2020 (4) TMI 716 - AT - Income Tax

Exemption u/s 11 - registration u/s 12AA denied - main object of the trust is to give benefit to the family member of the deceased members of the Rotary Club and same is not giving benefit to public at large and giving benefit to group of deceased members - HELD THAT - Trust has been given a certificate from the office of the Charity Commissioner after going through the Memorandum of Association and seeing the activities of the trust and trust is meant for deceased member of Rotary Club Family Members. As Rotary Club is carrying out charitable activities for the public at large as organizing the blood donation camp giving books to poor students and doing charity for orphanage etc. there are trusts meant for benefit of war widows those widows are also getting Government pension and in some of the cases they have been allotted petrol pump, gas agencies and houses etc. has been given to them at concessional rates by the Govt. but apart from that there are trusts those are getting donation and doing lots of activities for betterment of the war widows and their families. If there trust registration is legal and valid why Rotary Club Social Security fund cannot held to be legal and valid. In our considered opinion, rejecting the application for registration of the Trust is amounting to miscarriage of justice. DIT(E) ought to have allowed the registration application filed to the assessee - Direct the department to grant registration u/s. 12AA to the assessee. - Decided in favour of assessee.

Issues Involved:
1. Application for registration of trust under Section 12AA of the Income Tax Act.
2. Rejection of the application by DIT(E) based on the trust's objectives.
3. Examination of whether the trust's activities benefit the public at large.
4. Applicability of the principle of mutuality.
5. Precedent cases cited by the assessee.
6. Evaluation of the charitable nature of the trust's activities.

Detailed Analysis:

1. Application for Registration of Trust under Section 12AA of the Income Tax Act:
The assessee filed an application for registration of the trust under Section 12AA of the Income Tax Act, accompanied by a copy of the certificate of registration by the Assistant Charity Commissioners and a copy of the PAN Card.

2. Rejection of the Application by DIT(E) Based on the Trust's Objectives:
The DIT(E) rejected the application on the grounds that the main objective of the trust was to benefit the family members of deceased Rotary Club members, which did not benefit the public at large but rather a specific group.

3. Examination of Whether the Trust's Activities Benefit the Public at Large:
The assessee contended that the Memorandum of Association stated the trust was a voluntary, non-political, non-profit-making charitable and social services organization aimed at the general welfare and upliftment of its members. The assessee cited the ITAT Mumbai Bench's decision in the case of M/s. The Bombay Presidency Golf Club Ltd., which granted registration despite the club's facilities being restricted to its members, emphasizing that activities incidental to the promotion of a general public utility do not amount to business, trade, or commerce.

4. Applicability of the Principle of Mutuality:
The principle of mutuality was discussed, referencing Board Circular No. 11 of 2008, which clarifies that entities claiming exemption under the principle of mutuality must have a complete identity between contributors and participants, with no dealings with non-members. The assessee argued that their activities were confined to members, thus falling under the principle of mutuality.

5. Precedent Cases Cited by the Assessee:
The assessee cited several judgments, including the Hon’ble Supreme Court's decision in Ahmedabad Rana Caste Association vs. CIT, which held that a trust benefiting a specific community could still be considered charitable. Additionally, the assessee referenced the Hon’ble High Court of Chhattisgarh's decision in CIT vs. Chhattisgarh Urology Society, which granted relief to a trust promoting mutual benefits among Urologist Doctors, emphasizing that charitable activities benefiting members do not negate the charitable nature of the trust.

6. Evaluation of the Charitable Nature of the Trust's Activities:
The tribunal examined the trust's activities, noting that the trust had been certified by the Charity Commissioner and carried out charitable activities such as organizing blood donation camps, providing books to poor students, and supporting orphanages. The tribunal compared the trust to other trusts benefiting specific groups, such as war widows, which are considered charitable despite also receiving government benefits.

Conclusion:
The tribunal concluded that the rejection of the trust's registration was a miscarriage of justice. The DIT(E) should have granted the registration application. The tribunal quashed the order of the DIT(E) dated 30.12.2013 and directed the department to grant registration under Section 12AA to the assessee. The appeal filed by the assessee was allowed.

Order Pronounced:
The order was pronounced in open court on 19-02-2020.

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