2014 (8) TMI 1036 - AT - Income Tax

Registration u/s 12AA denied - Held that - The trust is not created for the benefit of particular community or caste. The object of the assessee trust is based on activity of both charitable and religious. In such a situation, the benefits are not meant for exclusively for a particular religious community. The trust will not be disqualified to claim the exemption u/s.12AA of the Act. The second objection of CIT is that no activity has been carried out by the assessee at a particular point of time. In this regard, the learned Authorized Representative drew our attention to the order of the Hon ble High Court of Gujarat in the case of CIT Vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust (2012 (12) TMI 876 - GUJARAT HIGH COURT) wherein the activities of trust have not commenced, the Commissioner was persuaded to reject its application for registration. Matter was travelled before the Hon ble Gujarat High Court wherein it was held that the Tribunal was right in granting relief to the assessee in similar set of facts. As stated above, this view is fortified by the ratio of Hon ble Supreme Court in the case of Dawoodi Bohra Jamat (2014 (3) TMI 652 - SUPREME COURT ). In view of above, the assessee is entitled for registration u/s.12AA of the Act for both accounts as discussed above. - Decided in favour of assessee

Summary

Issues:
1. Denial of registration to the Appellant Trust under section 12AA of the Income Tax Act, 1961.
2. Allegation that the trust was solely for the benefit of a specific religious community or caste.
3. Lack of activities carried out by the trust for the past three years affecting the charitable purpose and genuineness of the trust.

Analysis:

Issue 1: Denial of Registration under Section 12AA
The Commissioner of Income Tax-V, Pune refused registration to the assessee trust under section 12AA, citing concerns about the trust's objectives and genuineness due to the absence of activities. The Authorized Representative argued against this decision, emphasizing that the trust's purpose was not solely for a particular community or caste and that the denial was unjustified. The Departmental Representative supported the CIT's decision. The Tribunal referred to the case of CIT Vs. Dawoodi Bohra Jamat, where the Supreme Court clarified that the nature of a trust, whether religious, charitable, or both, is determined by the trust deed's objects. The Tribunal concluded that the trust's activities were both charitable and religious, not limited to a specific community, thus qualifying for exemption under section 12AA.

Issue 2: Allegation of Benefit to a Specific Community
The CIT alleged that the trust exclusively benefited a particular religious community or caste, which influenced the denial of registration. However, the Tribunal, based on the Dawoodi Bohra Jamat case, found that the trust's objects reflected both charitable and religious purposes, with activities not restricted to benefiting a specific community. Therefore, the trust did not fall under section 13(1)(b) of the Act, making it eligible for exemption under section 11.

Issue 3: Lack of Activities Affecting Charitable Purpose
Another ground for denial was the lack of activities by the trust in the past three years, raising doubts about its charitable purpose and genuineness. The Authorized Representative cited a Gujarat High Court case where the Tribunal's decision to grant relief in a similar scenario was upheld. The Tribunal, supported by the Dawoodi Bohra Jamat case, ruled in favor of the assessee, stating that the absence of activities at a specific time does not disqualify the trust from registration under section 12AA.

In conclusion, the Tribunal allowed the appeal, directing the CIT to grant registration to the assessee trust under section 12AA of the Income Tax Act, 1961, based on the trust's dual charitable and religious objectives, non-exclusive benefit distribution, and the lack of activities not being a barrier to registration.