2014 (1) TMI 401 - AT - Income Tax

Rejection of registration u/s 12AA - Held that - The assessee, Shia Dawoodi Bohra Jamat Waqf (Kolkata), was earlier known as Dawoodi Bohra Community Wakf, was created vide Indenture dated 09.07.1920 - It was enrolled with the Office of the Commissioner of Wakfs (Kolkata) on 21.11.1979 - Original of the indenture dated 09.07.1920 was produced before the Director of Income-Tax (Exemptions) for his verification - As per the objects of the Waqf, it was engaged in charitable and religious activities - As the Waqf is existing prior to Income-tax Act, 1961, the object beneficial to a section of the public is an object of general public utility - To serve as a charitable purpose, it is not necessary that the object must be to serve the whole mankind or all persons living in a country or province - Even if a section of the public is given benefit, it cannot be said that it is not a trust for charitable purpose in the interest of public - Following Ahmedabad Rana Caste Association 1971 (9) TMI 8 - SUPREME Court - An object beneficial to a particular community of a particular domicile at large along with immigrates of the same community as accepted by the natives according to the custom and usage amounts to a benefit to a section of the public without personal touch, hence an object of general public utility - The assessee was founded for development of Muslim religion, cannot be denied the benefit of registration under section 12AA of the Act on the plea that it was only for the purpose of Muslim religion, as it was for the purpose of a section of the public amounts to an object of general public utility - DIT(Exemption), Mumbai, has granted registration under section 12AA in case of Dawoodi Bohra Mosque At Machhi Bazar Wakf dated 20.09.2006, Jamali Mohallah Dawoodi Bohra Waqf Mumbai dated 06.10.2009 and Dawoodi Bohra Jamat Anjuman-e-Najmi Wakf dated 15.04.2008, as placed on record, which were also having very same objects and indenture - Decided in favour of assessee.

Summary

Issues:
1. Registration under section 12AA of the Income Tax Act denied.
2. Interpretation of legal entity creation for Waqf registration.
3. Entitlement to exemption under section 11 of the Income Tax Act.
4. Consideration of Waqf as a trust or society for tax purposes.

Analysis:

Issue 1: Registration under section 12AA denied
The appeal was against the order of the Director of Income-Tax (Exemption), Kolkata denying registration under section 12AA for the assessment year 2012-13. The assessee contended that the Waqf should be registered based on an indenture from 1920. The Coordinate Bench's decisions were cited to support the claim that registration should be granted.

Issue 2: Interpretation of legal entity creation for Waqf registration
The Director of Income-Tax (Exemption) held that the Waqf could not be registered without specific evidence of legal entity creation, despite the submission of the 1920 indenture. The Waqf's existence was argued to be provable through other evidence. The Waqf's activities included religious propagation, maintenance of properties, and charity, aligning with its stated objectives.

Issue 3: Entitlement to exemption under section 11
The Director of Income-Tax (Exemption) contended that the Waqf was neither a trust nor a society, thus not eligible for exemption under section 11 of the Income Tax Act. However, the Tribunal found that the Waqf's activities served a section of the public, meeting the criteria for general public utility, as per legal precedents.

Issue 4: Consideration of Waqf as a trust or society for tax purposes
The Tribunal analyzed the Waqf's objectives, activities, and compliance with legal requirements. It noted the Waqf's registration with the Office of the Commissioner of Wakfs and its charitable and religious endeavors. The Waqf's status as a religious institution for the Muslim community was deemed sufficient for registration under section 12AA. The Tribunal emphasized that benefiting a section of the public qualifies as general public utility, enabling exemption under section 11.

In conclusion, the Tribunal directed the Director of Income-Tax (Exemptions) to grant registration under section 12AA of the Income Tax Act, allowing the appeal of the assessee. The decision was based on the Waqf's historical establishment, activities, and alignment with legal provisions and precedents.