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2024 (9) TMI 196 - AT - Income TaxDenial of registration u/s 12A(1)(ac)(iii) - nature of charitable activities, are restricted to the benefit of a particular community or caste, that is, Gandhvi and their sub caste Mandhuda, Shakhra, Alsuwa and Nukh - provision of Section 13(1)(b) of the Act, would be applicable to the assessee-trust denying exemption/ registration - Whether the trust's objects are exclusively for a particular community or for the general public? HELD THAT - We observe that in the case of Jamiatul Banaat Tankaria 2024 (3) TMI 376 - ITAT AHMEDABAD 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 under Section 12A, by invoking Section 13(1)(b) of the Act, 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 held that since provisions of Sections 11, 12 and 13 are intended for exercise of jurisdiction by an assessing officer (AO) in an assessment proceedings, the Commissioner (Exemption) is not competent to invoke such provisions for purpose of declining registration u/s 12A(1)(ac)(iii) of the Act. Therefore, we note that Section 13(1)(b) of the Act can be invoked only at the time of assessment and not at the time of registration u/s 12A(1)(ac)(iii) of the Act . We also note that when the assessee-trust under consideration, has large number of other objects, which are for benefit of general public, (apart from a few objects in the nature of religious), therefore registration should not be denied to the assessee-trust u/s 12A (1)(ac)(iii)of the Act, for that reliance is placed on the judgment of Bayath Kutchhi Oswal Jain Mahajan Trust 2016 (9) TMI 8 - GUJARAT HIGH COURT Considering the above facts and circumstances, we set aside the order of Ld. CIT(E) and remit the matter back to the file of Ld. CIT(E), with the direction to grant the registration to the assessee-trust in accordance with law. For statistical purposes, the appeal of the assessee is allowed.
Issues Involved:
1. Denial of registration under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961. 2. Applicability of Section 13(1)(b) of the Income Tax Act, 1961. 3. Whether the trust's objects are exclusively for a particular community or for the general public. Issue-wise Detailed Analysis: 1. Denial of Registration under Section 12A(1)(ac)(iii): The assessee-trust filed an application in Form No.10AB under Section 12A(1)(ac)(iii) of the Income Tax Act, 1961. The Learned Commissioner of Income Tax (Exemption) [Ld. CIT(E)] rejected the application, holding that the trust's objects, although charitable, were restricted to the benefit of a particular religious community or caste, namely 'Gandhvi and their sub-caste Mandhuda, Shakhra, Alsuwa, and Nukh'. Consequently, the trust was deemed ineligible for registration under Section 12A(1)(ac)(iii) due to the applicability of Section 13(1)(b) of the Act. 2. Applicability of Section 13(1)(b): The Ld. CIT(E) relied on the Supreme Court's decision in CIT vs. Dawoodi Bohara Jamat, which held that a composite trust serving both religious and charitable purposes would not be covered by Section 13(1)(b). The Ld. CIT(E) concluded that since the trust's charitable activities were restricted to a specific community, Section 13(1)(b) applied, thereby denying registration. The assessee contended that Section 13(1)(b) is applicable only at the time of assessment, not during the registration process. This argument was supported by previous ITAT rulings, including Jamiatul Banaat Tankaria and Malik Hasmullah Islamic Educational and Welfare Society, which stated that the Commissioner (Exemption) is not competent to invoke Section 13(1)(b) for declining registration under Section 12A(1)(ac)(iii). 3. Trust's Objects: The assessee-trust argued that its objects were not exclusively for a particular community but also included numerous charitable activities for the general public. The objects listed in the trust deed included providing food, clothing, shelter, medical relief, educational scholarships, and other welfare activities. The Tribunal observed that most of the trust's objects were charitable and not confined to the 'Gandhvi and their sub-caste'. The Tribunal also referenced the Gujarat High Court's decision in CIT vs. Bayath Kutchhi Oswal Jain Mahajan Trust, which emphasized that the Commissioner should not mix the requirements for registration with the conditions for granting exemptions under Section 13. Conclusion: The Tribunal concluded that the Ld. CIT(E) erred in denying registration based on Section 13(1)(b), as this provision should be considered during the assessment, not at the registration stage. The Tribunal set aside the Ld. CIT(E)'s order and directed the Commissioner to grant registration to the assessee-trust in accordance with the law. The appeal was allowed for statistical purposes. Final Order: The appeal of the assessee was allowed for statistical purposes, and the order was pronounced in the open court on 24/07/2024.
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