Our trust benefits one caste. Can that be a charitable purpose at all?
Yes. It is not necessary that the object benefit the whole of mankind or all persons in a country; it is enough that a section of the public, as distinguished from specified individuals, is intended to be benefited. The Supreme Court held that the members of the Rana caste of Ahmedabad — whether natives or admitted to the caste under custom or usage — are united by a quality that is impersonal, so they form a section of the public and the trust's objects were charitable.
Decided by the Supreme Court (Supreme Court of India; K.S. Hegde and A.N. Grover JJ (judgment delivered by Grover, J.)) on 1971-09-16, reported as (1971) 82 ITR 704 (SC). It bears on section 2(15), section 11, section 11(1)(a), section 4(3)(i) Indian Income-tax Act, 1922 of the Income Tax Act 1961, in Charitable Trusts & Exemption, Capital Gains Exemptions and How Tax Law Is Read matters.
Community and caste associations are refused registration every year on the footing that a closed class cannot be the public. This is the answer to that objection at the level of principle. It is not, however, an answer to s.13(1)(b), which is a different provision doing different work and which did not arise in this case: the years before the Court were 1960-61 to 1962-63 and the claim was made under s.4(3)(i) of the 1922 Act as well as s.11 of the 1961 Act.
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The Ahmedabad Rana Caste Association, an association of persons registered under the Bombay Public Trusts Act, held properties for the purposes set out in its constitution, among them the management of the movable and immovable properties of the Rana community of the city of Ahmedabad, acts to improve education in the community and medical help to the community. The Income-tax Officer held the objects not charitable. The Appellate Assistant Commissioner held some object clauses charitable and others not, and thought the class to be benefited vague and its number negligible. The Tribunal found the beneficiaries to be the Rana community, meaning natives of Ahmedabad and other community members accepted by the community according to old custom and staying in Ahmedabad - a well-defined cross-section of the public of Ahmedabad, put in the order at about 2,400 people - and allowed the exemption. On reference the Gujarat High Court, by its judgment of 25 July 1967 reported at [1968] 70 ITR 503, held that this class of beneficiaries did not constitute a well-defined section of the public connected by a common quality, because the second limb of it consisted of persons admitted by the caste under its old custom or usage, and answered the reference against the assessee. It decided the whole matter on that one point and left the other points undecided. The assessment years are 1960-61, 1961-62 and 1962-63, and exemption was claimed under s.4(3)(i) of the Indian Income-tax Act, 1922 and s.11 of the Income-tax Act, 1961.
The appeals by special leave were allowed and the answer returned by the High Court was discharged - but the Court did not itself answer the reference. The matters were remitted to the High Court to return the answer after determining the other points which had been left undecided, and the parties were left to bear their own costs. The appeals by certificate, C.A. Nos. 2146-2148 of 1968, were dismissed, the certificate being defective for want of reasons. On the point actually decided, the Court held that the members of the Rana caste or community of Ahmedabad form a section of the public: the common quality uniting the potential beneficiaries is membership of that caste or community, whether as natives or as persons admitted to it under custom or usage, and that quality is impersonal. The Court also recorded that under the 1922 Act a trust for the benefit of a particular religious community or caste was entitled to exemption, that the 1961 Act disentitles such a trust created on or after 1 April 1962, and that this trust having been created before that date the point did not arise.
An object beneficial to a section of the public is an object of general public utility; it is not necessary that the object benefit the whole of mankind or all persons in a country or State, and it is enough that the intention is to benefit a section of the public as distinguished from a specified individual. The Court noted that Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) had overruled the contrary view of Beaumont C.J. in Grain Merchants' Association of Bombay [1938] 6 ITR 427 (Bom.), while requiring that the section benefited be sufficiently defined and identifiable by a common quality of a public or impersonal nature. It adopted the formulation of Lord Greene M.R. in In re Compton: a trust is of a public character where the beneficiaries take not by virtue of their character as individuals but by virtue of membership of a specified class, the uniting quality being definable by reference to what each has in common with the others and being something into which their status as individuals does not enter. Applying that, the Court held the predominant content of the beneficiaries clause to be the fact of belonging to the Rana community of Ahmedabad, and that having to prove one's credentials according to the custom and usage of the community in order to be admitted does not introduce a personal element - where a question arises whether a person belongs to a caste, custom and usage must play a decisive part, and that does not detract from the impersonal nature of the common quality. The Court distinguished the kind of personal nexus fatal in Oppenheim v. Tobacco Securities Trust Co. Ltd., where the link between the beneficiaries was employment by particular employers. It also noted that the Gujarat translation point mattered: the constitution's Gujarati word Riwaj means custom or usage, not 'old rules' as the orders below had rendered it.
The common quality, therefore, uniting the potential beneficiaries into the class consists of being members of the Rana caste or community of Ahmedabad whether as natives or as being admitted to that caste or community under custom or usage.
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Handle my notice → Ask a CA on WhatsAppYes. It is not necessary that the object benefit the whole of mankind or all persons in a country; it is enough that a section of the public, as distinguished from specified individuals, is intended to be benefited. The Supreme Court held that the members of the Rana caste of Ahmedabad — whether natives or admitted to the caste under custom or usage — are united by a quality that is impersonal, so they form a section of the public and the trust's objects were charitable. This was decided by the Supreme Court (Supreme Court of India; K.S. Hegde and A.N. Grover JJ (judgment delivered by Grover, J.)) and bears on section 2(15), section 11, section 11(1)(a), section 4(3)(i) Indian Income-tax Act, 1922 of the Income Tax Act 1961. It is reported as (1971) 82 ITR 704 (SC). Community and caste associations are refused registration every year on the footing that a closed class cannot be the public. This is the answer to that objection at the level of principle. It is not, however, an answer to s.13(1)(b), which is a different provision doing different work and which did not arise in this case: the years before the Court were 1960-61 to 1962-63 and the claim was made under s.4(3)(i) of the 1922 Act as well as s.11 of the 1961 Act. If it applies to you, the first step is this: Frame the argument as the Court did — identify the common quality that unites the beneficiaries and show that it is impersonal, not a relationship to a named individual or family.
The Ahmedabad Rana Caste Association, an association of persons registered under the Bombay Public Trusts Act, held properties for the purposes set out in its constitution, among them the management of the movable and immovable properties of the Rana community of the city of Ahmedabad, acts to improve education in the community and medical help to the community. The Income-tax Officer held the objects not charitable. The Appellate Assistant Commissioner held some object clauses charitable and others not, and thought the class to be benefited vague and its number negligible. The Tribunal found the beneficiaries to be the Rana community, meaning natives of Ahmedabad and other community members accepted by the community according to old custom and staying in Ahmedabad - a well-defined cross-section of the public of Ahmedabad, put in the order at about 2,400 people - and allowed the exemption. On reference the Gujarat High Court, by its judgment of 25 July 1967 reported at [1968] 70 ITR 503, held that this class of beneficiaries did not constitute a well-defined section of the public connected by a common quality, because the second limb of it consisted of persons admitted by the caste under its old custom or usage, and answered the reference against the assessee. It decided the whole matter on that one point and left the other points undecided. The assessment years are 1960-61, 1961-62 and 1962-63, and exemption was claimed under s.4(3)(i) of the Indian Income-tax Act, 1922 and s.11 of the Income-tax Act, 1961. The matter was decided on 1971-09-16 by the Supreme Court (Supreme Court of India; K.S. Hegde and A.N. Grover JJ (judgment delivered by Grover, J.)). On those facts the Supreme Court held as follows. The appeals by special leave were allowed and the answer returned by the High Court was discharged - but the Court did not itself answer the reference. The matters were remitted to the High Court to return the answer after determining the other points which had been left undecided, and the parties were left to bear their own costs. The appeals by certificate, C.A. Nos. 2146-2148 of 1968, were dismissed, the certificate being defective for want of reasons. On the point actually decided, the Court held that the members of the Rana caste or community of Ahmedabad form a section of the public: the common quality uniting the potential beneficiaries is membership of that caste or community, whether as natives or as persons admitted to it under custom or usage, and that quality is impersonal. The Court also recorded that under the 1922 Act a trust for the benefit of a particular religious community or caste was entitled to exemption, that the 1961 Act disentitles such a trust created on or after 1 April 1962, and that this trust having been created before that date the point did not arise.
An object beneficial to a section of the public is an object of general public utility; it is not necessary that the object benefit the whole of mankind or all persons in a country or State, and it is enough that the intention is to benefit a section of the public as distinguished from a specified individual. The Court noted that Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) had overruled the contrary view of Beaumont C.J. in Grain Merchants' Association of Bombay [1938] 6 ITR 427 (Bom.), while requiring that the section benefited be sufficiently defined and identifiable by a common quality of a public or impersonal nature. It adopted the formulation of Lord Greene M.R. in In re Compton: a trust is of a public character where the beneficiaries take not by virtue of their character as individuals but by virtue of membership of a specified class, the uniting quality being definable by reference to what each has in common with the others and being something into which their status as individuals does not enter. Applying that, the Court held the predominant content of the beneficiaries clause to be the fact of belonging to the Rana community of Ahmedabad, and that having to prove one's credentials according to the custom and usage of the community in order to be admitted does not introduce a personal element - where a question arises whether a person belongs to a caste, custom and usage must play a decisive part, and that does not detract from the impersonal nature of the common quality. The Court distinguished the kind of personal nexus fatal in Oppenheim v. Tobacco Securities Trust Co. Ltd., where the link between the beneficiaries was employment by particular employers. It also noted that the Gujarat translation point mattered: the constitution's Gujarati word Riwaj means custom or usage, not 'old rules' as the orders below had rendered it. In the words reproduced by the source cited on this page: "The common quality, therefore, uniting the potential beneficiaries into the class consists of being members of the Rana caste or community of Ahmedabad whether as natives or as being admitted to that caste or community under custom or usage."
It was decided by the Supreme Court on 1971-09-16 and is reported as (1971) 82 ITR 704 (SC). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 2(15), section 11, section 11(1)(a), section 4(3)(i) Indian Income-tax Act, 1922, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals by special leave were allowed and the answer returned by the High Court was discharged - but the Court did not itself answer the reference. The matters were remitted to the High Court to return the answer after determining the other points which had been left undecided, and the parties were left to bear their own costs. The appeals by certificate, C.A. Nos. 2146-2148 of 1968, were dismissed, the certificate being defective for want of reasons. On the point actually decided, the Court held that the members of the Rana caste or community of Ahmedabad form a section of the public: the common quality uniting the potential beneficiaries is membership of that caste or community, whether as natives or as persons admitted to it under custom or usage, and that quality is impersonal. The Court also recorded that under the 1922 Act a trust for the benefit of a particular religious community or caste was entitled to exemption, that the 1961 Act disentitles such a trust created on or after 1 April 1962, and that this trust having been created before that date the point did not arise. It arises in Charitable Trusts & Exemption, Capital Gains Exemptions and How Tax Law Is Read matters, on section 2(15), section 11, section 11(1)(a), section 4(3)(i) Indian Income-tax Act, 1922 of the Income Tax Act 1961, and was decided by Supreme Court of India; K.S. Hegde and A.N. Grover JJ (judgment delivered by Grover, J.). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show that a beneficiary receives the benefit by virtue of membership of the class, not by virtue of who he is. Deal with s.13(1)(b) separately and on its own terms, since this decision does not touch it. Do not stretch the case to a trust for the relatives or descendants of a founder, which is the classic case of a personal rather than impersonal common quality.
Still good law. The sequel is now established. On the remit the Gujarat High Court answered the reference in the assessee's favour, reported as CIT v. Ahmedabad Rana Caste Association [1973] 88 ITR 354, and the Supreme Court affirmed that judgment in CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC), decided 7 April 1981 (R.S. Pathak and E.S. Venkataramaiah, JJ., Civil Appeal Nos. 923 to 925 of 1973) - though on the separate question whether the object clauses sufficiently confined the application of income to religious and charitable purposes, not on the section-of-the-public test decided here. Nothing found overrules, doubts or narrows that test. The Ahmedabad Bench of the Tribunal in Patidar Samaj Trust Khajurdi v. CIT (Exemption), order of 12 February 2025, is recorded in a published report of that order as having taken up this decision in setting aside a refusal of registration under s.12A; that report, and not the order itself, is the source for it. The Supreme Court's later charitable-purpose judgment, ACIT (Exemption) v. Ahmedabad Urban Development Authority (2022), does not mention this decision. A caution on the provision limb: the Court itself noted that a trust created for the benefit of a particular caste on or after 1 April 1962 would be disentitled under the 1961 Act, and s.2(15) has since been amended more than once, so a 1971 reading of the words should be checked against the present text before it is relied on. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read in the law report at [1971] 82 ITR 704 (SC). Two things a reader should carry away. First, this is not a final disposal: the Court allowed the appeals by special leave, discharged the High Court's answer and remitted the reference to the High Court to answer after deciding the points it had left undecided. What happened on that remit is recorded under validity. Second, the decision does address the post-1962 restriction on caste trusts, if only to put it aside: it records that under the 1922 Act a trust for the benefit of a particular religious community or caste was entitled to exemption, that under the 1961 Act a charitable trust created for such benefit on or after 1 April 1962 is disentitled, and that this trust having been created earlier the point did not arise. The appeals by certificate were dismissed because the certificate was defective for want of reasons. The judgment is reported without numbered paragraphs, so the quote is located by its opening words rather than by a paragraph number. The Court decided only the section-of-the-public point. It says nothing about the other objections that had been taken - the Appellate Assistant Commissioner had held some of the object clauses non-charitable, and those points went back to the High Court undecided. The decision therefore does not tell you whether these particular objects were wholly charitable; that was settled later, at [1973] 88 ITR 354 (Guj.), affirmed at [1983] 140 ITR 1 (SC). It says nothing about a trust confined to a caste in a single village or locality, nothing about any minimum size for the class - the Tribunal expressly recorded that no minimum number is prescribed - and, because the trust pre-dated 1 April 1962, nothing about how a caste or community trust created after that date is to be treated. One citation discrepancy is left open: the Supreme Court in the 1981 appeal describes the High Court judgment under appeal as delivered on 29/30 June 1972, while the reporter indexes [1973] 88 ITR 354 under 29 January 1972. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals by special leave were allowed and the answer returned by the High Court was discharged - but the Court did not itself answer the reference. The matters were remitted to the High Court to return the answer after determining the other points which had been left undecided, and the parties were left to bear their own costs. The appeals by certificate, C.A. Nos. 2146-2148 of 1968, were dismissed, the certificate being defective for want of reasons. On the point actually decided, the Court held that the members of the Rana caste or community of Ahmedabad form a section of the public: the common quality uniting the potential beneficiaries is membership of that caste or community, whether as natives or as persons admitted to it under custom or usage, and that quality is impersonal. The Court also recorded that under the 1922 Act a trust for the benefit of a particular religious community or caste was entitled to exemption, that the 1961 Act disentitles such a trust created on or after 1 April 1962, and that this trust having been created before that date the point did not arise.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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