2011 (4) TMI 1005 - AT - Income Tax

Appellant charitable and religious trust only for charitable and religious purposes - applied for registration u/s. 12A of the Act - A trust or institution created or established for the benefit of Scheduled Castes backward classes Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1) - if the application of s. 13(1)(b) granting so has no bearing on the registration u/s. 12A as contended the same would become irrelevant for our purpose. Toward this we find that the words minorities and backward classes do not appear only in clause 11(z) of the Deed but runs through the trust deed - s. 13 only restricts the application of ss. 11 and 12 the same impinging on the denominational character of the trust as well as the fact that s. 13(1)(b) extends to the entire income of the trust (irrespective of the extent of application for the benefit of a particular religious community or caste) the same s. 13(1)(b) where applicable could validly lead to denial of registration u/s. 12A of the Act - registration stands rightly denied by the ld. CIT in the instant case and his order is accordingly upheld - assessee s appeal is dismissed

Summary

Issues Involved:
1. Applicability of section 13(1)(b) of the Income-tax Act, 1961 to the assessee.
2. Impact of section 13(1)(b) on the denial of registration under section 12A of the Act.

Detailed Analysis:

1. Applicability of section 13(1)(b) of the Income-tax Act, 1961 to the assessee:

The appellant is a Trust constituted for charitable and religious purposes, seeking registration under section 12A of the Act. The Commissioner of Income-tax (CIT) denied the registration, citing clause 11(z) of the trust deed, which states the trust's purpose as benefiting minorities and other backward classes. The CIT interpreted this as the trust being established for a particular religious community or caste, thus invoking section 13(1)(b) of the Act, which disqualifies trusts created for the benefit of any particular religious community or caste from tax exemption.

The Tribunal examined the trust deed and noted that the term "minorities" appears throughout the document, including the preamble and several object clauses, indicating the trust's focus on minorities and backward classes. The Tribunal emphasized that section 13(1)(b) applies to charitable trusts benefiting a particular religious community or caste, and since the trust deed specified minorities, it fell within this purview.

The Tribunal also referenced the case of CIT v. Barkate Saifiyah Society, where a composite trust for charitable and religious purposes was found not subject to section 13(1)(b). However, in the present case, the Tribunal distinguished it by noting that all object clauses of the trust were charitable, and the beneficiaries were defined as minorities and backward classes, making section 13(1)(b) applicable.

The Tribunal further clarified that the word "minorities" in the trust deed likely referred to religious minorities, supported by the trust's creation as a religious trust and the appellant's own arguments. The Tribunal concluded that section 13(1)(b) was applicable, as the trust's beneficiaries were defined by religious identity or caste.

2. Impact of section 13(1)(b) on the denial of registration under section 12A of the Act:

The Tribunal considered whether the application of section 13(1)(b) should affect the registration under section 12A. It noted that section 13 specifies conditions under which sections 11 and 12, which exclude trust income from total income, would apply. Since the trust's income would be fully taxable under section 13(1)(b), granting registration under section 12A would be purposeless.

The Tribunal reasoned that the denominational character of the trust, as defined by its beneficiaries, warranted the application of section 13(1)(b), leading to the denial of registration under section 12A. The Tribunal also addressed the appellant's argument that the word "minorities" did not necessarily mean a religious minority, stating that the appellant needed to specify the minority group referred to in the trust deed to avoid vagueness and uncertainty.

The Tribunal examined the constitutional provisions and the National Minorities Commission's definition of minorities, concluding that the term "minorities" in the trust deed referred to religious minorities. It held that the trust's focus on religious minorities disqualified it from exemption under section 13(1)(b), supporting the CIT's decision to deny registration.

Conclusion:

The Tribunal upheld the CIT's decision to deny registration under section 12A, finding that the trust's focus on minorities and backward classes fell within the scope of section 13(1)(b), which disqualifies trusts benefiting a particular religious community or caste from tax exemption. The Tribunal dismissed the assessee's appeal, affirming the applicability of section 13(1)(b) and its impact on the denial of registration.