2015 (3) TMI 1377 - AT - Income Tax

Registration u/s.12A denied - activities carried on by the trust were meant for members of the Jain community and thus it is established for the benefit of specific religious community attracting the provisions of section 13(1)(b) - whether the trust whose objects were religious as well as charitable would be entitled for registration under section 12A? - HELD THAT - One of the objects of the assessee trust was to build a temple prayer hall and maintain the same and further object was to set up a religious library maintain it and propagate Indian culture and inculcate and study all the cultures of all the religion. Further to take up research on religious social and educational in order to uplift the public at large. The objects Nos.3 to 5 of the Trust Deed were admittedly for the propagation of philosophy of Shri Jain Shwetamber Murtipujak. However object No.7 was to create encourage and propagate inter-se cooperation co-living and feeling of co-living in the community of entire public at large. The objects of the assessee trust thus reflect the activities to be carried on for the purpose of Jain religion and also for the purpose of public at large. In view thereof it could not be held that the same are meant for the benefit of only Jain religious community. We reverse the findings of the Commissioner in this regard. Hon ble Supreme Court in CIT Vs. Dawoodi Bohra Jamat 2014 (3) TMI 652 - SUPREME COURT while holding the trust eligible to claim exemption under section 11 of the Act. In the totality of the above said facts and circumstances we hold that the assessee is a charitable religious trust and the provisions of section 13(1)(b) of the Act would not be applicable. In view thereof we direct the Commissioner to grant registration to the assessee under section 12A of the Act as charitable religious trust. The grounds of appeal raised by the assessee are thus allowed.

Summary

Issues Involved:
1. Denial of registration under Section 12A of the Income Tax Act, 1961.
2. Applicability of Section 13(1)(b) of the Income Tax Act, 1961.
3. Determination of whether the trust's activities are charitable or religious.
4. Evaluation of the genuineness of the trust's activities.

Detailed Analysis:

1. Denial of Registration under Section 12A of the Income Tax Act, 1961:
The primary issue in both appeals was the denial of registration under Section 12A of the Income Tax Act, 1961. The Commissioner of Income Tax (CIT) denied the registration on the grounds that the trust's activities were predominantly religious and for the benefit of a specific religious community, which attracted the provisions of Section 13(1)(b) of the Act.

2. Applicability of Section 13(1)(b) of the Income Tax Act, 1961:
The CIT argued that the trust's activities were meant for the Jain community, thus violating Section 13(1)(b), which disallows exemption if the trust benefits a particular religious community. The CIT observed that the trust's primary thrust was to benefit the Jain religious community, as evidenced by the trust deed and the nature of its activities, such as organizing religious ceremonies and maintaining Jain temples.

3. Determination of Whether the Trust's Activities are Charitable or Religious:
The assessee contended that the trust's activities were charitable and not exclusively for the Jain community. The trust's objects included building a Jain temple, setting up a religious library, organizing social and educational activities, and promoting mutual understanding and cooperation among the public. The CIT, however, noted that the trust's income and expenditure accounts primarily reflected activities related to letting out the Dharmshala, which was not authorized by the trust's objects.

4. Evaluation of the Genuineness of the Trust's Activities:
The CIT questioned the genuineness of the trust's activities, noting that the trust's income was mainly from Bhavan booking charges, and the expenditure was on maintenance and salaries. The CIT concluded that the trust's activities did not align with its stated objects and were not genuinely charitable.

Tribunal's Observations and Judgment:

On Denial of Registration:
The Tribunal noted that the assessee trust was registered under the Bombay Public Trusts Act, 1950, and had applied for registration under Section 12A of the Income Tax Act. The Tribunal observed that the trust's objects included both religious and charitable activities, such as building a temple, setting up a library, and organizing social and educational events.

On Applicability of Section 13(1)(b):
The Tribunal referred to the Hon'ble Supreme Court's judgment in CIT Vs. Dawoodi Bohra Jamat, which held that a trust with composite objects (both charitable and religious) could claim exemption under Sections 11 and 12, provided the activities were not exclusively meant for a particular religious community. The Tribunal also cited the Hon'ble Gujarat High Court's judgment in CIT Vs. Chandra Charitable Trust, which held that a trust with both charitable and religious objects was not subject to Section 13(1)(b).

On Determination of Trust's Activities:
The Tribunal found that the trust's objects were not exclusively for the Jain community and included activities for the benefit of the public at large. The Tribunal concluded that the trust's activities were both charitable and religious, and thus, the provisions of Section 13(1)(b) were not applicable.

On Genuineness of Trust's Activities:
The Tribunal held that the CIT's observations regarding the trust's income and expenditure were not sufficient to deny registration. The Tribunal emphasized that the trust's objects and activities should be considered in their entirety, and the trust's charitable activities should not be disregarded.

Conclusion:
The Tribunal directed the CIT to grant registration to the assessee under Section 12A of the Income Tax Act, recognizing the trust as a charitable religious trust. The Tribunal allowed the appeals, concluding that the provisions of Section 13(1)(b) were not applicable, and the trust's activities were genuine and aligned with its stated objects.