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Eligibility of exemption under section 11 of the Income-tax Act for a charitable trust; Interpretation of Explanation 2 to section 13 regarding trusts created for the benefit of a particular religious community or caste. Eligibility of Exemption under Section 11: The case involved a trust, registered under section 12A of the Income-tax Act, claiming exemption under section 11 as a charitable institution. The Tribunal initially granted the exemption, stating that the trust's benefits were for the public at large and not a specific religious community. However, a Division Bench directed a fresh hearing, leading to a reevaluation. The Tribunal then concluded that the primary purpose of the trust was for the betterment of the Muslim community, and the clarificatory resolution did not impact the trust's nature. The Revenue contended that since the trust primarily benefited the Muslim community, it was not entitled to section 11 exemption under section 13(1)(b). However, the Tribunal invoked Explanation 2 to section 13, stating that trusts for backward classes, including Muslims in Kerala, were not considered trusts for a particular religious community under section 13(1)(b). Consequently, the trust was deemed eligible for section 11 exemption for the relevant assessment years. Interpretation of Explanation 2 to Section 13: The Tribunal analyzed whether the trust, mainly benefiting the Muslim community, fell under section 13(1)(b) due to its religious focus. The Revenue argued that Explanation 2 required trusts for multiple backward classes to qualify, not just one. However, the Tribunal referenced Kerala's recognition of Muslims as a backward class and Gazette notifications listing Muslims as such. It emphasized that Explanation 2 applied to trusts benefiting backward classes as a whole, including Muslims. The court rejected the Revenue's narrow interpretation, affirming that trusts for all members of a backward class, like the Muslim community in Kerala, were covered by Explanation 2. Consequently, the trust was deemed entitled to section 11 benefits, as the primary focus was on the broader backward class, not specific subgroups. The court ruled in favor of the assessee, affirming their entitlement to section 11 exemption based on Explanation 2's clear and unambiguous application. In conclusion, the judgment addressed the eligibility of a trust for exemption under section 11 of the Income-tax Act, emphasizing the trust's primary beneficiaries and invoking Explanation 2 to section 13 to determine the trust's classification regarding religious communities or castes. The court's detailed analysis and interpretation of relevant provisions led to a decision in favor of the trust, highlighting the broader scope of trusts benefiting backward classes like the Muslim community in Kerala under Explanation 2.
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