2024 (7) TMI 952 - AT - Income Tax

Denial of registration u/s 12AB - CIT(E), rejected application holding that the nature of activity of the trust is restricted to the benefit of particular religious community or caste ( Leva Patel ) and therefore provisions of section 13(1)(b) would be applicable - HELD THAT - We find that assessee-trust, under consideration, was in existence since 1946, that is, prior to the Income-Tax Act, 1961, came into being. That is, the trust under consideration was created in 1946, however, the Indian Income Tax Act 1961, was come into force in the year 1961. The assessee-trust was in existence prior to the Indian Income Tax Act 1961, hence the provisions of section 13(1) (b) would not be applicable to the assessee-trust under consideration. Assessee, explained before us that the property was purchased by the trust in 1946. As per the PTR records, the assessee- trust became an owner of land by registered purchase deed, dated 26.12.1946 and 30.06.1959. Therefore, the assessee- trust, was in existence before the commencement of the Income-Tax Act 1961, hence, even if, the trust was created only for a particular community, ( LEVVA PATEL ), the Ld. CIT(E), should not have denied the registration of the trust, provided, the assessee- trust fulfilled the conditions mentioned in section 12AB of the Income Tax Act, 1961 and Rule 17 A of the Income Tax Rules, 1962. Therefore, we find that judgments referred by Ld. CIT(E) in the case of Palghat Shadi Mahal Trust 2001 (7) TMI 8 - SUPREME COURT and the case of Dawoodi Bohara Jamat 2014 (3) TMI 652 - SUPREME COURT are not applicable to the assessee trust under consideration. Registration of the trust, should not be denied on account of provisions of section 13(1) (b) of the Income Tax Act, 1961, as these provisions are not applicable to the assessee-trust, under consideration, as explained above. Therefore, we direct the ld CIT(E ) to grant the registration to the assessee- trust provided, the assessee-trust fulfilled other conditions, as mentioned in section 12AB and Rule 17A of the Income Tax Rules, 1962. For statistical purposes, the appeal of the assessee is treated to be allowed.

Issues Involved:
1. Applicability of section 13(1)(b) of the Income Tax Act, 1961.
2. Eligibility for registration under section 12AB of the Income Tax Act, 1961.
3. Genuineness of the trust's activities.
4. Trust's establishment date and its implications on the applicability of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Applicability of section 13(1)(b) of the Income Tax Act, 1961
The Learned Commissioner of Income Tax (Exemption) [CIT(E)] rejected the application for registration under section 12AB, citing that the trust's activities were restricted to a particular religious community or caste ("Leva Patel"), invoking section 13(1)(b) of the Act. Section 13(1)(b) stipulates that provisions of sections 11 and 12 would not apply to a charitable trust created for the benefit of any particular religious community or caste. The CIT(E) referenced the Supreme Court case of CIT vs. Palghat Shadi Mahal Trust, which held that section 13(1)(b) applies to trusts benefiting a specific community. However, the assessee argued that the trust was established before the Income Tax Act, 1961, and thus section 13(1)(b) should not apply.

Issue 2: Eligibility for registration under section 12AB of the Income Tax Act, 1961
The assessee contended that the trust was in existence since 1946, predating the Income Tax Act, 1961. The trust's counsel argued that section 13(1)(b) pertains to the assessment of trusts, not their registration. The counsel cited several judicial precedents to support the claim that "Leva Patel" is not a specific caste/community and that section 13(1)(b) should not bar the trust from registration under section 12AB.

Issue 3: Genuineness of the trust's activities
The CIT(E) questioned the genuineness of the trust's activities, noting that the trust had not provided sufficient evidence of its charitable activities. The Revenue argued that the trust had not demonstrated genuine charitable activities since its establishment. The assessee countered by stating that the trust had been operational since 1946 and had acquired property through registered deeds in 1946 and 1959, indicating its longstanding existence and activities.

Issue 4: Trust's establishment date and its implications on the applicability of the Income Tax Act, 1961
The tribunal noted that the trust was established in 1946, before the commencement of the Income Tax Act, 1961. According to section 13(1)(b), the provisions apply to trusts established after the Act's commencement. Therefore, the tribunal concluded that section 13(1)(b) does not apply to the assessee-trust, as it was created before 1961. The tribunal found that the CIT(E)'s reliance on the cases of Palghat Shadi Mahal Trust and Dawoodi Bohara Jamat was misplaced, as these cases involved trusts established after the Act's commencement.

Conclusion:
The tribunal directed the CIT(E) to grant registration under section 12AB, provided the trust fulfills other conditions mentioned in section 12AB and Rule 17A of the Income Tax Rules, 1962. The appeal was allowed for statistical purposes, and the order was pronounced in the open court on 05-07-2024.

← Previous Next →