2018 (1) TMI 807 - HC - Income Tax

Denial of registration u/s 12AA - Held that - We remit matter back to the authority to consider the law on subject and will reconsider independently, in view of observation made by us, will independently consider the law declared by the Supreme Court and also while remitting matter back, we restrained from passing order of registration, keeping the power of authority intact their independent power to grant registration. We are remitting back the matter to the authority.

Summary

Issues Involved:
1. Denial of registration under Section 12AA of the Income Tax Act, 1961.
2. Objects of the appellant society being contrary to charitable purposes.
3. Assurance and undertaking to remove the objectionable clause.
4. Examination of charitable and religious purposes.
5. Precedents and judgments supporting the appellant's case.

Issue-wise Detailed Analysis:

1. Denial of Registration under Section 12AA:
The appellant challenged the Tribunal's order, which denied the registration under Section 12AA of the Income Tax Act, 1961, to the assessee society. The substantial question of law framed was whether the ITAT was correct in confirming the denial of registration.

2. Objects of the Appellant Society:
The main ground for refusal was clause 5 in the objects of the appellant society, which was perceived as contrary to charitable objects. The court noted that the appellant society had a history dating back to the partition of India, with the society being involved in maintaining a temple and running into losses, dependent on its members for upkeep and maintenance.

3. Assurance and Undertaking to Remove the Objectionable Clause:
An assurance was given by the management of the appellant society, supported by a resolution. The society decided to remove clause 5 from its object clause, which was creating an impression that the trust opposed government or court orders, laws, rules, or regulations. The Secretary and President were authorized to ensure the removal of the said clause.

4. Examination of Charitable and Religious Purposes:
The court referred to several judgments to determine the nature of the appellant society's objects:
- CIT vs. Dawoodi Bohara Jamat: The Supreme Court held that objects indicating both charitable and religious purposes are permissible under Section 11 of the Act.
- CIT vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust: The Gujarat High Court noted that the Commissioner’s conclusion that the trust's objects were confined to a religious community was incorrect, leaving the assessment of activities to the Assessing Officer.
- CIT vs. Leuva Patel Seva Samaj Trust: The Gujarat High Court emphasized that the Commissioner should only decide if the trust fulfills the requirements for registration under Section 12AA, not assess the benefit to a particular community.
- CIT v. Bigabass Maheshwari Sewa Samiti: The Rajasthan High Court found that reassessment proceedings require cogent material indicating income escape, which was absent in this case.
- CIT v. Arulmigu Sri Kamatchi Amman Trust: The Madras High Court ruled that Section 12AA applies to trusts with charitable and religious purposes without disqualification for registration.
- CIT v. JSB Shikshan Sansthan: The Rajasthan High Court clarified that Section 12AA registration should consider the trust's objects, not the actual benefits at the registration stage.
- CIT v. Shri Digamber Jain Mandir Godhaji: The Rajasthan High Court agreed with the Tribunal's view, supported by the Supreme Court's decision in Dawoodi Bohara Jamat.
- CIT v. Bhagwan Mahaveer Pursharth Prerna Nidhi Nyas: The Rajasthan High Court held that the ITAT was justified in granting registration despite Section 13(1)(b) violations.
- CIT v. Indian Society of the Church of Jesus Christ of Latter Day Saints: The Delhi High Court found that the society’s activities were not exclusively for one religious community, thus not attracting Section 13(1)(b).
- CIT v. Andhra Chamber of Commerce: The Supreme Court ruled that an object beneficial to a section of the public is of general public utility.
- CIT v. Jodhpur Chartered Accountant Society: The Rajasthan High Court noted that disseminating knowledge and education for public benefit qualifies as a charitable purpose.
- Hiralal Bhagwati v. CIT: The Gujarat High Court held that benefiting a section of the public serves a charitable purpose.

5. Precedents and Judgments Supporting the Appellant's Case:
The court considered various precedents where trusts with charitable and religious purposes were granted registration under Section 12AA. The judgments emphasized that the Commissioner should focus on the trust's objects at the registration stage and not on the actual benefits or activities.

Conclusion:
The court remitted the matter back to the authority for reconsideration, directing an independent review of the law and the trust's objects. The appeal was allowed, and the matter was to be reconsidered in light of the observations and precedents discussed.