The Gujarat High Court has held that the Compliance of the Section 13 of the Income Tax Act to be tested at Assessment Stage and not at the time of registration.
Section 13 acts as a safeguard provision under the Income-tax Act. While Sections 11 & 12 grant tax exemptions to charitable or religious trusts, Section 13 withdraws those exemptions if certain conditions are violated.
The bench of Justice Bhargav D. Karia and Justice Pranav Trivedi has observed that the question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant only when income of the trust is assessed in terms of Section 11, however, at the time of disposing of application of a trust seeking registration, Commissioner has to merely decide whether said trust has fulfilled necessary requirements of registration as provided under Section 12A of the Act or not.
The respondent assessee filed an application for grant of registration of the Trust under Section 12AB of the Act on 21.12.2022 in Form No. 10AB.
The CIT (Exemption), Ahmedabad rejected the application filed by the respondent assessee by order dated 28.6.2023 on the ground that the objects of the Trust are restricted to the benefit of a particular religious community or caste i.e. “Leuva Patel Community”.
The respondent assessee preferred an appeal before the Tribunal and contended that it is a settled law that as per Section 13(1)(b) of the Act, though benefit of provisions of Sections 11 and 12 of the Act are not available to the income of the Trust, if such Trust or institution is created or established for the benefit of any particular religious, community or caste, however, the provision of Section 13 would be applicable at the assessment stage and the CIT (Exemption) could not have rejected the application for registration of the Trust.
The court held that “Leuva Patel Community” consists mainly of agriculturists and, therefore, such community cannot be dubbed as a “religious community”.
The Gujarat High Court dismissed the department’s appeal and reaffirmed that eligibility under Section 12AB must be judged on statutory criteria for registration alone.
Case Details
Case Title: The Commissioner Of Income Tax (Exemption) Ahmedabad Versus Bhojaram Leuva Patel Seva Samaj Trust
Case No.: R/TAX APPEAL NO. 1082 of 2024
Date: 08/09/2025
Counsel For Petitioner: MAITHILI D MEHTA
