2015 (9) TMI 600 - AT - Income Tax

Registration under section 12AA denied - Trust is created for the benefit of a particular community, which does not ensure for the benefit of the public, and thus, hit by section 13(1)(b) as said by CIT(Exemptions) - Held that - As decided in C.I.T. vs. Barkate Saifiyah Society (1993 (11) TMI 13 - GUJARAT High Court) the Tribunal has rightly held that section 13(1)(b) applies only to trusts which were purely for charitable purposes and the assessee trust was charitable as well as religious in nature and the assessee was entitled to exemption under section 11. Also see case of Shree Vasupujya Swami Jain Derasar Trust vs. CIT 2010 (8) TMI 937 - ITAT AHMEDABAD wherein held that for serving a chartable purpose, it is not necessary that the object should be for the benefit of the whole mankind or all persons in a country or a State and it is sufficient if the intention is to benefit, a section of the public as distinguished from a specific individual or person. It was also held that the section of the community sought to be benefited must be sufficiently defined and identifiable by some common quality of a public or impersonal nature. As the above decisions were not cited by the assessee before the CIT (E) and the CIT (E) has not taken into consideration the aforesaid decisions for deciding the issue under appeal. Thus restore the matter back to the CIT (E) for deciding the issue after taking into consideration the above stated decisions. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Denial of registration under section 12AA of the I.T. Act based on trust benefiting a particular community rather than the general public.

Analysis:
The appeal contested the denial of registration under section 12AA of the I.T. Act due to the trust being perceived as benefiting a specific community instead of the public at large. The Commissioner of Income Tax (Exemption) rejected registration, citing that the trust's objectives primarily focused on a particular community, thus violating section 13(1)(b) of the Act. The appellant argued that the trust's activities encompassed both charitable and religious aspects, aligning with a previous Gujarat High Court ruling that charitable trusts with religious elements are eligible for exemption under section 11. The appellant highlighted various welfare initiatives, educational endeavors, and community development projects undertaken by the trust to support their claim.

The Appellate Tribunal reviewed the trust's objectives, emphasizing a wide array of activities aimed at societal welfare, education, healthcare, and community development. Notably, the trust expressed intentions to benefit the general public through religious and charitable initiatives, educational support, medical aid during calamities, and assistance to economically disadvantaged individuals. The Tribunal considered precedents, including decisions by the Gujarat High Court and various Tribunal benches, which clarified that section 13(1)(b) applies to trusts solely established for charitable purposes, not religious trusts. These judgments emphasized that trusts benefiting specific communities are permissible as long as the community is well-defined and identifiable by common public characteristics.

In light of the arguments presented and legal precedents cited, the Tribunal concluded that the denial of registration based on benefiting a particular community was unjustified. They directed the matter back to the Commissioner of Income Tax (Exemption) for reconsideration, emphasizing the need to review the case in light of the relevant judicial decisions. The Tribunal instructed the Commissioner to afford the appellant a fair hearing before making a final determination. Consequently, the appeal was allowed for statistical purposes, signifying a procedural victory for the appellant without altering the substantive outcome.