2015 (7) TMI 1328 - AT - Income Tax

Registration as a charitable institution u/s.12AA rejected - assessee society to be formed for the benefit of the Christians community - HELD THAT - Applicability or otherwise of s. 13(1)(b) as a valid ground while considering the issue of registration u/s. 12AA of the Act in-as-much as registration is a pre-requisite for availing the benefit of ss. 11 12 In the facts of the case we have found the assessee society to be formed for the benefit of the Christians community and which therefore definitely could form a ground for denial of its registration in-as-much as its income is liable to be excluded for consideration u/ss. 11 and 12 of the Act. Nothing has been brought on record to exhibit or otherwise any case made out of the assessee-society undertaking any (charitable) project in a wholly impartisan manner i.e. devoid of any consideration as to religion either in terms of the people employed; provided support (refer Cl. 3(vi)) or served thereby. - Decided against assessee.

Summary

Issues Involved:
1. Maintainability of the denial of registration as a charitable institution under Section 12AA of the Income Tax Act, 1961.
2. Characterization of the assessee-society as a charitable or religious institution.
3. Applicability of Section 13(1)(b) of the Income Tax Act to the assessee-society.
4. Validity of the denial of registration under Section 12AA in light of Section 13(1)(b).

Detailed Analysis:

1. Maintainability of the Denial of Registration:
The primary issue in this case is whether the denial of registration under Section 12AA of the Income Tax Act, 1961, to the assessee-society by the Commissioner of Income Tax (CIT) is legally maintainable. The CIT denied the registration on the grounds that the society was established for the benefit of a particular religious community, thereby attracting the provisions of Section 13(1)(b) of the Act.

2. Characterization of the Assessee-Society:
The assessee argued that it is both a charitable and religious society, and thus should not be disqualified under Section 13(1)(b). The Tribunal examined the 'Object' clause of the society's charter, which included aims such as education, relief to the poor, medical relief, and other objects of general utility. The Tribunal noted that the predominant purpose of the society, as stated in its preamble, aligns with the definition of 'charitable purpose' under Section 2(15) of the Act. The Tribunal found no explicit mention of religious propagation in the object clauses, concluding that the society's primary purpose is charitable, not religious.

3. Applicability of Section 13(1)(b):
The Tribunal considered whether the society was formed for the benefit of a particular religious community, which would attract Section 13(1)(b) of the Act. The Tribunal noted that the society's name, membership conditions, and objects indicated a clear intent to serve the Christian community in preference to others. The Tribunal emphasized that Section 13(1)(b) does not require total exclusion of other communities but focuses on the intent to benefit a particular religious community. The Tribunal referred to the Supreme Court's decision in CIT vs. Kamla Town Trust, which held that a trust's public character is negated if it primarily benefits a specific group, even if others are not excluded.

4. Validity of the Denial of Registration:
The Tribunal addressed whether the denial of registration under Section 12AA is valid, given the applicability of Section 13(1)(b). The Tribunal concluded that registration under Section 12AA would be purposeless if the society's income is excluded from exemption under Sections 11 and 12 due to Section 13(1)(b). The Tribunal cited the Supreme Court's decision in Dawoodi Bohra Jamat, which affirmed that Section 13(1)(b) is a valid ground for denying registration under Section 12AA.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the CIT's decision to deny registration under Section 12AA. The Tribunal found that the society was formed for the benefit of the Christian community, thereby attracting the provisions of Section 13(1)(b) and justifying the denial of registration.