Shri Veer Teja Jat Vishram Graha Trust Vs ITO Ward Exemption (ITAT, Jodhpur Bench)
Jodhpur ITAT Directs Section 12AA Registration: Trust Cannot Be Branded Caste-Specific by Selectively Reading Dharamshala Object; Capital Expenditure Qualifies as Application; Rural Community Trust Entitled to Section 12AA Registration; Charitable Objects Beyond Caste Justify Section 12AA Registration; Trust Registration Granted; Capital Expenditure Claim Sent to AO; Administrative Expenditure Alone Cannot Make Trust Activities Non-Genuine: ITAT Jodhpur
Summary:The Income Tax Appellate Tribunal, Jodhpur Bench allowed the assessee-trust’s appeal against refusal of registration under section 12AA of the Income-tax Act, 1961 and directed the CIT(E) to grant registration with effect from 15.09.2014, the date of the application. The connected assessment appeal for AY 2015-16 was allowed for statistical purposes, with the computation restored to the Assessing Officer for giving effect to the registration and determining the exemption admissible under sections 11 and 12.
The assessee, Shri Veer Teja Jat Vishram Graha Trust, had applied in Form No. 10A on 15.09.2014 for registration under section 12AA. The CIT(E) rejected the application on 23.03.2015 after concluding that the Trust had principally been formed for constructing and maintaining a dharamshala for persons belonging to the Jat community and was therefore intended to benefit a particular community or caste. The CIT(E) considered its objects to violate section 2(15) and section 13(1)(b). He also considered the activities not genuine because the accounts reflected predominantly administrative expenditure and, according to him, no expenditure directly towards the Trust’s objects.
The Tribunal examined the operative objects of the Trust as a whole. Apart from construction and maintenance of a dharamshala, the trust deed contemplated education of poor children, distribution of books, scholarships, eradication of addiction and social evils, environmental awareness, assistance to poor widows, elderly and differently-abled persons, maintenance of a gaushala, relief during natural calamities, management of cremation grounds, medical camps and treatment of poor and destitute persons. The Tribunal noted that these objects were expressed for the overall development of the “Gramin Samaj” or rural community and were not confined to members of the Jat community.
The Tribunal held that the CIT(E) had selectively treated construction of the dharamshala as the sole or dominant object while disregarding numerous independent charitable objects forming part of the operative trust deed itself. The beneficiaries of those objects were described generally and were not limited by caste. The expression “Gramin Samaj” was held to have wider amplitude and to refer to the rural community generally.
The Tribunal also considered the genuineness of activities. A grant approval dated 16.12.2013 recorded sanction of Rs.31,00,000/- for construction of the Vishram Graha. Further, during the assessment for AY 2015-16, the AO had examined the assessee’s cash book, ledger, bank statements, receipt books, bills, vouchers and supporting documents. The AO recorded construction expenditure of Rs.11,26,216/- but did not reject the books, dispute the construction or hold the expenditure to be unsupported or non-genuine. Exemption had been denied only because registration under section 12AA had not been granted. The Tribunal therefore held that mere predominance of administrative expenditure or accumulation of income during the initial period, without a finding of false accounts or fictitious activities, could not establish that the activities were non-genuine.
The Tribunal distinguished Agrawal Sabha v. CIT and Gowri Ashram v. DIT (Exemptions) on their facts. It also relied on the principle stated by the Supreme Court in Ahmedabad Rana Caste Association v. CIT that an object beneficial to an identifiable section of the public can constitute an object of general public utility and need not benefit the whole of mankind or all persons in a State or country.
Accordingly, the Tribunal held that the assessee’s objects, read as a whole, were charitable within section 2(15), were not confined exclusively to a particular caste or community and the material did not justify the finding that its activities were non-genuine. The CIT(E) was directed to grant registration under section 12AA from 15.09.2014.
Consequently, in the AY 2015-16 assessment appeal, the Tribunal held that the foundation for denying exemption under sections 11 and 12 no longer survived. The AO was directed to recompute income after giving effect to registration and to examine the nature, amount and supporting evidence for the claimed expenditure. Capital expenditure was to be treated as application of income to the extent actually incurred towards construction of the Vishram Graha or otherwise in furtherance of the Trust’s objects. The AO was specifically prohibited from revisiting the assessee’s entitlement to registration or the charitable character of its objects.
Cases Discussed
- Agrawal Sabha v. CIT, [2014] 45 taxmann.com 273 (Allahabad) / [2014] 223 Taxman 353 (Allahabad) — distinguished because the dominant object and evidentiary record were materially different.
- Gowri Ashram v. DIT (Exemptions), [2013] 36 taxmann.com 97 (Madras) / [2013] 356 ITR 328 (Madras) — distinguished because the wider objects in that case were introduced subsequently and had not been incorporated in the court-framed governing scheme.
- Ahmedabad Rana Caste Association v. CIT, [1971] 82 ITR 704 (SC) — relied upon for the principle that benefit to an identifiable section of the public may constitute an object of general public utility.
- CIT v. S.D.K.I. Jaipuria Trust, [1990] 186 ITR 728 (Allahabad) — relied upon by the assessee in support of its contention regarding benefit to an identifiable section of the public.
FULL TEXT OF THE ORDER OF INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH
These two appeals filed by the same assessee involve interconnected issues and arise from proceedings relating to the registration of the assessee under section 12AA of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]and the consequential assessment for assessment year 2015-16. The first appeal, being ITA No.269/Jodh/2016 is directed against the order dated 23.03.2015 passed by the learned Commissioner of Income-tax (Exemptions), Jaipur [hereinafter referred to as “the CIT(E)”], under section 12AA(1)(b) of the Act, refusing registration to the assessee. The second appeal, being ITA No. 698/Jodh/2025 for assessment year 2015-16, is directed against the order dated 17.06.2025 passed by the learned Addl./JCIT(A)-2, Delhi[hereinafter referred to as “the CIT(A)”], under section 250 of the Act, arising from the assessment order dated 30.08.2017 passed under section 143(3) of the Act. Since the appeals pertain to the same assessee and the outcome of the registration appeal has a direct bearing upon the assessment appeal, they were heard on the same day and are being disposed of by this common order.
2. Appeal against refusal of registration under section 12AA
2.1. The assessee filed an application in Form No. 10A on 15.09.2014 seeking registration under section 12AA of the Act. The application was originally filed before the Commissioner of Income-tax, Bikaner. Consequent upon the change of jurisdiction and creation of the office of the Commissioner of Income-tax (Exemptions), Jaipur, the application was transferred to the said authority. The learned CIT(E) examined the particulars furnished by the assessee with reference to the conditions prescribed under section 12AA, namely, whether the objects of the Trust were charitable and whether its activities were genuine.
2.2. On examination of the trust deed, the learned CIT(E) observed that the principal purpose behind the formation of the Trust was construction and maintenance of a dharamshala for the benefit of persons belonging to the Jat community. The trust deed also contained other objects relating, inter alia, to education of poor children, provision of books and educational assistance, medical aid, protection of the environment, assistance to poor widows and orphans, support to elderly and differently-abled persons, maintenance of a gaushala, relief during natural calamities, management of cremation grounds, organisation of medical camps, and treatment of poor and destitute persons. The learned CIT(E), however, held that these other objects had no apparent correlation with what he considered to be the principal purpose of the Trust and that the manner in which such objects were proposed to be pursued was not explained.
2.3. The learned CIT(E) held that, upon a combined reading of the stated purpose and objects of the Trust, it had been constituted for the benefit of persons belonging to the Jat community. He concluded that the Trust was working for the benefit of a particular community or caste and, therefore, its objects violated sections 2(15) and 13(1)(b) of the Act. In support of his conclusion, the learned CIT(E) referred to the decisions in Agrawal Sabha v. CIT [2014] 45 taxmann.com 273 (Allahabad)/[2014] 223 Taxman 353 (Allahabad) and Gowri Ashram v. DIT (Exemptions) [2013] 36 taxmann.com 97 (Madras)/[2013] 356 ITR 328 (Madras).
2.4. The learned CIT(E) also examined the accounts furnished by the assessee. For assessment year 2014-15, he noticed aggregate receipts of Rs.32,39,874/- against which the assessee had shown administrative expenditure of Rs.33,219/-, bank charges of Rs.69/-, light and water expenditure of Rs.22,264/-, other expenditure of Rs.5,325/-, travelling expenditure of Rs.43,650/-, and workshop/meeting expenditure of Rs.1,20,310/-, leaving an excess of income over expenditure of Rs.30,15,037/-. Similarly, for assessment year 2013-14, against aggregate receipts of Rs.1,60,274/-, the assessee had shown administrative expenditure of Rs.2,714/-, bank charges of Rs.210/-, light and water expenditure of Rs.8,035/-, other expenditure of Rs.6,892/-, and workshop/meeting expenditure of Rs.35,534/-, leaving an excess of income over expenditure of Rs.1,06,889/-.
2.5. On the basis of the aforesaid accounts, the learned CIT(E) observed that the expenditure was predominantly administrative and that no expenditure was shown to have been incurred directly towards the objects of the Trust. He consequently held that the activities of the Trust could not be regarded as genuine. He further reiterated that the activity of establishing a dharamshala for the Jat community was intended to benefit a particular community and not the public at large. Accordingly, by order dated 23.03.2015 passed under section 12AA(1)(b), the learned CIT(E) refused registration to the assessee.
3. Aggrieved by the aforesaid order, the assessee is in appeal before us and has raised the following grounds:
1. That order passed by the CIT(Exemptions) Jaipur u/s 12AA in the case of the assessee is bad in law and on facts.
2. That CIT(Exemptions) has wrongly rejected application seeking registration of the assessee u/s 12AA of IT Act, 1961 in the facts and circumstances of the case.
3. That CIT(Exemptions) has failed to consider letter and spirit of the objective sought to be achieved by the trust. The objectives are for benefit of public at large hence eligible to be registered u/s 12AA of IT Act, 1961.
4. That CIT(Exemptions) should have considered overall facts and circumstances of the case but failed to do so.
5. That the appellant prays for justice and may please be allowed to add, amend and delete further/any grounds of appeal on or before hearing on the case.
4. Appeal arising from the assessment for assessment year 2015-16
4.1. The facts relevant to the second appeal are that the assessee filed its return of income for assessment year 2015-16 on 24.06.2016 in Form ITR-7, declaring nil income. The case was selected for scrutiny under the compulsory selection criteria and a notice under section 143(2) was issued on 20.09.2016. In response to the statutory notices, the authorised representative of the assessee attended the assessment proceedings from time to time and furnished written submissions and the information called for. The assessee also produced its computerised books of account, comprising the cash book, ledger, bank statements, receipt books, bills, vouchers, and other supporting documents, which were test-checked by the AO.
4.2. The AO recorded that the assessee was constituted under a trust deed and was registered with the Sub-Registrar, Nokha. In its return, the assessee claimed exemption under section 11 in respect of an aggregate application of income amounting to Rs.13,12,813/-. As per the income and expenditure account and computation of total income, the assessee had gross receipts of Rs.9,72,790/-. Against the said receipts, it claimed revenue expenditure of Rs.1,86,597/- and capital expenditure of Rs.11,26,216/- incurred towards construction of a building.
4.3. During the assessment proceedings, the assessee explained that it was constructing a dharamshala at Nokha for the benefit of the public at large and that, during the year under consideration, an amount of approximately Rs.11.26 lakh had been applied towards its construction. It was further submitted that there had been no change in the objects or activities of the Trust and that its income had been applied towards its charitable objects.
4.4. Regarding its registration under section 12AA, the assessee submitted that its application had been rejected by the learned CIT(E) and that an appeal against the said rejection was pending before the Tribunal. The assessee accordingly requested that the benefit of section 11 be allowed, as it expected registration to be granted with effect from the date from which it had originally been sought.
4.5. The AO held that registration under section 12AA was an essential condition for claiming exemption under section 11. Since the assessee had not been granted such registration, the AO rejected its claim for exemption and adopted its status as an association of persons instead of a trust. The AO noticed that, after allowing the revenue expenditure of Rs.1,86,597/- against the gross receipts of Rs.9,72,790/-, the assessee had a surplus of Rs.7,86,193/-. The total income was ultimately assessed at Rs.7,86,190/-. The assessment was accordingly completed under section 143(3) on 30.08.2017.
4.6. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The assessee contended that the AO had erred in declining to consider the capital expenditure incurred on construction of the dharamshala while computing its taxable income. According to the assessee, neither the incurrence nor the genuineness of the capital expenditure had been disputed by the AO. Its contention was that, even in the absence of registration under section 12AA, its taxable income should be determined after deducting both revenue and capital expenditure incurred towards the charitable objects.
4.7. The learned CIT(A) observed that registration under section 12A was a mandatory precondition for availing exemption under sections 11 and 12. The learned CIT(A) held that, in the absence of registration, the assessee was not entitled to exemption under sections 11 and 12 and that the AO was justified in declining its claim relating to capital expenditure.
4.8. While dealing with the applicable rate of tax, the learned CIT(A) referred to section 164(2), CBDT Circular No. 320 dated 11.01.1982, and certain decisions of the Tribunal. The learned CIT(A) observed that the question whether the trustees or members were entitled to any share in the income could not be ascertained from the available record. The AO was, therefore, directed to verify whether the trustees or members were entitled to any share in the income and thereafter determine whether the income was taxable at the maximum marginal rate or at the rates ordinarily applicable to an association of persons. Subject to the said direction, the appeal was dismissed by order dated 17.06.2025.
5. Aggrieved by the order of the learned CIT(A), the assessee has preferred the appeal before us and has raised the following grounds of appeal:
1. That order passed u/s 250 of the Income Tax Act by CIT(A) /JCIT(A), NFAC for the AY 15-16 in the case of the assessee trust is bad in law and on facts.
2. That the CIT(A) while passing order u/s 250 of the Act has wrongly denied the allowability of capital expenditure incurred by the assessee in the facts and circumstances of the case. The Assessing Officer has also erred in law and on facts in denying the allowability of capital expenditure so incurred in the facts and circumstances of the case therefore addition made by the Assessing Officer of Rs. 7,86,190/- and uphold by the CIT(A) is requested to be deleted.
3. That both CIT(A) and Assessing Officer have wrongly interpreted the provisions of section 11 while denying the benefit of capital expenditure in the facts and circumstances of the case, the claim of capital expenditure made by assessee falls within the four corners of provisions of the law.
4. That the CIT(A) has erred in law and on facts while raising fresh ground dehors the assessment order directing the Assessing Officer to verify whether trustee /members are entitled to share any income or not and then decide the issue of taxability of income at MMR or individual rates. The matter was not raised by the Assessing Officer. The Assessing Officer calculated Income Tax by applying the individual rates. The CIT(A) raised this fresh ground suo moto which is against the law and the authority is precluded to bring a fresh ground which was not subject matter of litigation before the Assessing Officer.
5. The CIT(A) has erred in law and on facts for remanding the issue back to the file of the Assessing Officer to verify whether trustee/members are entitled to share of any income or not while the assessment order was completed u/s 143(3) not u/s 144 of the Act.
6. That appellant prays for justice and may please be allowed to add/ amend/ alter further or any grounds of appeal on or before hearing on the case.
6. During the course of hearing before us, the learned AR submitted that all the grounds raised in ITA No. 269/Jodh/2016 relate to the solitary issue of rejection of the assessee’s application for registration under section 12AA of the Act and, therefore, the grounds may be considered together. He submitted that the principal objection of the learned CIT(E) was that the Trust had been constituted exclusively for the benefit of the Jat community and, consequently, could not be regarded as having been established for the benefit of the public at large. According to the learned AR, this conclusion was founded upon an incorrect and incomplete reading of the objects contained in the trust deed.
7. The learned AR drew our attention to the object clause reproduced in the impugned order. He submitted that the objects expressly refer to the overall development of the rural community and include providing education to poor children, distributing books among needy students, granting scholarships to meritorious students, combating social evils such as addiction, promoting environmental awareness, assisting poor widows, elderly persons and differently-abled persons, maintaining a gaushala, extending relief during famine, floods and other natural calamities, maintaining cremation grounds, organising medical camps, providing treatment to poor and destitute persons, constructing and maintaining a dharamshala, and making accommodation available therein to persons belonging to the community. He contended that these objects, when read as a whole, were charitable and intended for the benefit of the rural community generally. The trust deed did not confine the beneficiaries of these activities exclusively to members of the Jat community.
8. The learned AR submitted that the learned CIT(E) had selectively referred to the proposed construction of a dharamshala and had failed to appreciate the scope and amplitude of the other objects. The expression employed in the object clause was “Gramin Samaj”, namely, the rural community, and not the Jat community alone. He, therefore, submitted that the conclusion that the Trust had been constituted exclusively for a particular caste was contrary to the express language of its objects.
9. In support of this alternative contention, the learned AR relied upon the decision of the Hon’ble Supreme Court in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC), the decision of the Hon’ble Allahabad High Court in CIT v. S.D.K.I. Jaipuria Trust [1990] 186 ITR 728 (Allahabad). On the strength of these authorities, he contended that a charitable purpose does not cease to be charitable merely because its benefits are directed towards an identifiable section of the public, provided that the beneficiaries are not specified private individuals.
10. The learned AR further invited our attention to the grant approval dated 16.12.2013 issued under the scheme for allocation of discretionary funds at the disposal of the Hon’ble Chief Minister of Haryana for the financial year 2013-14. The approval identifies the assessee as “Shri Veer Teja Jat Vishram Greh, Nokha, District Bikaner, Rajasthan” and records that a grant of Rs.31,00,000/- was sanctioned for construction of the building of the Vishram Graha. The learned AR submitted that the assessee had received the said grant pursuant to the approval and had utilised the funds for construction of the Vishram Graha in furtherance of its stated objects.
11. Referring to the aforesaid approval, the learned AR contended that the sanction of a substantial grant by a State Government for construction of the Vishram Graha supported the public and charitable character of the project. According to him, the approval also corroborated the assessee’s contention that it was actually pursuing its stated objects and that the construction activity was genuine. He, therefore, submitted that the observation of the learned CIT(E) that the activities of the Trust were not genuine or were not directed towards its objects was contrary to the material placed on record.
12. The learned AR accordingly submitted that the objections recorded by the learned CIT(E) were unsustainable, that the objects and activities of the assessee were charitable in nature, and that the assessee satisfied the requirements for registration under section 12AA. He, therefore, prayed that the impugned order be set aside and registration under section 12AA be granted to the assessee.
13. Regarding ITA No. 698/Jodh/2025 for assessment year 2015-16, the learned AR submitted that the disallowance arose solely because the assessee had not been granted registration under section 12AA. He submitted that the AO had otherwise accepted the construction of the Vishram Graha and had not doubted the genuineness of the capital expenditure of Rs.11,26,216/- or its application towards the stated objects of the Trust.
14. The learned AR contended that, if the assessee’s appeal against refusal of registration is allowed and registration under section 12AA is granted, the capital expenditure incurred on construction of the Vishram Graha would qualify as application of income for charitable purposes. He, therefore, prayed that the AO be directed to give effect to the registration, treat the eligible capital expenditure as application of income, and recompute the total income of the assessee for assessment year 2015-16 in accordance with law.
15. In the appeal concerning rejection of registration under section 12AA, the learned DR relied upon the findings recorded in the impugned order of the learned CIT(E). He specifically invited our attention to the Hindi narration appearing on page 2 of the impugned order, which sets out the background and principal purpose for which the Trust was constituted.Referring to the said narration, the learned DR submitted that the intention underlying the formation of the Trust was to construct a dharamshala at Nokha for members of the Jat community, particularly Jat farmers visiting the Nokha agricultural market for the sale of their produce. The narration records that such farmers occasionally had to remain at Nokha when their agricultural produce was not sold in time and that they lacked proper accommodation. It further refers to the acquisition of land in the name of Veer Teja Jat Vishram Graha and to the proposal that the dharamshala be constructed with the contribution and cooperation of members of the Jat community.
16. The learned DR contended that the aforesaid contemporaneous narration clearly disclosed that the dominant purpose of the Trust was to provide accommodation and related facilities to members of the Jat community and not to the public at large. According to him, the other objects incorporated in the trust deed were merely ancillary and did not alter its principal character. He, therefore, submitted that the learned CIT(E) had correctly concluded that the Trust was constituted for the benefit of a particular caste or community and that the rejection of registration under section 12AA deserved to be sustained.
17. In the appeal arising from the assessment for assessment year 2015-16, the learned DR relied upon the orders of the authorities below.
18. We have considered the rival submissions and perused the material available on record. The principal controversy in ITA No. 269/Jodh/2016 is whether the learned CIT(E) was justified in refusing registration under section 12AA on the ground that the assessee was constituted exclusively for the benefit of the Jat community and that its activities were not genuine. The issue necessarily requires consideration of the objects of the Trust as a whole and not merely of the historical circumstances which led to its formation.
19. The learned DR has relied upon the narration appearing in Hindi on page 2 of the impugned order. The said narration explains that Jat farmers visiting the agricultural market at Nokha sometimes required accommodation when their agricultural produce could not be sold during the day. It also records the proposal to construct a dharamshala with the cooperation of members of the Jat community. Undoubtedly, this narration explains the immediate circumstances which led to the acquisition of land and the formation of the Trust. However, the purpose of a trust for the purposes of section 12AA must ultimately be determined from the operative object clause contained in its governing instrument.
20. The object clause reproduced in Hindi on page 3 of the impugned order begins by declaring that the objects are intended to secure the overall development of the rural community, namely, “ग्रामीण समाज मेंसर्ाांगीण वर्कास”. It thereafter enumerates several independent charitable objects, including:
i. providing education to poor children;
ii. distributing books among poor and needy students;
iii. granting scholarships to meritorious students;
iv. working towards eradication of addiction and other social evils;
v. promoting environmental awareness;
vi. assisting poor widows;
vii. helping elderly and differently-abled persons;
viii. maintaining a gaushala;
ix. providing relief during famine, floods and other natural calamities;
x. managing cremation grounds;
xi. organising medical camps;
xii. providing treatment to poor and destitute persons; and
xiii. constructing and maintaining a dharamshala.
21. The aforesaid objects fall within recognised charitable fields of relief of the poor, education, medical relief, preservation of the environment, relief during natural calamities, and advancement of objects of general public utility. The beneficiaries of these objects have been described generally as poor children, needy students, meritorious students, poor widows, elderly persons, differently-abled persons, victims of natural calamities, and poor and destitute patients. These beneficiaries are not confined by the object clause to members of the Jat community. The expression “Gramin Samaj” is wider in amplitude and refers to the rural community generally.
22. It is true that the portion of the object clause dealing with the dharamshala also contemplates providing accommodation to persons belonging to the community. However, that part cannot be read in isolation so as to override or efface the numerous independent charitable objects expressly set out in the same clause. The learned CIT(E) has treated construction of the dharamshala as the sole or dominant object and has regarded the remaining objects as having no correlation with it. In our considered view, such an approach amounts to a selective reading of the trust deed. The objects are neither incidental recitals nor objects introduced subsequently. They form part of the operative object clause itself.
23. The material placed before us also indicates that the objects were not merely formal declarations. The approval dated 16.12.2013 issued under the scheme for allocation of discretionary funds at the disposal of the Hon’ble Chief Minister of Haryana records the sanction of a grant of Rs.31,00,000/- to “Shri Veer Teja Jat Vishram Greh, Nokha, District Bikaner, Rajasthan” for construction of the building of the Vishram Graha. This governmental approval lends corroboration to the existence and implementation of the construction project.
24. The subsequent assessment record for assessment year 2015-16 is also relevant in evaluating the genuineness of the activity. In the assessment order dated 30.08.2017, the AO recorded that the assessee produced its cash book, ledger, bank statements, receipt books, bills, vouchers, and other supporting documents, which were test-checked. The AO further recorded the assessee’s explanation that it was constructing a dharamshala at Nokha for the benefit of the public at large and that an amount of Rs.11,26,216/- had been incurred on such construction. The AO did not reject the books, dispute the construction, or hold that the expenditure was unsupported or non-genuine. The exemption was denied only because registration under section 12AA had not been granted.
25. The learned CIT(E) relied upon Agrawal Sabha v. CIT [2014] 45 taxmann.com 273/[2014] 223 Taxman 353 (Allahabad). That decision was rendered in materially different circumstances. In that case, the dominant object was found to be the benefit of the Agrawal community, substantial expenditure had been incurred on Shri Maharaja Agrasen Jayanti, and there was no evidence of any activity of general public utility. The Hon’ble High Court specifically noticed that “absolutely no documentary evidence was furnished” regarding use of the dharamshala by persons outside the concerned community.
26. The present case stands on a different factual foundation. The operative object clause is expressly directed towards the rural community and contains several distinct objects concerning education, medical aid, relief of poverty, assistance to vulnerable persons, environmental protection, and relief during natural calamities. Further, the governmental grant approval and the subsequent assessment proceedings provide material evidencing actual construction activity. The decision in Agrawal Sabha is, therefore, distinguishable on both the scope of the objects and the evidentiary record.
27. The decision in Gowri Ashram v. DIT (Exemptions) [2013] 356 ITR 328 (Madras) is also distinguishable. In that case, the assessee was governed by a court-framed Scheme Award and its controlling object was to provide facilities for marriages and auspicious functions of “The Telugu Beri Vysia Community primarily”. The wider objects relied upon by that assessee had been introduced later and had not been approved by the court which framed the governing scheme. The Hon’ble High Court, therefore, held that the subsequently expanded objects could not be acted upon until incorporated in the Scheme Award.
28. In the present case, the wider charitable objects are contained in the operative trust deed itself. There is no material suggesting that they were subsequently introduced, that they lack legal efficacy, or that approval of any court or other authority was required before they could be pursued. The ratio of Gowri Ashram does not apply to the materially different objects and governing instrument before us.
29. The principle that an object beneficial to an identifiable section of the public may constitute an object of general public utility was stated by the Hon’ble Supreme Court in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC). The Hon’ble Supreme Court observed:
“It is well settled by now and the High Court also has rightly taken that view that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present.”
30. On a plain reading of the operative object clause, we find that the charitable beneficiaries are not confined to that community. The assessee’s case is thus sustainable on the wider and independent objects contained in its governing instrument.
31. At the stage of registration under section 12AA, the authority was required to examine the charitable nature of the objects and the genuineness of the activities. The impugned order proceeds substantially upon an isolated reading of the historical narration and the dharamshala object, without giving due effect to the remaining operative objects. The finding that the activities were not genuine was drawn primarily from the nature and quantum of expenditure reflected in the accounts. Mere predominance of administrative expenditure or accumulation of income in the initial period, without any finding that the accounts were false or that the stated activities were fictitious, could not by itself justify the conclusion that the activities were not genuine. The subsequent verified construction activity further militates against such a conclusion.
32. In view of the foregoing discussion, we hold that the objects of the assessee, read as a whole, are charitable within the meaning of section 2(15) and are not confined exclusively to members of a particular caste or community. The material on record also does not justify the finding that its activities were non-genuine. Accordingly, the order dated 23.03.2015 passed by the learned CIT(E) under section 12AA(1)(b) is set aside. The learned CIT(E) is directed to grant registration to the assessee under section 12AA with effect from 15.09.2014, being the date of the application. ITA No. 269/Jodh/2016 is accordingly allowed.
33. We now take up ITA No. 698/Jodh/2025 for assessment year 2015-16. The AO denied exemption under sections 11 and 12 solely because the assessee had not been granted registration under section 12AA. The learned CIT(A) sustained the denial on the same basis. Since we have directed the learned CIT(E) to grant registration with effect from 15.09.2014, the very foundation upon which the exemption was denied no longer survives.
34. The assessment record shows that the assessee claimed revenue expenditure of Rs.1,86,597/- and capital expenditure of Rs.11,26,216/- towards construction of the Vishram Graha. Capital expenditure incurred for acquiring or constructing an asset for carrying out the charitable objects is liable to be considered as application of income, subject to verification that the expenditure was actually incurred and was applied towards the objects of the Trust.
35. We, therefore, set aside the impugned order dated 17.06.2025 and restore the computation of income to the file of the AO. The AO is directed to recompute the income of the assessee after giving effect to the registration granted under section 12AA and after allowing the exemption admissible under sections 11 and 12 in accordance with law. While doing so, the AO shall examine the nature, amount, and supporting evidence relating to the expenditure claimed by the assessee. The capital expenditure shall be treated as application of income to the extent it is found to have been actually incurred towards construction of the Vishram Graha or otherwise in furtherance of the objects of the Trust.
36. The AO shall confine the verification to the actual incurrence of the expenditure, its quantum, and its nexus with the objects of the Trust. The AO shall not revisit the entitlement of the assessee to registration or the charitable character of its objects, which stand concluded by our decision in ITA No. 269/Jodh/2016. A reasonable opportunity of being heard shall be afforded to the assessee before completing the recomputation.
37. In view of the aforesaid directions, the direction of the learned CIT(A) requiring the AO to examine the applicability of the maximum marginal rate does not survive independently and shall be reconsidered as part of the fresh computation in accordance with the statutory consequences flowing from the grant of registration and the exemption admissible under sections 11 and 12.
38. ITA No. 698/Jodh/2025 for assessment year 2015-16 is accordingly allowed for statistical purposes.
39. In the result, ITA No. 269/Jodh/2016 is allowed and ITA No. 698/Jodh/2025 is allowed for statistical purposes.
Order pronounced on 25.08.2026.
