2017 (6) TMI 241 - AT - Income Tax

Rejecting application seeking registration u/s 12AA - Held that - As gone through the objects of the trust, a bare reading of the objectives makes it clear that objectives of the trust are essentially for the purpose of benefit of a particular religious community as per Clause 5 of the objects states oppose the laws which effect the Jain Community and Religion. CIT has rightly rejected the application. We also find that the dominant objectives of the assessee in the form of the other clauses of the objectives is for the purpose of safeguarding and benefiting the interest of the Jain Community. Therefore, we do not see, any reason to interfere into the decision of the Ld. CIT(E) same is hereby affirmed, this application is dismissed - Decided against assessee.

Summary

Issues Involved:
1. Refusal and rejection of application seeking registration under section 12AA of the Income Tax Act, 1961.
2. Examination of the applicability of section 13(1)(b) of the Income Tax Act, 1961.
3. Alleged violation of principles of natural justice.

Detailed Analysis:

1. Refusal and Rejection of Application under Section 12AA:
The assessee filed an application in Form No. 10A seeking registration under section 12AA of the Income Tax Act, 1961. The Ld. Commissioner of Income Tax (Exemption) rejected the application on the grounds that the objects and activities of the trust/society were for the benefit of a particular religious community, specifically the Jain community, thereby violating section 13(1)(b) of the Act.

2. Examination of the Applicability of Section 13(1)(b):
The primary issue revolves around whether the trust's activities violated section 13(1)(b) of the Act, which pertains to trusts created for the benefit of any particular religious community. The assessee argued that the trust was both religious and charitable in nature and not solely for the benefit of the Jain community. The trust's objectives included maintaining a Jain temple and working for the upliftment of society in general and the Jain community in particular. The assessee contended that the objects were not confined to a particular community and cited several judicial precedents to support their claim, including:
- CIT v. Bigabass Maheshwari Sewa Samiti: Beneficiaries were society at large, not confined to any particular caste, community, or religion.
- CIT v. Dawoodi Bohara Jamat: The Supreme Court held that section 13(1)(b) would not apply to a charitable religious trust.
- CIT v. Chandra Charitable Trust: The Gujarat High Court held that the trust was both charitable and religious, and section 13(1)(b) was not applicable.
- CIT Vs. Barkate Saifiya Society: The Gujarat High Court ruled that exclusion under section 13(1)(b) applies only to charitable trusts, not those that are both charitable and religious.

The Ld. CIT (Exemptions) maintained that the trust's objectives were primarily for the benefit of the Jain community, as evidenced by Clause 5 of the trust's objectives, which aimed to oppose laws affecting the Jain community and religion. The CIT argued that the introduction of section 12AA(4) necessitated examining the applicability of section 13(1)(b) at the stage of registration.

3. Alleged Violation of Principles of Natural Justice:
The assessee claimed that no opportunity of being heard was provided before the rejection of the application, violating the principles of natural justice. The assessee argued that a written show-cause notice was necessary, which was not provided in this case. The assessee emphasized that the CIT's role at the stage of registration is limited to satisfying the genuineness of the trust's activities and objects, not examining potential violations of section 13(1)(b).

Tribunal's Findings:
The Tribunal examined the rival contentions and the trust's objectives. It concluded that the objectives were primarily for the benefit of the Jain community, as evidenced by the trust's clauses. The Tribunal upheld the CIT's decision to reject the application, affirming that the trust's dominant objectives were to safeguard and benefit the Jain community. Consequently, the application was dismissed.

Conclusion:
The Tribunal dismissed the assessee's application for registration under section 12AA, affirming the CIT's decision that the trust's objectives were primarily for the benefit of a particular religious community, thereby violating section 13(1)(b) of the Income Tax Act, 1961. The Tribunal found no reason to interfere with the CIT's decision and upheld the rejection of the application.