Rejection on ‘Community-Benefit’ Ground Unsustainable Without Evidence: ITAT Restores Trust’s 12AB and 80G Applications for Fresh Adjudication [Read Order]

The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) has remanded two connected appeals filed by assessee, after holding that the Commissioner of Income Tax (Exemption), Ahmedabad, erred in concluding that the trust was created exclusively for the benefit of the Jain community and in treating its activities as non-charitable.

The Bench directed the CIT(E) to grant the assessee a fresh opportunity to furnish complete documentary evidence and thereafter re-examine the trust’s eligibility for registration under Section 12AB and approval under Section 80G(5)(iii) of the Income-tax Act, 1961.

The assessee, Jito Gandhidham Chapter, had filed Form 10AB seeking registration under Section 12A(1)(ac)(iii), and approval under Section 80G(5)(iii). During processing, the CIT(E) issued notices pointing out that certain objects in the Memorandum of Association appeared to be framed for the benefit of the Jain community, which is a specific religious community.

The CIT(E) further found that expenditure towards box cricket activities appeared commercial in nature, arbitration-related objects were trade-specific, and no evidence was produced to show activities benefiting the general public.

Accordingly, the CIT(E) rejected both 12AB registration and 80G approval and cancelled the provisional 80G recognition.

The assessee contended that the trust’s objects, in essence, were for the welfare of the general public and not confined to the Jain community and no expenditure had been incurred on any activity benefiting a specific community. Further, no arbitration services were actually carried out. Therefore, neither Section 12AB nor Section 80G(5) had been violated.

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The Departmental Representative argued that box cricket and arbitration-related activities were commercial and non-charitable. It was maintained that the assessee failed to furnish documentary evidence in response to notices. Hence, the CIT(E)'s rejection was justified.

After examining the record and submissions, the ITAT Bench comprising Dr. Arjun Lal Saini (Accountant Member) and Dinesh Mohan Sinha (Judicial Member) observed that the majority of objects of the trust were general in nature, intended for the benefit of the public at large.

The Tribunal noted that although certain objectives mentioned by the CIT(E) referenced the Jain community, no expenses were actually incurred on such objects. Therefore, there was no violation of the Explanation to Section 12AB.

The Tribunal accepted the assessee's explanation that the box cricket event was organised to promote sports and health which is charitable in nature and not a profit-oriented venture.

The ITAT also noted that the assessee could not provide all supporting documents such as bills, vouchers, ledgers, and detailed activity records. Given that these documents were essential for a conclusive examination, the Bench held that the assessee deserved one more opportunity.

The ITAT set aside the CIT(E)'s orders, remanding the matter and directing the CIT(E) to re-examine all documentary evidence afresh and grant the assessee adequate opportunity of being heard. If satisfied that the conditions of Section 12AB and Section 80G(5)(iii) are met, the CIT(E) was ordered to grant the respective registration and approval.

Hence, both appeals were allowed for statistical purposes.