2024 (6) TMI 801 - AT - Income Tax

Rejection of application for registration u/s 12AB citing violation of section 13(1)(b) - objects of the trust are not restricted to SUNNI MUSLIMS - HELD THAT - We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon and perused the facts of the case including the findings of the ld. CIT(E) and other material brought on record. We note that CIT(E ) denied the registration mainly on the reason that assessee is not a religious trust but it is religious cum charitable trust and ld CIT(E ) also gone through the objects which are in the nature of charitable but the same is restricted to benefit of a particular religious community or caste SUNNI MUSLIMS and therefore the provision of section 13(1)(b) of the Act would be applicable to the assessee and therefore the assessee would not be eligible for exemption under section 11 of the Act. We have gone through the objects of the assessee-trust and noted that all the objects are not restricted to particular religious community or caste SUNNI MUSLIMS . We direct the ld. CIT(E) to reconsider the application of assessee regarding registration under section 12AB of the Income Tax Act 1961 and grant the registration to the assessee-trust in accordance with law. For statistical purpose ground of appeal raised by assessee-trust is allowed.

Summary

Issues Involved:
1. Rejection of application for registration u/s 12AB citing violation of section 13(1)(b).

Summary:

Issue 1: Rejection of Application for Registration u/s 12AB Citing Violation of Section 13(1)(b)
The appeal is directed against the order passed by the Learned Commissioner of Income Tax (Exemption) [CIT(E)], Ahmedabad, rejecting the application filed by the assessee in Form No. 10AB for registration u/s 12AB of the Income Tax Act, 1961. The CIT(E) observed that the application did not meet the requirements stipulated under Rule 17A of the Income Tax Rules, which prescribes different forms and documents to be submitted for registration of a charitable or religious trust.

Despite notices issued on 07/11/2022 and 28/11/2022, the assessee failed to furnish the required details. The CIT(E) noted that the trust's objectives, which include benefiting "SUNNI MUSLIMS," fall under the provision of section 13(1)(b) of the Act, which disallows exemption u/s 11 for trusts established for the benefit of any particular religious community or caste.

The CIT(E) cited precedents, including CIT vs. Palghat Shadi Mahal Trust and CIT vs. Dawoodi Bohara Jamat, to support the view that composite trusts (religious cum charitable) are also subject to section 13(1)(b). Thus, the assessee was deemed ineligible for exemption u/s 11, and the application for registration u/s 12AB was rejected.

Appeal and Tribunal's Decision:
The assessee argued that the trust benefits the general public and not exclusively Muslims. The Tribunal noted that some of the trust's objectives are not restricted to "SUNNI MUSLIMS" and are charitable in nature, such as efforts to abolish social evils and resolve local disputes.

Considering these facts, the Tribunal directed the CIT(E) to reconsider the application for registration u/s 12AB and grant registration in accordance with the law. The appeal was allowed for statistical purposes.

Conclusion:
The Tribunal found that not all objectives of the trust were restricted to a particular religious community and directed the CIT(E) to reconsider the application for registration u/s 12AB. The appeal was allowed for statistical purposes.