2024 (7) TMI 279 - AT - Income Tax

Rejection of registration of trust u/s 12AB - objects beneficial to a section of the public is an object of general public utility - scope of objects of the trust u/s 2(15) - trust created for the benefit of public at large or incorporated to take care of the interest of the members HELD THAT - We observe that in the case of Jamiatul Banaat Tankaria 2024 (3) TMI 376 - ITAT AHMEDABAD the ITAT held that where objects of assessee-trust were primarily charitable rather than favouring any specific religious community, CIT(E) was not justified in denying registration u/s 12A, by invoking Section 13(1)(b) as said provisions would be attracted only at time of assessment and not at time of grant of registration. In the case of Malik Hasmullah Islamic Educational and Welfare Society 2012 (8) TMI 680 - ITAT, LUCKNOW the ITAT held that since provisions of Sections 11, 12 and 13 are intended for exercise of jurisdiction by an AO in an assessment proceedings, Commissioner is not competent to invoke such provisions for purpose of declining registration u/s 12AA. In the case of St. Joseph Academy 2015 (2) TMI 495 - ITAT HYDERABAD the ITAT held that provisions of Section 13 can be invoked by Assessing Officer while framing assessment and not by Commissioner while considering application for registration u/s 12AA. We are of the considered view that the provisions of Section 13 can be invoked only at the time of assessment while considering the applicability of section 11/12 with respect to assessee s set of facts and not at the time of grant of registration under Section 12A of the Act. Our view is further supported by the decision of Bayath Kutchhi Dasha Oswal Jain Mahajan Trust 2016 (9) TMI 8 - GUJARAT HIGH COURT wherein on the issue of denial of grant of registration u/s 12A of the Act by invoking Section 13(1)(b) of the Act, it was categorically held that the provisions of Section 13 would be attracted only at the time of assessment and not at the time of grant of registration. Thus the matter is restored to the file of CIT (E), for de novo consideration, after giving due opportunity of being heard and with the direction not to disentitle the assessee for grant of registration only on the grounds as mentioned in its order passed for rejecting the application filed by the assessee trust for grant of registration u/s 12A of the Act. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against rejection of registration of Trust under section 12AB of the Income Tax Act, 1961 on the grounds of objects not being for the benefit of the general public and being limited to members of a specific association.

Detailed Analysis:

Issue 1: Rejection of Registration based on Objects Benefiting Members Only
The Commissioner of Income-tax (Exemption) rejected the registration application of the Trust under section 12AB of the Act, citing that the Trust's objects were primarily for the benefit of the members of a specific association, National Real Estate Development Council Gujarat (NREDC-Gujarat). The CIT observed that the Trust's objects were limited to safeguarding the interests of its members and not for the general public. The Trust's membership was restricted to individuals involved in real estate development, land development, and related fields, excluding representation from customers. The CIT concluded that the Trust's focus was on the welfare of its members and not for public utility, leading to the rejection of the registration application.

Issue 2: Judicial Precedents and Interpretation of Section 13
The Appellate Tribunal referred to various judicial precedents to analyze the rejection of registration under section 12AB. The Tribunal highlighted that the provisions of Section 13 of the Act, which deal with exemptions, should be considered at the time of assessment and not during the grant of registration. Citing cases like Jamiatul Banaat Tankaria and St. Joseph Academy, the Tribunal emphasized that the intention to benefit a section of the public suffices for charitable purposes, and the denial of registration based on Section 13(1)(b) was not justified. The Tribunal also referenced the Supreme Court's decision in Dawoodi Bohara Jamat, which emphasized the dual nature of religious and charitable purposes of trusts.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the matter to be reconsidered by the CIT (Exemptions) without disentitling the Trust for registration solely on the grounds mentioned in the previous rejection order. The Tribunal's decision was based on the interpretation that Section 13 should be invoked during assessment and not during the registration process under Section 12A of the Act. The judgment emphasized the importance of considering the charitable nature of the Trust's objects and the broader interpretation of public utility.