2015 (1) TMI 1102 - AT - Income Tax

Application for grant of registration u/s 12A rejected - Held that - Trust/institution having charitable and religious objects will be eligible for exemption u/s 11 unless hit by restrictions imposed u/s 13(1)(a) or 13(1)(b) of the Act. As in the present case, ld. DIT(E) has not brought any material on record to show that provisions of section 13(1)(a) or 13(1)(b) applies to the assessee, denial of registration u/s 12AA for alleged violation of section 11(1)(a), in our view, is not justified. Moreover, applicability of section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by ld. DIT(E) while exercising power u/s 12AA of the Act. In view of the aforesaid, we hold that ld. DIT(E) was not justified in refusing grant of registration u/s 12AA of the Act on the ground that assessee is having mixed objects. As far as the other objections of ld. DIT(E) relating to non mentioning of date of creation of trust and absence of certain clauses in the trust deed, we have to observe that even though it is a fact that date of creation of trust is not specifically mentioned in the trust deed, however, the date of registration of the trust deed before the SRO i.e. 13/03/13 can be considered as the date of creation of trust. In so far as the absence of certain clauses, as mentioned in para 2 of ld. DIT(E) s order is concerned, we are of the view that before refusing registration on the ground of absence of these clauses, ld. DIT(E) could have called upon assessee to explain on the issue and if necessary, asked assessee to make necessary amendments to the trust deed considering the fact that these clauses form part of a standard trust deed. However, without giving any opportunity to assessee to explain on the issue or make necessary amendment to trust deed, ld. DIT(E) was not justified in rejecting assessee s application for grant of registration u/s 12AA. We consider it appropriate to set aside the impugned order of ld. DIT(E) and remit the matter back to his file to consider the issue afresh. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Eligibility of a trust with mixed objects (both religious and charitable) for registration under Section 12AA of the Income Tax Act.
2. Absence of specific clauses (amendment, audit, dissolution) and the date of creation in the trust deed.

Detailed Analysis:

1. Eligibility of a Trust with Mixed Objects for Registration under Section 12AA:
The primary issue addressed was whether a trust with mixed objects, i.e., both religious and charitable, is eligible for registration under Section 12AA of the Income Tax Act. The DIT(E) denied the registration on the grounds that the trust had mixed objects and thus was not eligible for exemption under Section 11.

The Tribunal held that the presence of mixed objects does not automatically disqualify a trust from registration under Section 12AA. The Tribunal referenced several judicial precedents, including the Supreme Court's decision in CIT Vs. M/s Dawoodi Bohara Jamat, which clarified that a trust with both charitable and religious purposes could still claim exemption under Section 11, provided it does not benefit a specific religious community or caste exclusively. The Tribunal emphasized that Section 11(1)(a) does not differentiate between religious and charitable purposes and that the term "or" used in the section is conjunctive, meaning that income from property held under trust for both purposes is exempt.

The Tribunal concluded that the DIT(E) had not provided any evidence that the trust's activities were exclusively benefiting a particular religious community, thus making the denial of registration unjustified. The Tribunal also noted that the applicability of Section 13, which imposes restrictions on trusts benefiting specific communities, should be examined during assessment proceedings and not at the registration stage.

2. Absence of Specific Clauses and Date of Creation in the Trust Deed:
The DIT(E) also denied registration due to the absence of specific clauses (amendment, audit, dissolution) and the date of creation in the trust deed. The Tribunal acknowledged that while the date of creation was not explicitly mentioned, the date of registration of the trust deed (13/03/13) could be considered the date of creation.

Regarding the absence of certain clauses, the Tribunal observed that the DIT(E) should have provided the trust an opportunity to explain or amend the trust deed to include these clauses. The Tribunal stated that these clauses are part of a standard trust deed and that the DIT(E) could have suggested their inclusion rather than outright denying the registration.

The Tribunal remitted the matter back to the DIT(E) for reconsideration, instructing that the DIT(E) may suggest the necessary amendments to the trust deed. Once the trust incorporates these amendments, the DIT(E) should grant the registration under Section 12AA.

Conclusion:
The appeal was allowed for statistical purposes, with the Tribunal setting aside the DIT(E)'s order and remitting the matter back for fresh consideration. The Tribunal emphasized the need for a fair opportunity for the trust to amend its deed and clarified the legal position regarding trusts with mixed objects.