2017 (5) TMI 905 - AT - Income Tax

Registration under Section 12AA - charitable purposes - Held that - Out of 40 objects of the Trust only one object No. 4 and its sub-clauses, as mentioned by the ld. CIT, no doubt throw light on the benefit of Christian Community, but the ld. CIT has failed to give any comment on the other prime objects of the assessee trust, which are undisputedly for the purpose of charity for public at large. The ld. CIT has considered and resorted to the provisions of section 13(1)(b) of the Act, but he has not considered the fact that the provision of section enacts a bar to the availability of exemption under section 11 in respect of various incomes enumerated therein, meaning thereby that the provisions of section 11 are not applicable when the provisions of section 13 are attracted in a particular case. This section, however, does not lay any bar on granting of registration if it is found that the objects of the trust are charitable or religious. To be more clear, the provisions of this section is applicable while considering the exemption claimed by the assessee trust u/s. 11 of the Act at the assessment stage and not at the stage of granting registration u/s. 12AA. We are not inclined to support the order of the ld. CIT and we hold that the assessee-trust is eligible for registration u/s. 12AA of the Act. The ld. CIT is, therefore, directed to grant registration to the assessee trust. Appeal of the assessee is allowed

Summary

Issues:
1. Refusal to grant registration under Section 12AA of the Income-tax Act, 1961.
2. Consideration of objects of the trust for a particular religious community.
3. Interpretation of Section 13(1)(b) in relation to registration under Section 12AA.

Analysis:
1. The appeal was against the rejection of registration under Section 12AA by the ld. CIT, citing the trust's objects benefiting a specific religious community. The assessee contended that most objects were charitable, and the trust operated a school without discrimination. The CIT's refusal was based on Section 13(1)(b) of the Act, which bars exemption for community-specific trusts. The Tribunal noted that only one object favored the Christian community, while others were charitable, and Section 13(1)(b) applies at the assessment stage, not during registration. Citing precedents, the Tribunal held the trust eligible for registration under Section 12AA.

2. The ld. CIT's refusal was primarily due to the trust's objects benefiting the Christian community, invoking Section 13(1)(b) of the Act. The Tribunal observed that while some objects did favor a specific community, the trust's overall objectives were charitable and not solely for a particular religious group. Relying on precedents, the Tribunal clarified that Section 13(1)(b) pertains to exemption under Section 11, not registration under Section 12AA. The trust's diverse objectives, including education and welfare, justified registration.

3. The ld. CIT's order was deemed unjustified as it focused on the trust's objects benefiting a religious community, overlooking its charitable nature. The Tribunal emphasized that Section 13(1)(b) applies during assessment for exemption, not during registration. Precedents highlighted that a trust with mixed charitable and religious objectives can still qualify for registration under Section 12AA. Citing the Supreme Court's decision, the Tribunal directed the ld. CIT to grant registration to the trust, emphasizing its eligibility under Section 12AA.

This detailed analysis showcases the Tribunal's thorough examination of the issues raised in the appeal, emphasizing the distinction between registration under Section 12AA and exemption under Section 11, and the significance of the trust's charitable objectives in determining eligibility for registration.