2022 (9) TMI 1638 - AT - Income Tax

Denial of registration u/s 12AA - assessee society has not carried out any charitable activity for public at large and established for a particular Community and almost objects are for the benefit of a particular community - main objects of the society are for the benefit of Kanya Kubj Samaj , which is a subcommunity in the Brahmin Community belonging to Kanya Kubj Gotra - HELD THAT - Hon'ble Rajasthan High Court in the case of CIT Vs. Vijay Vargiya Charitable Trust 2015 (2) TMI 671 - RAJASTHAN HIGH COURT . has categorically held that at the time of granting registration, the objects of the Trust for which it was formed, is only to be looked into and the CIT s satisfaction about genuineness of activities of the Trust was not criteria as the Trust was just commencing activities. Hence the issue regarding satisfaction or genuineness of the activities of the trust is not a matter to be looked into at the time of granting registration u/s 12AA of the Act. Invoking provision of section 13(1)(b) - Where the Trust attracts section 13 (1)(b) of the Act and therefore, not entitle to the claim of deduction u/s 11 and 12 of the Act is a matter of concern only at the time of assessment proceedings. As decided in Barkate Saifiyah Society 1993 (11) TMI 13 - GUJARAT HIGH COURT has held that the provisions of section 13(1)(b) will apply only to the Trust which are purely for charitable purposes. If the assessee Trust has objects in both charitable and religious in nature, in such Trust, Section 13(1)(b) is not applicable. On perusal of the bye-laws of the assessee society it is evident that the assessee society has charitable as well as religious objects, therefore, squarely covered by the judgment of the Hon ble Gujarat High Court in the case of Barkate Saifiyah Society (supra). Thus we are of the considered opinion that registration to the assessee trust cannot be denied on the basis of observation of the CIT(E) as mentioned herein above. Decided in favour of assessee.

Summary

Issues:
Appeal against rejection of registration u/s 12AA of the Income Tax Act.

Detailed Analysis:

1. The appeal was filed by the assessee against the order of the CIT(E) rejecting the registration u/s 12AA. The main contention was that the assessee was entitled to approval u/s 12AA as per the objects and activities of the society, which were not limited to the assessee society only but extended to the public at large. The assessee argued that the rejection based on section 13(1)(b) was unwarranted, citing Explanation 2 of the section to support their case. The assessee relied on a previous decision by the ITAT Raipur in a similar case, where the issue was decided in favor of the assessee.

2. The CIT-DR, on the other hand, supported the decision of the CIT(E) and argued that the rejection was justified as the society's activities were deemed to benefit a particular community, triggering section 13(1)(b) of the IT Act.

3. The ITAT considered the arguments of both parties and examined the evidence on record. It noted that the registration was denied to the assessee society because its objects primarily benefited a particular sub-community within the Brahmin Community. The CIT(E) also highlighted the lack of evidence regarding charitable activities carried out by the society.

4. The ITAT referred to a judgment by the Rajasthan High Court, emphasizing that at the time of granting registration u/s 12AA, the focus should be on the objects of the trust rather than the genuineness of its activities. It also discussed the application of section 13(1)(b) and cited a decision by the ITAT Raipur, stating that the denial of exemption under sections 11 and 12 should be considered during assessment proceedings, not at the time of granting registration.

5. The ITAT further referred to a judgment by the Gujarat High Court, which clarified that section 13(1)(b) applies only to trusts purely for charitable purposes. Since the assessee society had both charitable and religious objects, it was not subject to the provisions of section 13(1)(b).

6. After careful consideration of the facts, submissions, and legal precedents, the ITAT concluded that the registration could not be denied based on the observations of the CIT(E). In the absence of any contradictory decisions brought by the revenue, the ITAT set aside the order of the CIT(E) and directed to grant registration u/s 12AA to the assessee trust.

7. Ultimately, the appeal of the assessee was allowed, and the order was pronounced on 21/09/2022 in accordance with ITAT Rules, 1963.