2024 (10) TMI 712 - HC - Income Tax

Denial of registration u/s 12A - charitable activity or not - assessee trust is not created for the benefit of general public but one of its object clause is for the benefit of a particular religious community - HELD THAT - In view of the findings recorded by the Tribunal, supported by decision of this Court in case of CIT V/S Bhaya Kutchhi Dasa Oswal Jain Mahajan Trust 2016 (9) TMI 8 - GUJARAT HIGH COURT that the objects of the trust are not wholly for the benefit of a particular religious community, but are largely charitable in character for general public at large and for the purpose of granting registration under 12A of the Act, the provision of section 13 (1) (b) cannot be referred to. Section 13 (1) (b) is to be applied while granting exemption to the trust. Decided in favour of assessee.

Summary

Issues:
1. Interpretation of provisions of Section 12AB of the Income Tax Act, 1961 regarding registration of a trust.
2. Application of Section 13 (1) (b) in determining grant of registration under Section 12A.
3. Consideration of recent amendments in the Income Tax Act for registration of trusts.

Detailed Analysis:
Issue 1:
The case involved an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) regarding the grant of registration under Section 12AB of the Act. The appellant, a trust, sought registration under Section 12AB, but the Commissioner of Income Tax (Exemption) denied the registration citing that the trust's objects were for the benefit of a particular religious community, thus not meeting the requirements of Section 13 (1) (b) of the Act.

Issue 2:
The ITAT allowed the appeal of the trust, emphasizing that the provisions of Section 13 (1) (b) should be applied only at the time of granting exemption to the trust and not at the time of grant of registration under Section 12A. The ITAT referred to a previous decision of the Hon'ble Supreme Court in the case of Dawoodi Bohara Jamat, which held that a trust serving a particular religious community could still qualify as a charitable entity serving the public at large, making it eligible for registration under Section 12A.

Issue 3:
The ITAT further highlighted that recent amendments in the Act introduced a new procedure for registration under Section 12A, specifying violations that could lead to cancellation of registration, including application of income for the benefit of a particular religious community. The ITAT noted that the trust's objects were largely charitable in nature, benefiting the general public, and that the provision of Section 13 (1) (b) could not be invoked to deny registration under Section 12A.

The High Court upheld the ITAT's decision, emphasizing that the trust's objects were not solely for the benefit of a particular religious community but largely charitable for the general public. The Court clarified that Section 13 (1) (b) should be considered only when granting exemption to the trust and not for the purpose of registration under Section 12A. Citing previous judgments, the Court dismissed the appeal, stating that no substantial question of law arose for consideration.