2016 (9) TMI 8 - HC - Income Tax

Eligibility of registration u/s 12A - Whether the assessee trust is hit by section 13(1)(b) of the Act, as the trust is not created for the benefit of general public but is created for the benefit of a particular religious community i.e. Jain Community ? - Tribunal allowed registration - Held that - As per clause 4.1, the trust would engage itself in activities relating to education by maintaining and running education centers, infant schools, primary secondary and high schools, colleges etc., to run hostels, training centers for creating awareness in the common people and to make the education available for the public. It would also engage in imparting training in computers. As per clause 4.3, the trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise in clause 4.4 the trust could engage in rural development schemes. As per clause 4.5, the trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Clause 4.6 which pertains to other included activities such as running cow shelters, to provide food, cloth and financial help for economically weaker persons, to help during natural or other calamities, to serve humans and animals etc. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community, is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Act, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record. No question of law arises

Summary

Issues:
Appeal against refusal of registration under Section 12A of the Income-Tax Act, 1961 based on the trust's activities being considered as not charitable and confined to a specific religious community.

Analysis:

1. The primary issue in this case was the refusal of registration to the respondent-assessee trust under Section 12A of the Income-Tax Act, 1961 by the Commissioner, citing that the trust's objects and activities were not charitable and were confined to a particular religious community. The Commissioner believed that the trust mainly operated for the benefit of the Jain Community, which led to the denial of registration.

2. The assessee challenged the Commissioner's decision before the Tribunal, which ruled in favor of the trust. The Tribunal referred to previous court decisions and emphasized that the registration of a trust should not be mixed with the granting of exemptions under Section 13 of the Act. The Tribunal's view was that the Commissioner's assessment was flawed in linking the two aspects.

3. The crux of the matter was whether the trust's activities were indeed limited to benefiting a specific religious community, as alleged by the Commissioner. The trust's constitution revealed a wide range of objectives aimed at benefiting the general public, including educational, social, medical, rural development, literary, cultural, and humanitarian activities. The trust's objects encompassed a broad spectrum of initiatives beyond religious community-specific endeavors.

4. The High Court scrutinized the trust's constitution and noted that the Commissioner's focus on a particular clause to conclude that the trust's activities were confined to a religious community was erroneous. The court highlighted various other clauses that demonstrated the trust's commitment to serving the broader public interest through educational, medical, rural development, cultural, and humanitarian initiatives.

5. The Court concluded that the Commissioner's assessment, which led to the denial of registration based on the trust's alleged confinement to a religious community, was unfounded. The Court emphasized that the assessment of exemptions under Section 13 of the Act should be conducted by the Assessing Officer during the assessment process based on relevant evidence. As a result, the Court dismissed the Tax Appeal, stating that no legal question arose from the case.

In summary, the High Court's judgment revolved around the Commissioner's erroneous assessment of the trust's activities as being confined to a religious community, which led to the denial of registration under Section 12A of the Income-Tax Act, 1961. The Court emphasized the trust's diverse objectives aimed at benefiting the general public and highlighted the distinction between registration and exemption assessments under the Act. Ultimately, the Court dismissed the appeal, affirming that no legal question warranted further consideration in the case.