TRUST FOR THE BENEFIT OF PARTICULAR GROUP AND NOT GENERAL PUBLIC NOT ENTITLED FOR REGISTRATION
Ahmedabad ITAT holds registration under Section 12AB not permissible if charitable activities are restricted to specific society members
A charitable trust claiming tax exemption cannot operate as a private club for a specific group — that’s the clear message from a recent decision by the Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT). The case of Dwarika Greens Foundation vs. CIT (Exemption) emphasizes that trusts created for the benefit of a closed group or particular society members are not eligible for registration under Section 12AB of the Income-tax Act, 1961.
In this case, the Dwarika Greens Foundation sought registration under Section 12AB, claiming to pursue charitable purposes. However, on scrutiny, it was found that all the objectives and benefits of the trust were exclusively for the residents of “Dwarika Green Society”, making it a trust for a particular group rather than the general public.
Violation of Section 12AB(4) and Section 13(1)(b)
The CIT (Exemption) rejected the application on the grounds that it violated clause (d) of the Explanation to Section 12AB(4), which states that registration can be cancelled if a trust’s income is applied for the benefit of a particular religious community or caste. In this case, though not religious, the trust’s operations were limited to a select group—which defeats the purpose of general public benefit required for a charitable institution.
Additionally, the Tribunal highlighted the role of Section 13(1)(b), which excludes the benefit of Sections 11 and 12 to trusts established after the commencement of the Act if their income benefits **any particular community
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