Gujarat High Court
The Commissioner Of Income Tax … vs Rotary International District 3054 … on 23 June, 2026
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/415/2025 JUDGMENT DATED: 23/06/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 415 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
No
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THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), AHMEDABAD
Versus
ROTARY INTERNATIONAL DISTRICT 3054 CHARITABLE TRUST
================================================================
Appearance:
MR AMAN MIR(10881) for the Appellant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 23/06/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Standing Counsel
Mr.Aman Mir for the appellant.
2. By this Appeal under Section 260A of the
Income Tax Act, 1961 (for short ‘the Act’),
the appellant-Revenue has proposed the
following substantial questions of law,
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arising out of the order dated 26th November,
2024 passed by the Income Tax Appellate
Tribunal, ‘B’ Bench Ahmedabad (for short ‘the
Tribunal’) in ITA No.844 of 2023 :
“(i) Whether on the facts and in
circumstances of the case, the Hon’ble
Tribunal is justified in holding that
one-time fund raising programme carried
out by the assessee trust was not an
organised activity in the nature of
business ignoring the fact that a major
portion of the funds so raised were
spent by the assessee for developing
software for lottery process.
(ii) Whether on the facts and in the
circumstances of the case and in law,
the Honble ITAT has etred in ignoring
the amendment brought in by Finance Act,
2022 w.c.f 01.04.2022 through which sub-
section (4) of Section 12AB was inserted
wherebv as per clause (b) below
explanation to sub section (4) of
section 12AB of Income-tax Act, 1961,
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having income from profits and gains of
business not incidental to the
attainment of its objectives has been
listed as a specified violation for
cancellation of registration of trust.
(iii) Whether on the facts and in the
circumstances of the case and in law,
the Hon’ble ITAT has erred by not
appreciating that registration can not
be granted to a trust or institution
which is found to be carrying out
specified violation at the time of
application since that would imply
giving registration to an entity whose
registration is liable to be cancelled.
(iv) Whether on the facts and in the
circumstances of the case and in law,
the Hon’ble ITAT has erred by not
appreciating that registration is pre-
requisite and essential condition for
claiming exemption and all the exemption
provisions are to be strictly
interpreted as held by Hon’ble Supreme
Court in Commissioner of Customs
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(Import), Mumbai Vs M/s Dilip Kumar &
Company and therefore allowing
registration even in cases where there
is a specified violation mean the most
liberal interpretation of the exemptions
provision against the ratio laid down by
Hon’ble Supreme Court in the case
referred.
3. The brief facts of the case are as under :
3.1. The respondent-assessee is a public
charitable trust, which came into existence on
24th September, 2020, and is registered under
the provisions of the Bombay Public Trust Act,
1950 with the Charity Commissioner, Ahmedabad.
3.2. The Commissioner of Income Tax
(Exemption) (for short ‘CIT(E)’) by order
dated 27th May, 2021 granted the provisional
registration to the respondent-assessee for
the Assessment Years 2020-21 to 2023-24.
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3.3. The respondent-assessee filed Form
No.10AB on 5th April, 2023 for final
registration under Section 12AB of the Act.
However, the said application in Form 10AB was
rejected by the CIT(E) vide order dated 29th
August, 2023 on the ground that the fund
raising programmes carried out by the
assessee-trust by way of coupon sales and mega
lucky draw were in the nature of business
activities, which is not identical to carry
out the object of the trust and therefore,
there is violation of the conditions specified
in Section 12AB(4) of the Act. The CIT(E)
therefore, denied the registration under
Section 12AB of the Act and also cancelled the
provisional registration granted to the
assessee-trust.
3.4. Being aggrieved, the assessee-trust
preferred an Appeal before the Tribunal. The
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Tribunal, after considering the submissions
made on behalf of the assessee-trust relied
upon the decision of this Court in case of The
Commissioner of Income Tax (Exemption) Versus
United Way of Baroda in Tax Appeal No.95 of
2020 dated 25th February, 2020, wherein, it is
held that conducting Garba activity could not
be termed as business activity, trade or
commerce as occurring in the first provisio to
Section 2(15) of the Act. The Tribunal
therefore, following the aforesaid decision of
this Court, held that holding a one-time fund
raising programmee carried out by the
assessee-trust is not an organised activity in
the nature of business akin to selling of
lottery tickets since the surplus funds were
invested in buying medical equipment and
established Blood Bank and Skin Bank at
various parts of Gujarat and Rajasthan and
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there is no question of violation of
provisions of Section 12AB(4) of the Act.
3.5. The Tribunal also held that the
provisions of Section 13 of the Act also could
not be applicable while deciding as to whether
the registration under Section 12AB of the Act
is to be granted or not, as provisions of
Section 13(1)(b) of the Act would be
applicable only at the time of assessment and
not at the time of registration. The Tribunal
referred to and relied upon the decision in
case of Malik Hasmullah Islamic Educational
and Welfare Society Versus Commissioner of
Income Tax reported in [2012] 24 taxmann.com
93/138 ITD 519 (Lucknow) as well as the
decision of this Court in case of CIT
(Exemption) Versus Bayath Kutchhi Dasha Oswal
Jain Mahajan Trust reported in (2016) 74
taxmann.com 199 (Gujarat), wherein, on the
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issue of denial of grant of registration under
Section 12A of the Act, by invoking Section
13(1)(b) of the Act, was held to be not legal
and it was categorically held that the
provisions of Section 13 of the Act would be
applicable at the time of assessment and not
at the time of granting of registration.
4. It would therefore be germane to refer to
Section 12AB(4) of the Act, which reads as
under :
“12AB(4):Where registration or
provisional registration of a trust or
an institution has been granted under
clause (a) or clause (b) or clause (c)
of sub-section (1) or clause (b) of sub-
section (1) of section 12AA, as the case
may be, and subsequently,–
(a)the Principal Commissioner or
Commissioner has noticed occurrence
of one or more specified violationsPage 8 of 18
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during any previous year; or
(b)the Principal Commissioner or
Commissioner has received a
reference from the Assessing Officer
under the second proviso to sub-
section (3) of section 143 for any
previous year; or
(c)such case has been selected in
accordance with the risk management
strategy, formulated by the Board
from time to time, for any previous
year, the Principal Commissioner or
Commissioner shall–
(i)call for such documents or
information from the trust or
institution, or make such inquiry
as he thinks necessary in order
to satisfy himself about the
occurrence or otherwise of any
specified violation;
(ii)pass an order in writing,
cancelling the registration of
such trust or institution, after
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affording a reasonable
opportunity of being heard, for
such previous year and all
subsequent previous years, if he
is satisfied that one or more
specified violations have taken
place;
(iii)pass an order in writing,
refusing to cancel the
registration of such trust or
institution, if he is not
satisfied about the occurrence of
one or more specified violations;
(iv)forward a copy of the order
under clause (ii) or clause
(iii), as the case may be, to the
Assessing Officer and such trust
or institution.”
5. This Court in case of United Way of Baroda
(Supra), while considering the issue on merits
as to whether conducting of Garba activity
would amount to business activity or not, has
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held as under :
“13. Prior to the introduction of the
Proviso to Section 2(15) of the Act,
there was no dispute that the assessee
herein was established for charitable
purposes and, therefore, its income was
not to be included in the total income
and was, therefore, granted the benefit
of exemption. The income received by
the assessee is from organizing the
event of Garba by sale of tickets and
also leasing out food and beverages
outlets at the venue of the event.
However, the dominant and main object
of the assessee cannot be said to be
organizing the event of Garba. The
charitable activities which the
assessee has been undertaking has been
discussed by the Appellate Tribunal. We
take notice of the fact that the
assessee has been supporting 120 non-
government organizations. The assessee
is into health and human services for
the purpose of improving the quality of
life in the society. The objectives ofPage 11 of 18
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the Society includes mobilizing
resources from the local communities.
It organizes medical camps for
thalassemia affected children. It also
provides vocational training to the
disabled orphans, undertakes various
program for empowering women including
providing midday meal to the poor
students. The activities like
organizing the event of Garba including
the sale of tickets and issue of passes
etc. cannot be termed as business. The
two authorities have taken the view
that the profit making is not the
driving force or the objective of the
assessee. This is indicative of the
fact that any income generated by the
assessee from events like Garba does
not find its way into the pockets of
any individual or entities. It is to be
utilized fully for the purposes of the
objects of the assessee. As held in
many pronouncements, the expression
“trade”, “commerce’ and “business” as
occurring in the first Proviso to
Section 2(15) of the Act must be readPage 12 of 18
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in the context of the intent and
purport of section 2(15) of the Act and
cannot be interpreted to mean any
activity which is carried on in an
organized manner. The purpose and the
dominant object for which an
institution carries on its activities
is material to determine whether the
same is business or not. The object of
introducing the first proviso is to
exclude the organizations which are
carrying on regular business from the
scope of “charitable purpose”. An
activity would be considered ‘business’
if it is undertaken with a profit
motive, but in some cases, this may not
be determinative. Normally, the profit
motive test should be satisfied, but in
a given case the activity may be
regarded as a business even when the
profit motive cannot be
established/proved. In such cases,
there should be evidence and material
to show that the activity has continued
on sound and recognized business
principles and pursued with reasonablePage 13 of 18
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continuity. There should be facts and
other circumstances which justify and
show that the activity undertaken is in
fact in the nature of business.”
6. The Tribunal, applying the aforesaid
decision to the facts of the present case,
held as under :
“6.2. Respectfully following the above
judicial precedents of the
Jurisdictional High Court, we have no
hesitation in holding that the one-time
fund raising programme carried out by
the assessee trust is not an organized
activities in the nature of business
akin to selling of lottery tickets.
Since the surplus were been invested in
buying medical equipment and
establishing Blood Bank and Skin Bank
at various parts of Gujarat and
Rajasthan. There is no question of
violation of Section 12AB(4) of the
Act. Thus we hereby set aside the order
passed by the Ld. CIT(E) and direct himPage 14 of 18
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to grant exemption u/s. 12AB of the
Act.
7. Further the provisions of Section 13
of the Act can be invoked only at the
time of assessment and not at the time
of grant of registration under Section
12A of the Act. In the case of
Bhojalram Leuva Patel Seva Samaj Trust
[2024] 162 taxmann.com 270 (Ahmedabad –
Trib.), the ITAT held that provisions
of section 13(1)(b) can be invoked only
at the time of assessment and not at
the time of grant of registration under
section 12A. Again, in the case of
Jamiatul Banaat Tankaria [2024] 160
taxmann.com 358 (Ahmedabad-Trib.), the
ITAT held that where objects of
assessee trust were primarily
charitable rather than favouring any
specific religious community, Ld.
CIT(E) was not justified in denying
registration under Section 12A, by
invoking Section 13(1)(b) as said
provision would be attracted only at
the time of assessment and not at thePage 15 of 18
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time of grant of registration. In the
case of Malik Hasmullah Islamic
Educational and Welfare Society, [2012]
24 taxmann.com 93/138 ITD 519
(Lucknow), the ITAT held that since
provisions of Sections 11, 12 and 13
are intended for exercise of
jurisdiction by an Assessing Officer in
an assessment proceedings, Commissioner
is not competent to invoke such
provisions for purpose of declining
registration under Section 12AA. In the
case of St. Joseph Academy 2014) 50
taxmann.com 216 (Hyderabad-Trib), the
ITAT held that provisions of Section 13
can be invoked by Assessing Officer,
while framing assessment and not by
Commissioner while considering
application for registration under
Section 12AA of the Act. Our view is
further supported by the decision of
the Hon’ble jurisdictional High Court
in the case of CIT (Exemptions) v.
Bayath Kutchhi Dasha Oswal Jain Mahajan
Trust 2016) 74 taxmann.com 199
(Gujarat) wherein on the issue ofPage 16 of 18
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denial of grant of registration us 12A
of the Act by invoking Section 13(1)(b)
of the Act, it was categorically held
that the provisions of Section 13 would
be attracted only at the time of
assessment and not at the time of grant
of registration.
8. In the case of United Way of Baroda
(cited supra) the Hon’ble High Court
held that sales of tickets for Garba
events during Navratri period does not
amount to “trade”, “commerce” and
“business” as occurring in the first
Proviso to Section 2(15) of the Act and
cannot be interpreted to mean any
activity which is carried on in an
organized manner. The purpose and the
dominant object for which an
institution carries on its activities
is material to determine whether the
same is business or not. Thus the
Hon’ble High Court held that denial of
exemption u/s. 11 during the assessment
proceedings is also held to be not
correct on sales of tickets for GarbaPage 17 of 18
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events. Thus the assessee cannot be
denied registration u/s. 12AB of the
Act.”
7. Considering the above findings of fact
arrived at by the Tribunal in light of the
decision of this Court, we are of the opinion
that no question of law, much less any
substantial question of law, arises from the
impugned order of the Tribunal.
8. The Appeal therefore, is accordingly
dismissed.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
PALAK
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