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TMI Blog2024 (8) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961, the provisions of section 13(1)(b) would not be applicable to such trust, even if, such trust was established or created for the benefit of any particular religious community or caste. We find that assessee-trust, under consideration, was in existence since in 1937, that is, prior to the Income-Tax Act, 1961, came into being. That is, the trust under consideration was created in 1937, however, the Indian Income Tax Act 1961, was come into force in the year 1961. Therefore, the assessee-trust was in existence prior to the Indian Income Tax Act 1961, hence the provisions of section 13(1)(b) of the Income Tax Act, 1961, would not be applicable to the assessee-trust under consideration. Therefore, CIT (E) should not have denied the registration on this issue. Registration of the trust should not be denied on account of provisions of section 13(1) (b) as these provisions are not applicable to the assessee-trust, under consideration, as explained above. Therefore, we direct the CIT(E ) to grant the registration to the assessee-trust provided, the assessee-trust fulfilled other conditions, as mentioned in section 12AB and Rule 17A of the Income Tax Rules, 1962. For st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and on verification of the details available on records, as well as Self-Certified copy of Public Trust Register [PTR], the ld CIT(E) noticed from the objects of the trust that objects are restricted to particular community i.e. Soni Nyat . The objects of the trust show that the trust is established for the benefit of a particular community i.e. Soni Nyat and not for general public. Therefore, ld CIT(E ) noted that the trust is created for the benefit of a particular community i.e. Soni Nyat which does not ensure for the benefit of the public, and thus, provisions of Section 13(1)(b) of the I.T.Act, 1961 are fully applicable in the assessee s case. Further, the assessee has not furnished any documentary evidences to change in the object of the trust. In view of the above, the assessee does not satisfy the conditions for grant of approval as sought. The ld. CIT(E) also noted that assessee-trust does not have intention even to start charitable/religious activities. Section 12AA makes, it very clear that before granting registration under this section, the Commissioner has to satisfy himself about the genuineness of the activities of the trust or institution and also h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee- trust. 8. On the other hand, the Ld. D.R. for the Revenue, argued that before Ld. CIT(E), the assessee-trust has failed to submit the relevant documents and details to prove the genuineness of the activities. Before the Ld. CIT(E), the assessee also failed to submit the objects of the Trust mentioned in the Public Trust Register (PTR). Since, the assessee has not submitted the essential documents before the Ld. CIT(E), therefore, Ld. CIT(E) has rejected the application of the assessee in From No. 10A, for approval under Section 12AA of the Act. Regarding, the provision of Section 13(1)(b) of the Act, the Ld. D.R. submitted that these provisions are squarely applicable to the Assessee-Trust under consideration, as the main object of the trust is restricted to particular community, that is Soni Nyat . Besides, the Assessee- Trust has not been carrying out any activity since long even for particular community, that is Soni Nyat .Since the Assessee-Trust has not been doing any activity and has not submitted essential documents / evidences before the Ld. CIT(E), therefore, Assessee-Trust is not entitled for registration under Section 12AA of the Act, for that Ld. D.R. for the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted in view of the verdict of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 wherein it was held that where additional ground raises a purely legal plea which goes to the very root of the matter, the same deserves to be admitted. Whether provisions of section 13(1)(b) are applicable to the assessee is purely a legal issue. As the entire facts relating to incorporation of the assessee-trust were already on record, I do not find any merit in the action of the CIT for declining to accept the legal ground and to adjudicate the same. From the assessment order itself, I found that on page No. 2, it has been clearly mentioned that the said trust was incorporated in SY 2016. This fact was also mentioned in the copy of Memorandum and Articles of Trust submitted to the Assessing Officer. The Assessing Officer has not controverted this fact which is already on record. I therefore do not find any merit in the action of the lower authorities for declining the exemption claimed under section 11, by invoking provisions of section 13(1)(b) of the Income-tax Act. 7. Hon'ble Madhya Pradesh High Court in the case of CIT v. Shri Maheshwari Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 5, 1967, on which date it was registered under the Societies Registration Act. Inasmuch as the trust enured for the benefit of the Vysya community, the Income-tax Officer thought that it was for the benefit of a particular religious community as envisaged by section 13(1)(b) of the Act and, consequently, the income derived by such a trust for the benefit of a particular religious community was not exempt under the Act. In that view, the Income-tax Officer brought to assessment the income of Rs. 21,982. The assessee contested the assessment basically on the ground that its income is not liable to be taxed in view of the provisions contained in section 11 of the Act. In appeal before the Appellate Assistant Commissioner, the assessee urged that no new trust has come into existence on December 5 1967, as held by the Income-tax Officer. It was explained that the trust initially came into existence on October 20, 1918, under the will executed by the late K. China Venkata Subbaiah and the trust was all along under administration. It was pointed out that the trust properties were augmented in course of time and the trust fund was also used for the objects which are of charitable cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that, in any event, the income of the assessee-trust derived by letting out the properties could not be exempt as the assessee-trust must be held to be carrying on an activity for profit. We are unable to accept the Revenue's plea that a new trust has come into existence on December 5, 1967, when registration was made under the Societies Registration Act. It may be pointed out that there is no requirement under the law that a trust should be registered under the Societies Registration Act in order to be recognised as a charitable institution for the purpose of earning exemption under section 11 of the Act. The requirement for earning exemption under section 11 of the Act is that there must be an institution in existence which may be in the nature of a trust or held under any legal obligation. The will dated October 20, 1918, executed by the late K. China Venkata Subbaiah had undoubtedly brought into existence a trust for the benefit of the Vysya community. Trustees were duly appointed under the will. Objects were specified and the manner in which the trust fund should be utilised was specified in the will. These requirements are sufficient to render the purpose as coming wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lets out its property. This proposition is fairly settled in the decisions of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) and CIT v. Federation of Indian Chambers of Commerce and Industry [1981] 130 ITR 186 (SC). We do not consider that there is any activity for profit involved in merely letting out a property to derive income from rents. The Tribunal was, therefore, justified in rejecting the Department's plea that there was any activity for profit involved in the present case. We accordingly answer the first question referred in the affirmative, i.e., in favour of the assessee and against the Revenue. The answer to the second question is in the negative, i.e., in favour of the assessee and against the Revenue. The answer to question No. 3 is in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference is answered accordingly. 12. The similar and identical facts were also held in the case of CIT vs. Maheshwari Agarwal Marwari Panchayat 10 taxman183 (MP), wherein it was held as follows: Facts as stated by the Tribunal are as follows: The assessee is a Panchayat registered under section 12 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the bye-laws passed on 17th March, 1958. On the basis of these two documents, the Appellate Tribunal recorded a finding of fact that the trust existed before the coming into force of the 1961 Act and managed the affairs of the property of the temple. In the light of this finding of fact about the existence of the trust before the coming into force of the 1961 Act, we have to examine whether the Tribunal was right in holding that the assessee was entitled to the benefit of exemption under section 11 of the Income-tax Act for its entire income. The department sought to deny the exemption claimed by the assessee on the short ground that in view Of section 13(1)(b) of the Act, the trust had been established for the benefit of a particular religious community. Section 13(1)(b) of the Income-tax Act is as follows : 13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof ... (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or establishe ..... 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