moreover, the welfare activities adopted for its members are in nature of services being rendered to members as are common in other welfare organizations, which could not be termed for general public utility and charitable purpose. Further, the Hon’ble Punjab & Haryana High Court in the case of CIT v. Truck. Operators Association reported in decided the matter in favour of revenue and held as under.

“9. On examination of the objects and the purpose of the Association in the present case, it emerges that the respondent-Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or nonmember to undertake any business activity within the precincts of Hansi Town/village. The Association charges fees from its members before the transportation on the basis of the distance involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing The association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. The welfare activities adopted for the truck drivers, cleaners and mechanics of the truck owners are in the nature of staff welfare activities, as are common in other business organizations which cannot be termed for general public utility.”

9 Therefore, as the aforesaid objects are for the benefit/welfare/interest of the members of the association ie members and their families of Salej Rotary Seva Foundation and not for the benefit of public at large, thus, does not fall within the ambit of charitable purposes as defined u/s. 2(15) of Act. I am of the considered opinion that the applicant/assessee is not eligible for registration u/s 12A of the Act. Therefore in the facts and circumstances of the case, the applicant/assessee cannot be granted registration u/s 12A of the Act.”

4. Having heard the learned advocate for the appellant and having perused the Memorandum of Association of the respondent – Trust, which is a Company formed under Section 8 of the Companies Act, 2013, it would be germane to refer to the objects of the respondent – Trust. The main objects of the Trust reads as under:

“(A) The main objects to be pursued by the Company on its incorporation

To establish, promote, conduct, organize, support, undertake, provide, set-up educational, cultural, social, religious, medical and other developmental activities for welfare of the public at large and for the upliftment of the poor, needy and backward classes.

ii.

To provide medical aid to the public at large without any discrimination of the basis of caste, creed, gender, religion etc.

iii.

To helping victims during natural as well as man-made disaster.

iv.

To help agriculture, farmer and pastoralists and to help the weak people in the different field.

To conduct programmes related to women empowerment.

vi.

To set up water treatment plant and water conservation and carrying out activities for natural resources.

vii.

To undertake sports activities and to do activities that promote any and all kind of sports and to encourage the work of such projects which thrive on the power of youth.

viii.

To encourage, promote, organize and set up all kinds of religious events or institutions and promote cultural activities.

ix.

To do all work should be done for the welfare of all beings without any discrimination of caste or religion.

“However the Company shall apply its profit, if any or other income in promoting its objects, and to prohibit the payment of any dividend to its members.”

“No objects of the Company shall be carried out without permission of the competent authority and no Objects of the company shall be carried on commercial basis.”

5. None of the above main objects refers to religious activities as observed by the CIT (Exemption) and referred to by the learned advocate for the appellant. The various activities referred to in objects incidental or ancillary to the attainment of the main objects i.e. Object No.13 and 25 referred to by the learned advocate for the appellant also do not refer to any religious activity. It is also evident that the aforesaid objects are for the benefit of public at large.

6. This Court in the case of Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (supra), after considering the objects of the said Trust has held as under:

“7. It can thus be seen that the Commissioner focused his attention to clause 4.2 of the objects of the trust to come to the conclusion that the same were for the benefit of a certain religious communities only, in the process ignoring various other objects, for e.g. as per clause 4.1, the trust would engage itself in activities relating to education by maintaining and running education centers, infant schools, primary and secondary and high schools, colleges etc., to run hostels, training centers for creating awareness in the common people and to make the education available for the public. It would also engage in imparting training in computers. As per clause 4.3, the trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise in clause 4.4 the trust could engage in rural development schemes. As per clause 4.5, the trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Clause 4.6 which pertains to other included activities such as running cow shelters, to provide food, cloth and financial help for economically weaker persons, to help during natural or other calamities, to serve humans and animals etc.

8. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Act, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record.”

7. In view of the above settled position of law as well as in the observations made by the Tribunal for allowing the appeal filed by the respondent – Trust and considering the main objects of the Trust, we are of the opinion that no question of law, much less any substantial question of law arises from the impugned order of the Tribunal.

8. The appeal, therefore, being devoid of any merit is accordingly dismissed.