2024 (10) TMI 1559 - AT - Income Tax

Rejection of registration u/s 12AB - objects of the Trust were confined to the Chhasath Prajapati Community , thus attracting the provisions of section 13(1)(b) of the Act, which disallows exemption for trusts benefiting a particular community - HELD THAT - Hon ble Supreme Court in the case of Dawoodi Bohara Jamat 2014 (3) TMI 652 - SUPREME COURT has categorically held that section 13(1)(b) of the Act is applicable at the stage of assessment for determining exemption under section 11 of the Act, and not at the stage of granting registration u/s 12AB of the Act. This principle was reiterated in the case of Jamiatul Banaat Tankaria vs. CIT(Exemption), Ahmedabad 2024 (3) TMI 376 - ITAT AHMEDABAD The assessee s has categorically stated that all documents were uploaded online through the official portal as per the notices issued. CIT (Exemption) has not pointed to any specific document that remained unfiled. In the absence of any specific deficiency in documentation being highlighted, we do not find merit in the Department s argument that the assessee failed to comply with the document submission requirement. Upon examination of the Trust's objectives, we find that the Trust is engaged in various educational, social, and economic activities that serve the public at large, not limited to the Chhasath Prajapati Community. These include scholarships, hostel facilities for students, social reform programs, and efforts to uplift the community economically. Therefore, the Trust s activities cannot be said to benefit only a particular religious or caste-based community. The registration u/s 12AB is merely a recognition of the charitable status of the Trust. The application of section 13(1)(b) of the Act would only arise at the stage of assessment when determining exemption under section 11, depending on the actual income and activities of the Trust. CIT (Exemption) erred in rejecting the application for registration under section 12AB - Decided in favour of assessee.

Summary

Issues:
Registration under section 12AB of the Income Tax Act - Rejection of application based on Trust's activities benefiting a particular community - Noncompliance with document submission requirement.

Analysis:
The appeal was filed against the rejection of the registration application under section 12AB of the Income Tax Act by the Commissioner of Income Tax (Exemption), Ahmedabad. The rejection was based on the grounds that the Trust's objectives primarily benefited the "Chhasath Prajapati Community," invoking section 13(1)(b) of the Act, which disallows exemption for trusts benefiting a specific community. Additionally, the Commissioner noted that the assessee failed to provide certain requested details during the registration process. The assessee contended that its aims were charitable in nature and included a wide range of activities serving the public at large, such as educational programs, scholarships, social initiatives, and economic activities for the Trust's development.

The Departmental Representative argued that the rejection was justified due to the alleged noncompliance with document submission requirements, reflecting poorly on the genuineness of the Trust's activities. However, the assessee's Authorized Representative countered this argument by stating that all necessary documents were uploaded online as per the notices issued and that no specific deficiency was highlighted by the Commissioner. The Tribunal examined the Trust's activities and found them to be diverse and inclusive, serving various sections of society beyond the Chhasath Prajapati Community.

The Tribunal referred to the judgment in the case of CIT vs. Dawoodi Bohara Jamat, which clarified that section 13(1)(b) of the Act applies at the stage of granting exemption under section 11, not during the registration process under section 12AB. The Tribunal emphasized that the application of section 13(1)(b) would be relevant at the assessment stage based on the Trust's actual income and activities. Citing the judicial precedents and the Trust's broad charitable objectives, the Tribunal held that the rejection of the registration application was erroneous. Consequently, the order of the Commissioner was set aside, and the Commissioner was directed to grant registration to the assessee Trust as applied for.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the registration under section 12AB is a recognition of the Trust's charitable status, and the application of section 13(1)(b) would be considered at the assessment stage. The judgment was pronounced in open court on 16th October 2024 at Ahmedabad.