2024 (9) TMI 197 - AT - Income Tax

Cancellation of registration u/s 12AB - Charitable activity or not? - invoking the provisions of Section 13(1)(b) for denying registration - religious-cum-charitable trust - CIT(E) observed that the object in the trust deed / instrument of creation of trust seems to be charitable in nature and appears to be restricted to the benefit of a particular religious community or caste or private religious community i.e, Jain community - HELD THAT - It is clear from the objects of the assessee-trust that it was not for benefit of only Jain community. CIT(E) has considered only clause-(F) and not the other clauses for proper appreciation of the issue. The objects also include medical help to the needy patients (clause-G), educational, occupational and medical help (clause-E), welfare activities for upliftment of general public (clause-D) etc. Hence, rejection of registration based on only one clause is not proper. Very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community, is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Ac, which would be the task of the AO to be undertaken at the time of assessment on the basis of material that may be brought on record. Since the facts of the present case are similar to the facts of the above case, following the reasons given in the above order, the matter is restored back to the file of CIT(E) for de novo consideration after giving adequate opportunity of hearing to the assessee - Appeal filed by the assessee is allowed for statistical purposes.

Issues:
1. Rejection of registration under section 12AB of the Income Tax Act.
2. Cancellation of provisional registration of the assessee-trust.
3. Invocation of Section 13(1)(b) of the Act for a religious-cum-charitable trust.
4. Holding of 'specified violations' under section 12AB(4) of the Act.
5. Proper consideration of the objects of the trust for registration.

Detailed Analysis:
1. The appeal was filed against the rejection of registration under section 12AB of the Income Tax Act by the Commissioner of Income Tax (Exemption). The Commissioner observed that the trust's object seemed charitable but restricted to the benefit of a particular religious community, the Jain community. The rejection was based on the application filed by the appellant and the objects mentioned in the trust deed. The CIT(E) invoked the provisions of Section 13(1)(b) of the Act, leading to the denial of registration under section 12A of the Act.

2. The cancellation of the provisional registration of the assessee-trust was also a key issue raised in the appeal. The CIT(E) held that the trust's activities were limited to benefiting a specific religious community, which led to the cancellation of the provisional registration. The appellant contested this decision by highlighting the broader objectives of the trust, including welfare activities for the general public and educational, occupational, and medical help for all.

3. The appellant argued that the CIT(E) erred in invoking Section 13(1)(b) of the Act for a religious-cum-charitable trust. The appellant contended that the provisions of Section 13(1)(b) apply only to charitable trusts, not religious-cum-charitable trusts. The appellant sought registration under section 12A of the Act, emphasizing that the trust's activities were not limited to benefiting a specific religious community but extended to all people following Jainism.

4. The issue of holding 'specified violations' under section 12AB(4) of the Act was also raised in the appeal. The CIT(E) had held that the assessee-trust conducted 'specified violations' as per the explanation to section 12AB(4) of the Act. However, the appellant argued that the objects of the trust were not limited to benefiting a private group but extended to all people following Jainism. The appellant sought a reevaluation of the violations alleged by the CIT(E).

5. The proper consideration of the objects of the trust for registration was a crucial aspect of the appeal. The appellant contended that the rejection of registration based solely on one clause of the trust's objects was improper. The Tribunal noted that the trust's objects included various activities for the welfare of the general public, medical help for needy patients, and educational assistance, indicating a broader scope beyond benefiting a specific religious community. The Tribunal referred to relevant judicial precedents and directed the matter to be restored to the file of CIT(E) for de novo consideration, emphasizing the need for a comprehensive review of the trust's activities and objectives.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the matter to be reconsidered by the CIT(E) with adequate opportunity for the assessee to present necessary documents and evidence. The decision highlighted the importance of a holistic assessment of the trust's objectives and activities for registration under the Income Tax Act.

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