2017 (12) TMI 1221 - AT - Income Tax

Seeking registration u/s 12AA - proof of charitable activities - scope of the object clauses - well being of the Gujarati community - Held that - The society is incorporated not only for the purpose of Gujarati Community, but also for other public charitable purposes which includes general public of Vijayawada and the society is also running school which is for public charitable purpose. The CIT rejected the registration considering only one of the objectives i.e. for well being of the Gujarati community. Gujarati community does not specify any specific caste or religion or sect i.e. all the communities, castes of the people speaking Gujarati residing in Vijayawada. In the instant case the Trust had large number of other objects for the benefit of general public apart from objects for benefit of a Guajarati community. Taking into consideration of other objects we hold that this is fit case for grating registration 12AA and the case is squarely covered by the case laws cited supra. Accordingly, we grant the registration u/s 12AA of I.T.Act to the society and allow the appeal of the assessee. Since we have allowed the appeal of the assessee and granted the Registration u/s12AA we consider it is not necessary to adjudicate alternate claim of the assessee. Accordingly we set aside the order of the Ld.CIT and grant registration to the society u/s 12AA of I.T.Act. - Decided in favour of assessee.

Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act.
2. Interpretation of the objectives of the society for determining charitable status.
3. Applicability of section 13(1)(b) at the stage of granting registration.
4. Relevance of the society's prior registration under the Societies Act and exemption status.

Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA:
The assessee filed an application in Form No. 10A seeking registration under section 12AA of the Income Tax Act. The Commissioner of Income-Tax (Exemptions) [CIT] rejected the application, stating that the society's objective clause indicated it existed solely for the benefit of the Gujarati community in Vijayawada, which is against the provisions of section 2(15) of the Act. The CIT concluded that the objects were not charitable in nature and thus refused to grant the registration.

2. Interpretation of the Objectives of the Society:
The assessee argued that the society's objectives were not limited to the Gujarati community but included general charitable purposes. The Memorandum of Association (MoA) listed several objectives, such as providing assistance to the general public in times of distress, imparting education irrespective of religion, caste, or creed, and maintaining institutions like schools and hospitals. The assessee contended that the CIT had considered only one objective and ignored the others, which were charitable and beneficial to the general public.

The Tribunal referred to the decision of the Hon’ble Gujarat High Court in CIT(Exemption) vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust, which held that the Commissioner should consider all the objectives of the trust and not just one. The High Court emphasized that the trust's activities included education, medical help, and rural development, which are charitable in nature.

3. Applicability of Section 13(1)(b) at the Stage of Granting Registration:
The assessee argued that section 13(1)(b) applies only at the stage of assessment when there is a claim under sections 11 and 12, not at the stage of granting registration. The Tribunal referred to the decision of the Hon’ble High Court of Allahabad in CIT vs. Sri Sai Darbar Trust, which stated that the question of granting exemption under sections 11 and 12 arises only when a claim is made by the assessee. At the stage of registration, the focus should be on whether the trust's objectives are charitable.

The Tribunal concluded that section 13(1)(b) would only be relevant at the time of assessment and not during the registration process.

4. Relevance of the Society's Prior Registration under the Societies Act and Exemption Status:
The assessee highlighted that the society was registered under the Societies Act on 21.02.1957 and had been granted exemption under section 15B, akin to section 80G of the Income Tax Act, on 06.04.1962. The assessee argued that the amendment to the proviso of section 13(1)(b) does not apply to societies registered before the commencement of the Income Tax Act, 1961. The Tribunal considered the decision of the jurisdictional High Court in CIT Vs. Arya Vysya Kalyana Nilaya Sangam, which supported this argument.

Tribunal's Conclusion:
The Tribunal observed that the society's objectives included not only the benefit of the Gujarati community but also several public charitable purposes. The CIT had erred in considering only one objective and ignoring the others. The Tribunal held that the society's objectives were charitable and for the benefit of the general public, and thus, the registration under section 12AA should be granted.

The Tribunal allowed the appeal of the assessee, set aside the order of the CIT, and granted registration to the society under section 12AA of the Income Tax Act, making it unnecessary to adjudicate the alternate claim of the assessee.

Result:
The appeal of the assessee was allowed, and the society was granted registration under section 12AA of the Income Tax Act. The order was pronounced in the open court on 20th December 2017.

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