2020 (11) TMI 959 - AT - Income Tax

Non granting registration u/s 12AA - CIT-A denied the registration primarily on the ground that the object of the trust prima-facie appears to be religious in nature and there was no dissolution clause in the instrument creating the trust - HELD THAT - The reasoning of the ld. Commissioner of Income Tax (Exemptions) that in the absence of dissolution clause the appellant trust does not entitle for registration u/s 12AA of the Act is also required to be adjudged in view of the decision in the cases of (i) DCIT vs. Vanchhara Thirthadhipati Chintamani Paraswaprwabhu 2015 (5) TMI 5 - GUJARAT HIGH COURT AND TAPAGACHHA SANGH MOTA 2015 (5) TMI 87 - GUJARAT HIGH COURT Provisions of section 13(1)(b) of the Act had carved out exception to the exemption available u/s 11 and 12 of the Act. One of those exception is that the exemption u/s 11 and 12 would not be available in case any income of trust or institution is created or established for the benefit of any particular religious community or caste. Hon ble Supreme Court in the case of CIT vs. Dawoodi Bohra Jamat 2014 (3) TMI 652 - SUPREME COURT after exhaustively referring to the earlier precedent held that where the objects of a trust are both charitable and religious the trust shall be eligible for registration u/s 12AA. The section only requires to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large. In the present case ld. Commissioner of Income Tax (Exemptions) had obviously not embarked upon enquiry into this aspect. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues Involved:
Grant of registration under section 12AA of the Income Tax Act, 1961 based on the nature of trust activities and the presence of a dissolution clause.

Analysis:

1. Nature of Trust Activities:
The appeal was filed by the assessee trust against the order of the Commissioner of Income Tax (Exemptions) denying registration under section 12AA of the Act. The Commissioner concluded that the trust's activities seemed to be religious in nature and lacked a dissolution clause, leading to the denial of registration. The appellant challenged this decision, emphasizing that the trust's activities were not solely religious. The Tribunal highlighted legal precedents, such as the Fazlul Rabbi Pradhan case, to establish that trusts for charitable purposes could include religious advancement. The Tribunal also cited other cases supporting the inclusion of religious activities under charitable purposes, indicating a broader interpretation of the term.

2. Presence of Dissolution Clause:
The Commissioner's denial of registration was partly based on the absence of a dissolution clause in the trust's instrument. However, the Tribunal referenced judgments from the Gujarat High Court, like DCIT vs. Vanchhara Thirthadhipati Chintamani Paraswaprwabhu, to evaluate the significance of a dissolution clause in such cases. The Tribunal pointed out that the Commissioner did not thoroughly examine whether the trust's activities solely benefited a specific religious community or caste, as required by section 13(1)(b) of the Act. The Tribunal emphasized that a trust with both charitable and religious objectives could still be eligible for registration under section 12AA, provided the charitable activities were not confined to a particular religious group. As a result, the Tribunal set aside the matter for fresh adjudication by the Commissioner, emphasizing the need for a comprehensive review based on the legal principles discussed.

3. Conclusion:
Ultimately, the Tribunal allowed the appeal for statistical purposes, directing the matter back to the Commissioner for a fresh assessment. The decision highlighted the importance of considering both the nature of trust activities and the presence of a dissolution clause in determining eligibility for registration under section 12AA of the Income Tax Act. The judgment underscored the need for a nuanced analysis of whether charitable activities benefit a specific religious community or caste, emphasizing the broader societal impact of such activities.