2018 (3) TMI 139 - AT - Income Tax

Non granting the registration u/s. 12A - change of objects - proof of charitable activities - purpose of establishing the SAMAJ - Held that - As can be seen there is difference only re numbering the aims and objects originally formed. The main aim of achieving alround welfare and unity among the families residing in Hyderabad had been renumbered as (A) so as to make it only as one of the objects by the revised draft. However, as approved in the case of Gangabai Charities Vs. Commissioner of Wealth Tax 2001 (2) TMI 130 - SUPREME Court the General Body cannot modify the trust deed so as to make a variation in the trust objects. In these circumstances, it is to be considered that there is no change in the aims and objects of assessee-trust which is mainly established for the purpose of establishing the SAMAJ to achieve all round welfare and unity among Visa Vadnagar Vanik families residing in Hyderabad. This clearly indicates that the trust was created for the purpose of a secluded group of persons who has their loyalty to a particular God i.e., Hatkeshwer Mahadev Temple and not general public. As most of the expenditure is held for the benefit of a particular community or a religious group called SAMAJ families and so, we are of the opinion that the Trust is not created for charitable or religious purposes for general public. Accordingly, it is not entitled for registration. The community is identified with a religious belief and royalty to a particular deity and that too for families residing in Hyderabad. Even the receipts are from the Members very few amounts of donation and except the other receipts and the expenditure is also seems to be within the community . - Decided against assessee.

Summary

Issues Involved:
1. Rejection of registration under Section 12A of the Income Tax Act.
2. Compliance and procedural aspects regarding the application for registration.
3. Nature of the Trust's activities and their eligibility for registration.
4. Legal precedents and their applicability to the case.

Detailed Analysis:

1. Rejection of Registration under Section 12A:
The primary issue is the rejection of the assessee's application for registration under Section 12A of the Income Tax Act. The Director of Income Tax (Exemptions) [DIT(E)] refused the registration on grounds that the Trust's objects and activities could not be verified, and the Trust's purposes were both charitable and religious, which under the circumstances, did not qualify for registration.

2. Compliance and Procedural Aspects:
The assessee initially filed an application for registration on 07-10-1988, which was neither accepted nor rejected by the Department. For the assessment year 2003-04, the Assessing Officer (AO) rejected the exemption claim under Section 11(2) and added ?2,53,146 to the income. On appeal, the CIT(A) dismissed the appeal citing the lack of registration with the Registrar of Societies before 2004 and the absence of evidence for the 1988 application. The ITAT remitted the matter back to the DIT(E) for fresh consideration, but the DIT(E) again refused registration, stating non-compliance by the assessee. The ITAT provided another opportunity, but the DIT(E) maintained the refusal, citing reasons including the potential disposal of the original application and the Trust's mixed purposes.

3. Nature of the Trust's Activities:
The Trust, Sri Visa Vadnagar Vanik Samaj, was established for the welfare and unity of specific families residing in Hyderabad. The objectives included managing a family deity temple, providing education and medical aid to community members, and celebrating religious feasts. The DIT(E) and ITAT noted that the Trust's activities were primarily for a specific community and not for the general public. The Trust's expenditures were limited to its members, and no evidence was provided to show charitable activities benefiting the general public.

4. Legal Precedents and Applicability:
The ITAT considered various legal precedents. The case of CIT Vs. Ahmedabad Rana Caste Association was distinguished as it involved a Trust created before 1961, whereas the current Trust was created after 1961. The principles from CIT Vs. Andhra Pradesh Police Welfare Society were not applicable as the Trust was for a specific community, not for public employees. The ITAT also referenced CIT Vs. Palghat Shadi Mahal Trust and CIT Vs. Surji Devi Kunjilal Jaipuria Charitable Trust, concluding that the Trust's benefits were limited to a specific community with a religious belief, not the general public, thereby justifying the rejection of registration.

Conclusion:
The ITAT upheld the DIT(E)'s decision to reject the registration under Section 12A, concluding that the Trust was created for a specific community and not for the general public. The appeal of the assessee was dismissed, and the order was pronounced in the open court on 28th February 2018.