2011 (7) TMI 652 - AT - Income Tax

Denial of registration of Trust u/s 13(1)(a)/13(1)(b) of the Act - Revenue alleged violation of the section 13(1)(a)/13(1)(b) - 13(1)(a) is applicable for a private religious trust which does not enure for the benefit of the public as decided in the case Ahmedabad Rana Caste Association 1971 -TMI - 6284 - SUPREME Court - It is well-settled that an object beneficial to a section of the public is an object of general public utility - Thus, the Tribunal rightly decided the issue of applicability of section 13(1)(b) holding that since the assessee was a religious trust, the provisions of section 13(1)(b) were not applicable because they were applicable in the case of the trust established for charitable purposes - As decided in the case of Dawoodi Bohra Jamat v. CIT 2009 -TMI - 34960 - MADHYA PRADESH HIGH COURT section 13(1)(b) would be applicable only to the trusts which is purely for charitable purpose - Hence CIT, Baroda should grant registration to the assessee-trust - Hence appeal allowed.

Summary

Issues:
- Refusal of registration of the Trust by the CIT under Section 12AA of the Income Tax Act, 1961 based on the grounds of not benefiting the general public within the meaning of section 13(1)(a)/13(1)(b) of the Act.

Detailed Analysis:

Issue 1: Refusal of Registration based on Section 13(1)(a) -
The main reason for the refusal of registration was the alleged violation of section 13(1)(a) of the Income Tax Act, which applies to a private religious trust not benefiting the public. The case referred to the decision in Ahmedabad Rana Caste Association v. CIT, where it was held that a trust for the benefit of a specific community can still be considered for general public utility. The judgment emphasized that for charitable purposes, it is not necessary to benefit all of mankind, but rather a section of the public with common qualities. The ITAT Ahmedabad held that since the trust benefited the entire Dawoodi Bohra community, it did not fall under the category of a private religious trust as defined in section 13(1)(a).

Issue 2: Refusal of Registration based on Section 13(1)(b) -
The refusal of registration also cited section 13(1)(b), which applies to trusts for charitable purposes benefiting a particular religious community or caste. However, the judgment clarified that section 13(1)(b) is not applicable to religious trusts, as highlighted in the case law of Barkate Saifiyah Society. The court held that section 13(1)(b) only applies to trusts purely for charitable purposes, and since the assessee trust was both charitable and religious in nature, this section did not apply. The ITAT Ahmedabad concurred with the High Courts' interpretation that section 13(1)(b) does not apply to trusts with religious purposes, and since the assessee trust was a religious trust, this section was not applicable.

Conclusion:
The ITAT Ahmedabad allowed the assessee's appeal, directing the CIT to grant registration to the trust. The judgment emphasized that the trust, benefiting the Dawoodi Bohra community, did not violate either section 13(1)(a) or section 13(1)(b) of the Income Tax Act, as it was considered to serve a section of the public and was not purely for charitable purposes.