Case Law Details
Visa Dishawal Bania Caste Trust Vs CIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, allowed the appeal challenging the order dated 31.12.2025 passed by the Commissioner of Income Tax (Exemptions), Mumbai, who had cancelled the appellant-trust’s registration under Section 12AB(4) of the Income Tax Act, 1961 with retrospective effect from 24.09.2021.
The appellant is a trust established in 1910 for the upkeep and maintenance of certain immovable properties as provided in the Trust Deed. According to the appellant, one of the Trust’s objects is to utilise the income from these properties for the benefit of the community, including social, religious and customary needs. The appellant further submitted that, although the primary object is the maintenance of the properties for the benefit of a particular community, this is incidental to the Trust’s broader public utility function. The Trust has existed since before the Income Tax Act, 1922.
The Trust was granted registration under Section 12A(1)(ac)(i) on 24.09.2021 for assessment years 2022-23 to 2026-27. During scrutiny assessment for assessment year 2023-24, the Faceless Assessing Officer made a reference under the second proviso to Section 143(3) for cancellation of the registration. The Commissioner (Exemptions) issued a show cause notice seeking documents including the Income and Expenditure Account, Trust Deed, a note on the Trust’s objects, and details of activities undertaken since assessment year 2022-23.
After considering the appellant’s replies, the Commissioner (Exemptions) found that the Trust’s objects were confined to maintaining and repairing three properties purchased in 1841 and that such objects did not prima facie fall within the definition of “charitable purpose” under Section 2(15). It was also observed that no object or activity indicating benefit to the public at large was discernible from the Trust Deed. The appellant was therefore asked to explain how it could be regarded as established for charitable purposes and for the benefit of the public at large. After considering the response, the Commissioner (Exemptions) concluded that the Trust’s activities violated Section 2(15), constituting “specified violations” under the Explanation to Section 12AB, and cancelled the registration retrospectively from 24.09.2021.
Before the Tribunal, the appellant submitted that Section 13(1)(b) does not apply to trusts established prior to the commencement of the Income Tax Act, 1961, relying on the Tribunal’s decision in Bai Navazbai Faramroze D Mehta Charity Blocks [2024] 167 com 218 (Surat Trib.). The appellant also pointed out that the Commissioner (Exemptions) had subsequently granted registration under Section 12AB by order dated 30.03.2026 for assessment years 2027-28 to 2036-37. It was therefore contended that cancellation of the earlier registration was not justified.
The Departmental Representative fairly submitted that an appropriate order may be passed, particularly in view of the subsequent grant of registration.
The Tribunal observed that the registration had been cancelled principally on two grounds: first, that the Trust existed for the benefit of a particular community and for maintenance of certain properties acquired in 1841; and secondly, that no other charitable activities had been demonstrated.
Examining Section 13(1)(b), the Tribunal noted that it applies to trusts or charitable institutions created or established after the commencement of the Income Tax Act, 1961 where such trusts are created for the benefit of any particular religious community or caste. It was undisputed that the appellant-trust had been established in 1910, much before the commencement of the 1961 Act.
The Tribunal referred to the co-ordinate Bench decision in Bai Navazbai Faramroze D Mehta Charity Blocks [2024] 167 com 218 (Surat Trib.), which had considered the same issue after taking note of the decisions in Arya Vysya Kalyana Nilaya Sangam, 159 ITR 324 (Andhra Pradesh), and Maheshwari Agarwal Marwari Panchayat, 136 ITR 556 (Madhya Pradesh). Agreeing with that decision, the Tribunal held that Section 13(1)(b) applies only to charitable trusts or institutions created or established after the commencement of the 1961 Act. Accordingly, the first ground for cancellation of registration could not be sustained.
Regarding the second ground, the Tribunal noted that the Commissioner (Exemptions) had granted registration to the Trust for assessment years 2027-28 to 2036-37. The Tribunal observed that grant of registration presupposes that the Trust had undertaken activities in accordance with the relevant provisions entitling it to registration. Since the principal basis of cancellation relating to Section 13(1)(b) had been found to be incorrect, the Tribunal held that the Commissioner (Exemptions) should now examine the Trust’s activities for assessment years 2022-23 to 2026-27 on their own merits.
Accordingly, the Tribunal allowed the appeal, set aside the impugned order cancelling registration, and directed the Commissioner (Exemptions) to reconsider the matter on its own merits, in accordance with law and the Tribunal’s observations, after providing the appellant an opportunity of hearing.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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 [2024] 167 com 218 (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 Arya Vysya Kalyana Nilaya Sangam, 159 ITR 324 (Andhra Pradesh) and that of Madhya Pradesh High Court in Maheshwari Agarwal Marwari Panchayat, 136 ITR 556 (Madhya Pradesh) 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.
Order pronounced in the open court on 17.06.2026.
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