2017 (2) TMI 688 - AT - Income Tax

Refusing registration u/s 12AA - objects of the trust are for the benefit of particular religious community and therefore provisions of section 13(1)(b) are attracted and it cannot be held as a charitable trust - Held that - There is no dispute with regard to the fact that as per definition of Charitable purpose under section 2(15) includes relief of the poor, education, medical relief (preservation of environment (including watersheds, forests and wildlife) and reservation of monuments or places or objects or artistic or historic interest) and the advancement of any other object of General Public Utility. As submitted that Jainism is the philosophy and preservation of symbol of such philosophy would definitely come into the embrace of the word Charitable . During the course of hearing, the ld. D/R could not refute the fact that clauses 16 of the objects which provides that without any discrimination of the caste or creed to help economically poor, old, ailing, handicap, poor students and clause 17 provides for help for hospitalization of ailing persons, medicines, cold water, night shelter and Dharamshala etc. In our considered view, both these objects definitely fall under the category of Charitable purpose and cannot be construed as solely for the benefit of a particular religious community. Thus we hereby direct the ld. CIT (Exemption) to grant registration to the assessee trust. - Decided in favour of assessee.

Summary

Issues Involved:
1. Refusal of registration under section 12AA of the Income Tax Act, 1961.
2. Applicability of section 13(1)(b) concerning benefits to a particular religious community.
3. Evaluation of the charitable nature of the trust's activities and objects.
4. Legal precedents and their applicability to the case.

Detailed Analysis:

1. Refusal of Registration under Section 12AA:
The primary issue revolves around the refusal of registration to the assessee under section 12AA of the Income Tax Act, 1961. The Commissioner of Income Tax (Exemptions) [CIT(E)] denied the registration on the grounds that the trust's objects were for the benefit of a particular religious community, thus invoking the provisions of section 13(1)(b).

2. Applicability of Section 13(1)(b):
The CIT(E) held that the trust's objects attracted the provisions of section 13(1)(b) because they were perceived to benefit a particular religious community. The assessee contended that the CIT(E) incorrectly applied section 12AA(4), which pertains to the cancellation of registration, to refuse the registration initially. The assessee argued that at the stage of granting registration, the CIT should not consider the conditions of sections 11 to 13.

3. Evaluation of Charitable Nature:
The assessee's counsel argued that the trust's objects were not confined to any particular religious community but were for the general public utility. The counsel cited multiple case laws to support the argument that the CIT(E) should not deny registration based on the potential application of section 13(1)(b) at the assessment stage. The trust's objects, such as providing medical aid, education, and other public utilities, were highlighted to demonstrate their charitable nature.

4. Legal Precedents:
The assessee relied on several judicial precedents to argue their case:
- CIT vs. Bigabass Maheshwari Sewa Samiti: The court held that providing preference to a particular community does not attract section 13(1)(b).
- St. Joseph Academy vs. DIT(Exemption): The Tribunal ruled that the application of section 13(1)(b) should be considered at the assessment stage, not at the registration stage.
- Bhai Mansa Singh Ji Welfare Society vs. CIT: It was held that the CIT should not be influenced by section 13(1)(b) while granting registration under section 12AA.
- Kul Foundation vs. CIT: The CIT should focus on the trust's objects and the genuineness of its activities, not on the potential application of section 13(1)(b).
- Aggarwal Mitra Mandal Trust vs. DIT (Exemp.): The Tribunal emphasized that section 13(1)(b) becomes relevant only at the assessment stage.

The assessee also cited the Supreme Court judgment in CIT vs. Dawoodi Bohra Jamat, which clarified that section 13(1)(b) applies only to charitable trusts and not to religious trusts. The court found that the trust's activities were not exclusively for a particular community.

Judgment:
The Tribunal, after reviewing the arguments and precedents, concluded that the CIT(E) erred in denying the registration under section 12AA. The Tribunal noted that the trust's objects included activities for the general public utility, which fall under the definition of "charitable purpose" as per section 2(15). The Tribunal directed the CIT(E) to grant registration to the assessee, aligning with the precedent set by the Supreme Court in the Dawoodi Bohra Jamat case.

Conclusion:
The appeal of the assessee was allowed, and the CIT(E) was directed to grant registration under section 12AA of the Income Tax Act, 1961. The Tribunal emphasized that the evaluation of compliance with section 13(1)(b) should occur at the assessment stage, not during the registration process.