Vardhman Sadhumargi Sthanakvasi Jain Shravak Sangh Vs CIT (Exemption) (ITAT Jodhpur)
Summary: The ITAT Jodhpur set aside the order dated 26.06.2025 rejecting the application of Vardhman Sadhumargi Sthanakvasi Jain Shravak Sangh for regular registration under section 12AB and restored the matter to the CIT(E) for fresh adjudication. The assessee had applied in Form No. 10AB on 12.12.2024. The CIT(E) considered certain objects to be restricted to the Jain community and relied on section 13(1)(b) and clause (d) of the Explanation below section 12AB(4). A resolution proposing amendments to the objects was not treated as an effective amendment because approval or registration by the competent authority had not been established. The Tribunal held that examination of the objects is expressly contemplated at the registration stage, but this differs from determining exemption under sections 11 and 12 for a particular year. The specified violation relied upon contemplated actual application of income, whereas the rejection order identified no specific expenditure, activity or beneficiary showing exclusive application for the Jain community.
Assistance to helpless and needy persons retained its charitable character, although restrictions on beneficiaries could affect exemption at assessment. The Tribunal agreed that a proposal alone could not amend the registered deed. It also found that the CIT(E) had not completed an independent examination of the full objects, genuineness of activities and compliance with other laws. On remand, the assessee must furnish the current amendment status, approvals, deed, activity details, accounts and beneficiary evidence. The CIT(E) must pass a speaking order after a reasonable hearing. Registration was not finally granted, and the appeal was allowed for statistical purposes.
Cases Discussed
- (2002) 254 ITR 212 (SC) — CIT v. Palghat Shadi Mahal Trust — Supreme Court — relied upon by the CIT(E) for rejection; discussed by the Tribunal in relation to the legal efficacy of a resolution proposing amendment of trust objects.
- (2014) 364 ITR 31 (SC) — CIT v. Dawoodi Bohara Jamat — Supreme Court — relied upon by the CIT(E); the Tribunal applied its explanation that section 13 operates at the exemption-claim stage and referred to its discussion of trust-deed amendments.
- (2020) 426 ITR 340 (SC) — Ananda Social and Educational Trust v. CIT — Supreme Court — cited by the assessee concerning examination of genuinely charitable objects and proposed activities at registration.
- (1990) 185 ITR 634 (All.) — Fifth Generation Education Society v. CIT — Allahabad High Court — cited by the assessee for the proposition that application of income should not be examined at registration.
- (1965) 55 ITR 722 (SC) — CIT v. Andhra Chamber of Commerce — Supreme Court — relied upon by the assessee in support of its submissions on charitable purpose and benefit to the public.
- (1994) 205 ITR 96 (All.) — CIT v. Bhartiya Khatri Sewa Trust — Allahabad High Court — relied upon by the assessee in support of its challenge to denial of registration.
- (1971) 82 ITR 704 (SC) — Ahmedabad Rana Caste Association v. CIT — Supreme Court — cited by the assessee and applied by the Tribunal for the charitable character of a purpose benefiting an identifiable section of the public.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
This appeal by the assessee is directed against the order dated 26.06.2025 passed by the learned Commissioner of Income Tax (Exemption), Jaipur [“CIT(E)”], in Form No. 10AD, rejecting the assessee’s application for registration made under section 12A(1)(ac)(vi), item (B), of the Income-tax Act, 1961 [“the Act”], in exercise of the powers conferred under section 12AB(1) (b) (ii) (B)(II) of the Act. 2. The grounds of appeal raised by the assessee are:
2. The grounds of appeal raised by the assessee are:
1.a. Theld. CIT(E) has erred in rejecting the application made for registration of trust u/s 12A of the Act.
b. The order so passed is bad in law and bad on facts.
c. Theld. CIT(E) has erred in not appreciating the amendments being already made and submitted to the concerned authorities.
2. The appellant crave liberty to add, amend, alter, modify, delete any of the ground of appeal on or before its hearing before your honours.
3. The assessee filed an online application on 12.12.2024 in Form No. 10AB seeking regular registration under section 12A(1)(ac)(vi), item (B), of the Act. As recorded in the impugned order, the assessee was originally registered as a society with the Registrar of Societies and was subsequently registered under the Rajasthan Public Trust Act, 1959 on 18.10.2024, after revision of its earlier deed of constitution. The assessee claimed its character to be that of a charitable-cum-religious institution.
4. For examining the application, the CIT(E) issued a questionnaire dated 21.02.2025, requiring compliance by 10.03.2025. The assessee furnished its reply, which was examined by the CIT(E). Thereafter, a show-cause notice dated 27.05.2025 was issued, requiring compliance by 02.06.2025.
Upon examination of the further reply, the CIT(E) noticed certain discrepancies and issued another show-cause notice dated 19.06.2025, requiring compliance by 20.06.2025. The impugned order records that the assessee responded through email. The table incorporated in the impugned order refers to an email dated 23.06.2025, whereas the subsequent discussion refers to an email addressed to the Devasthan Department on 25.06.2025.
5. On examination of the objects contained in the deed, the CIT(E) observed that some objects as referred to in the impugned order, were connected with and restricted to the Jain community. According to the CIT(E), the charitable benefits contemplated under these objects were intended wholly or substantially for members of that particular religious community. The CIT(E) also noticed objects relating to services to Jain saints and preservation and promotion of the Jain community and its religious institutions. The CIT(E), while issuing the show-cause notice dated 19.06.2025, specifically required the assessee to explain why the application should not be rejected in view of section 13(1)(b) of the Act and clause (d) of the Explanation below section 12AB(4) of the Act.
6. In response, the assessee furnished a resolution or proposal dated 20.06.2025 seeking to amend certain objects by replacing references to the Jain community with expressions such as A copy of the proposed amendment and an email addressed to the Devasthan Department were also furnished.
7. The CIT(E) held that the document submitted by the assessee represented only a proposal adopted by its office-bearers and could not be treated as an effective amendment of the deed until the proposed amendments were approved and registered by the competent authority under the Rajasthan Public Trust Act, 1959. The CIT(E) further observed that the assessee had obtained registration under the Rajasthan Public Trust Act on 18.10.2024 on the basis of the original objects and had continued to function under those objects until the resolution dated 20.06.2025.
8. The CIT(E) consequently held that the assessee had been constituted and had functioned for the benefit of the Jain community. Relying upon section 13(1)(b), clause (d) of the Explanation below section 12AB(4), and the decisions of the Hon’ble Supreme Court in CIT v. Palghat Shadi Mahal Trust [(2002) 254 ITR 212 (SC)] and CIT v. Dawoodi Bohara Jamat[(2014) 364 ITR 31 (SC)], the CIT(E) rejected the application by the order dated 26.06.2025.
9. Before us, the learned Authorised Representative (AR) submitted that the denial of registration merely because some of the objects referred to the Jain religion was contrary to the scheme of the Act. It was contended that the CIT(E) had selected a few clauses without construing the deed as a whole.
10. The learned AR submitted that the assessee had drawn inspiration from the teachings and philosophy of Jainism. However, the activities contemplated under the deed included promotion of non-violence, compassion, ethical living, education, medical relief, animal welfare, environmental protection, humanitarian service and public welfare. These were universally accepted values and fell within the meaning of “charitable purpose” under section 2(15) of the Act.
11. It was submitted that the charitable activities of the assessee were not confined to the followers of Jainism and that the members of the general public, irrespective of their religion or community, were eligible to receive the benefits. According to the learned AR, preservation or dissemination of Jain philosophy and culture would not, by itself, establish that the assessee had been created exclusively for the benefit of a particular religious community.
12. The learned AR further submitted that the assessee had initiated amendment of the objects and had forwarded the relevant resolution and proposed amendments to the competent authority. The CIT(E), therefore, ought not to have rejected the application by proceeding on the assumption that the proposed amendments would not attain finality.
13. Without prejudice, the learned AR submitted that the inquiry at the stage of registration under section 12AB was confined to the charitable nature of the objects and the genuineness of the activities. The applicability of section 13(1)(b) was required to be examined by the Assessing Officer during assessment with reference to the actual application of income in the relevant previous year.
14. Reliance was placed upon Ananda Social and Educational Trust v. CIT [(2020) 426 ITR 340 (SC)], wherein the Hon’ble Supreme Court explained that the Commissioner is required to examine whether the objects are genuinely charitable and whether the proposed activities accord with those objects. Reliance was also placed upon Fifth Generation Education Society v. CIT [(1990) 185 ITR 634 (All.)], wherein it was observed that at the stage registration, it is not proper to examine the application of income. The learned AR further relied upon CIT v. Andhra Chamber of Commerce [(1965) 55 ITR 722 (SC)], CIT v. Bhartiya Khatri Sewa Trust [(1994) 205 ITR 96 (All.)] and Ahmedabad Rana Caste Association v. CIT [(1971) 82 ITR 704 (SC)]. In Ahmedabad Rana Caste Association, the Hon’ble Supreme Court observed that an object beneficial to a section of the public is an object of general public utility.
15. On the above basis, the learned AR prayed that the impugned order be set aside and the CIT(E) be directed to grant registration to the assessee.
16. The learned DR relied upon the impugned order. He invited our attention to page 4 thereof, wherein the relevant objects of the assessee had been reproduced. The learned DR particularly referred to the following object:
17. The learned DR submitted that this object expressly restricts the intended beneficiaries to helpless or needy persons belonging to the Jain community. He contended that this was not a mere reference to the source of inspiration or to Jain philosophy, but a substantive restriction governing the class of beneficiaries.
18. The learned DR accordingly submitted that the CIT(E) was justified in concluding that the assessee was constituted wholly or substantially for the benefit of a particular religious community and in rejecting the application under section 12AB of the Act.
19. We have considered the rival submissions and perused the material available on record. The short controversy before us is whether the CIT(E) was justified in rejecting the application for registration solely on the ground that some objects contained in the deed restricted the intended beneficiaries to the Jain community and consequently attracted section 13(1)(b) and clause (d) of the Explanation below section 12AB(4) of the Act.
20. The application was made under section 12A(1)(ac)(vi), item (B), after commencement of the activities. Section 12AB(1)(b) authorises the CIT(E) to call for documents and information and to make inquiries for satisfying himself regarding the genuineness of the activities and compliance with requirements of other laws material to the achievement of the objects. The CIT(E) is also required to record his satisfaction regarding the objects of the institution.
21. We are, therefore, unable to accept the proposition, if stated in absolute terms, that the CIT(E) cannot examine the objects of the institution at the registration stage. Examination of the objects is expressly contemplated by section 12AB. At the same time, such examination cannot be equated with the determination of the allowability of exemption under sections 11 and 12 for a particular year.
22. In CIT v. Dawoodi Bohara Jamat [(2014) 364 ITR 31 (SC)], the Hon’ble Supreme Court explained the stage at which section 13 becomes operative in the following words:
“The examination of its applicability would only arise at the stage of claim under Sections 11 or 12.” (para 42)
23. Clause (d) of the Explanation below section 12AB(4), as applicable to the proceedings, treats it as a specified violation where an institution established for charitable purposes after commencement of the Act “has applied any part of its income” for the benefit of a particular religious community or caste. The statutory expression contemplates actual application of income. The scheme of section 12AB(4) also indicates that the provision operates where, after registration, the occurrence of a specified violation is noticed during a previous year.
24. In the present case, the CIT(E) has drawn an inference from the objects and from the fact that the assessee functioned under those objects until the resolution dated 20.06.2025. However, the impugned order does not identify any specific expenditure, application of income, activity or beneficiary demonstrating that any part of the income was, in fact, applied exclusively for the benefit of the Jain community. A mere possibility of future application of income in a manner attracting section 13(1)(b) cannot be equated with the occurrence of the specified violation contemplated by clause (d) of the Explanation below section 12AB(4).
25. We have also considered the specific object highlighted by the learned DR, namely, “जैन समाज के असहाय ोंक यथा शक्ति तन मन धन से सहायता पहुँचाना”. The clause undoubtedly refers to needy persons belonging to the Jain community. This aspect cannot be ignored. Nevertheless, assistance to helpless and needy persons is, in its essential character, an object of relief to the poor. The restriction concerning the class of beneficiaries may have consequences under section 13(1)(b) when exemption is examined with reference to the application of income. It does not, by itself, convert the nature of the activity from charitable to non- charitable for the limited purpose of examining registration.
26. In Ahmedabad Rana Caste Association, the Hon’ble Supreme Court recognised that a purpose beneficial to an identifiable section of the public can retain its charitable character. The distinction between charitable character and the statutory restriction upon exemption under section 13(1)(b) must, therefore, be maintained. The former concerns the nature of the object, whereas the latter concerns eligibility for exemption under sections 11 and 12.
27. We now advert to the proposed amendment relied upon by the assessee. We agree with the CIT(E) to the limited extent that a mere resolution or proposal submitted to the competent authority cannot automatically be treated as an operative amendment of a deed registered under the Rajasthan Public Trust Act, 1959. Until the amendment is approved or registered in accordance with the applicable law, the existing registered deed continues to govern the objects of the institution.
28. The above principle also finds support from Palghat Shadi Mahal Trust. While explaining the said decision, the Hon’ble Supreme Court in Dawoodi Bohara Jamat noticed that the resolution clarifying the object would not validly amend the object of the trust-deed(para 47).
29. Thus, the CIT(E) was justified in not treating the proposal dated 20.06.2025 as an accomplished amendment. However, the present status of that proposal and whether the amended objects have since been approved and registered by the competent authority are not available on record. The legal efficacy and operative date of the proposed amendments require verification.
30. We further find that, after recording his conclusion concerning the Jain community, the CIT(E) rejected the application without completing an independent examination of the genuineness of the activities, the full body of the objects and compliance with other laws, as contemplated by section 12AB(1)(b). In these circumstances, a direction for immediate grant of registration would not be appropriate. At the same time, the rejection of the application solely by invoking section 13(1)(b) and clause (d) of the Explanation below section 12AB(4), without identifying actual application of income constituting the alleged specified violation, cannot be sustained.
31. We, therefore, set aside the impugned order dated 26.06.2025 and restore the application to the file of the CIT(E) for fresh adjudication in accordance with law. The assessee shall place before the CIT(E)the present status of the amendments proposed by the resolution dated 20.06.2025; the amended deed, if duly approved or registered; documentary evidence regarding approval or registration by the competent authority; a complete note on the activities carried out by the assessee; the relevant books of account and evidence concerning the beneficiaries and such further material as may be required for examination under section 12AB.
32. The CIT(E) shall determine the legal efficacy and operative date of the amendments and shall examine the complete deed, the genuineness of the activities and compliance with the applicable laws. The application shall not be rejected merely on the possibility that section 13(1)(b) may become applicable in a subsequent assessment. If the material demonstrates actual occurrence of any specified violation or furnishes any other legally sustainable ground under section 12AB, the CIT(E) shall be at liberty to deal with the same in accordance with law after confronting the relevant material to the assessee.
33. Needless to state, the assessee shall be afforded a reasonable opportunity of being heard. The CIT(E) shall pass a speaking order uninfluenced by his earlier conclusion. We have not expressed any final opinion regarding the assessee’s entitlement to registration.
34. Ground No. 1 is accordingly allowed for statistical purposes. Ground No. 2 is general and does not require separate adjudication.
35. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 04.09.2026.
