2023 (7) TMI 799 - AT - Income Tax

Registration u/s 12AB denied - charitable activities of the trust were confined to a particular caste Surat Parish and Sindhis , therefore the provision of section 13(1)(b) are applicable and hence Ld. CIT(E) rejected the Form 10AB for the registration u/s 12AB - assessee argued that objects of trust are purely charitable without discrimination of creed, nationally or place except name, since it is started by Sindhis - HELD THAT - We note that assessee trust, has two type of objects, one exclusively for Sindhi caste and second other objects which are for the benefit of public in general, that is open for all sections of society. But these other objects, which are open for all public, have really been carried on, by the assessee-trust or not, is a question of fact, which has not been examined by CIT (E). As school is run by assessee- trust, which is open for all sections of the society/caste, this fact has not been examined by ld CIT(E), as there is no reference in the entire order of CIT(E), hence it is a fresh argument before us which needs examination by CIT(E). Assessee-trusts have other objects like to help poor, to give medical aid and to help public in general, in case of fire, flood and earthquake. Question before us is that since the assessee trust is an old trust, and whether in past, these activities were carried on by the assessee-trust or not, is not ascertainable by us from the paper book filed by the assessee. Considering these facts, we are of the view that entire lis of the assessee should be remitted back to the file of the ld CIT(E ) for examination - Appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Rejection of registration under section 12AB of the Income Tax Act, 1961.
2. Applicability of section 13(1)(b) of the Income Tax Act, 1961.
3. Examination of the charitable nature of the trusts' activities.

Summary:

Rejection of Registration under Section 12AB:
The appeals were filed by two assessee-trusts against the orders of the Commissioner of Income Tax (Exemption), Ahmedabad, who denied registration under section 12AB of the Income Tax Act, 1961. The denial was based on the grounds that the charitable activities of the trusts were confined to particular castes, namely "Surat Parish" and "Sindhis," making section 13(1)(b) applicable.

Applicability of Section 13(1)(b):
The Commissioner cited section 13(1)(b), which states that the provisions of sections 11 and 12 would not apply to a trust established for the benefit of any particular religious community or caste. The Commissioner referred to the Supreme Court judgment in CIT vs. Palghat Shadi Mahal Trust and CIT vs Dawoodi Bohara Jamat, emphasizing that section 13(1)(b) applies even to composite trusts with both religious and charitable purposes.

Examination of Charitable Nature:
The assessee argued that their objects were purely charitable and not confined to a particular caste. They cited various judicial precedents to support their claim. However, the Commissioner noted that the trust's objects were partly for the benefit of the "Sindhi" community, and thus section 13(1)(b) was applicable. The Tribunal observed that while some objects were restricted to the "Sindhi" community, others were open to the general public. The Tribunal remitted the case back to the Commissioner for a detailed examination of whether the trust's activities were genuinely open to all sections of society.

Conclusion:
The Tribunal set aside the orders of the Commissioner and remitted the cases back for fresh examination, directing the Commissioner to assess the facts and determine the applicability of section 13(1)(b) in light of the trust's activities. Both appeals were allowed for statistical purposes.