BRAHMAN SABHA KARVEER,KOLHAPUR vs. COMMISSIONER OF INCOME-TAX EXEMPTION, PUNE

आयकर अपीलीय अिधकरण “ए” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE (Through Virtual Court) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM आयकर अपील सं. / ITA No.626/PUN/2020 Brahman Sabha Karveer, 167, Mangaldham, B Ward, Mangalwar Peth, Kolhapur-416012. .......अपीलाथ� / Appellant PAN : AAATB1370L बनाम / V/s. CIT Exemption, ……��यथ� / Respondent Pune. Assessee by : None Revenue by : Shri Deepak Garg सुनवाई क� तारीख / Date of Hearing : 07.01.2021 घोषणा क� तारीख / Date of Pronouncement : 07.01.2021 आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee trust directed against the order of the ld. Commissioner of Income Tax (Exemption), Pune dated 05.10.2020 passed u/s 12AA(1)(b)(ii) of the Income Tax Act, 1961 (for short “the Act”) denying the grant of registration u/s 12AA of the Act. 2. Briefly, the facts of the case are that the appellant, namely, Brahman Sabha Karveer is a society originally registered under the Societies Registration Act, 1860 in the year 1943 and later under the Bombay Trust Act, 1950. It appears that the appellant society was formed with the mixed objects like religious and non-religious activity and the appellant society was registered u/s 12A of the Act. It is stated that the appellant society was

2 ITA No.626/PUN/2020 enjoying the registration u/s 12A of the Act since 1977-78. However, it is stated that the original certificate of the registration u/s 12A of the Act was misplaced and on the legal advice filed fresh application in Form 10A for grant of registration u/s 12AA of the Act on 04.03.2020. 3. On perusal of the application in Form 10A, ld. Commissioner of Income Tax (Exemption) had issued a questionnaire on 08.06.2020 calling for the appellant to file certain details. The ld. Commissioner of Income Tax (Exemption), on perusal of the information filed and the trust deed, held that the objects of the trust are religious in nature and also observed that the appellant society is engaged in the activities of running an Event Hall and a Bhaktniwas and enjoying the receipts of the rentals income attracting the proviso to section 2(15) of the Act. The ld. Commissioner of Income Tax (Exemption) also held that the receipts the income of the trust were not fully applied for charitable purpose instead the surplus funds were invested in the form of FDs with banks. Based on these observations, he had come to the conclusion that the activities as well as the objects of the trust are not charitable and also not satisfied with the genuineness of activities of the trust and, accordingly, he denied the grant of registration u/s 12AA of the Act vide order dated 05.10.2020. 4. Being aggrieved by the above decision of the ld. Commissioner of Income Tax (Exemption), the appellant is before us in the present appeal. 5. Before us, when the matter was called none appeared on behalf of the assessee. On the other hand, ld. CIT-DR placed heavily reliance on the impugned order.

3 ITA No.626/PUN/2020 6. We heard the ld. CIT-DR and perused the material on record. The solitary issue in the present appeal relates to the grant of registration u/s 12AA of the Act. On perusal of the objects of the appellant society, it is clear that the appellant society was formed with the mixed objects of the religious and non-religious activities. The appellant society had been formed in the year 1943 and it was stated that the appellant society had been enjoying the registration u/s 12A of the Act since 1977-78. These facts have not been disputed by the ld. CIT-DR. The appellant society sought the renewal of the registration u/s 12AA of the Act for whatever reasons by filing Form 10A on 04.03.2020. On perusal of the Form 10A, ld. Commissioner of Income Tax (Exemption) sought certain clarification/information from the appellant society which was duly complied with. Based on the information containing Form 10A and the subsequent information filed during the course of proceedings before the ld. Commissioner of Income Tax (Exemption), the ld. Commissioner of Income Tax (Exemption) had come to the conclusion that the objects of the trust are religious in nature. Further, the ld. Commissioner of Income Tax (Exemption) gave a finding that he was not satisfied with the genuineness of the activities on noticing two facts that (1) the income of the trust were not wholly applied for charitable purpose instead the surplus funds were invested in the form of FDs with the bank (2) the appellant society was in receipt of income from the letting out of Event Hall and Bhaktniwas, thereby attracting the proviso to section 2(15) of the Act. 7. We are afraid that the reasons assigned by the ld. Commissioner of Income Tax (Exemption) for denial of grant of registration u/s 12AA of the Act are no longer tenable in the eyes of law. Now, we shall deal with each of the reasons assigned by the ld. Commissioner of Income Tax (Exemption). Primarily, the ld. Commissioner of Income Tax (Exemption) was of the opinion

4 ITA No.626/PUN/2020 that the objects of the trust are not charitable in nature because the some of the objects are religious in nature. The Hon’ble Supreme Court in the case of Fazlul Rabbi Pradhan vs. State of West Bengal, AIR 1965 SC 1722 clearly held that the religious activity also falls within the ambit and scope of charitable activities. Further, the Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohra Jamat, 364 ITR 31 also held that whereby the objects of the trust are mixed in nature i.e. religious, partly religious and partly non- religious the registration cannot be denied u/s 12AA of the Act. These ratio of the judgements was followed by us consistently in series of decisions of the Tribunal like in the case of Jain Shwetambar Mandir Trust vs. CIT (Exemptions) vide ITA No.2901/PUN/2017 order dated 04.11.2020 (wherein one of us i.e. the Hon’ble Accountant Member is authored) held as under :- “6. We heard the ld. CIT-DR and perused the material on record. The only issue involved in the present appeal relates to the grant of registration u/s 12AA of the Act. The ld. Commissioner of Income Tax (Exemptions) had denied the registration primarily on the ground that the object of the trust prima-facie appears to be religious in nature and there was no dissolution clause in the instrument creating the trust. The tenability of the reasoning of the ld. Commissioner of Income Tax (Exemptions) requires to be adjudged on touchstone of the law laid down in the decision of the Hon’ble Supreme Court in the case of Fazlul Rabbi Pradhan vs. State of West Bengal, AIR 1965 SC 1722 held that the words “trust for charitable purposes” would include even trust for advancement of religious. The Hon’ble Supreme Court’s decision was relied upon in the case of CIT vs. Barkate Saifiyah Society, 213 ITR 492 (Guj.) where it was held that the words “trust for charitable purposes” would include even trust for advancement of religious. The words “trust for charitable purposes” would also include even trust for advancement of religious in the following decisions :- (i) CIT vs. Jaipur Charitable Trust , 81 ITR 1; (ii) Zenith Tin Works Charitable Trust vs. CIT, 102 ITR 119; (iii) CIT vs. Ahmedabad Rana Caste Association, 88 ITR 354; and, (iv) CIT vs. Chandra Charitable Trust, 294 ITR 86. 7. The reasoning of the ld. Commissioner of Income Tax (Exemptions) that in the absence of dissolution clause the appellant trust does not entitle for registration u/s 12AA of the Act is also required to be adjudged in view of the decision of the Hon’ble Gujarat High Court in the cases of (i) DCIT vs. Vanchhara Thirthadhipati Chintamani Paraswaprwabhu, 233 Taxman 01 (Guj.) and (ii) CIT vs. Taapagachha Sangh Mota, 232 Taxman 715 (Guj.)

5 ITA No.626/PUN/2020 8. Further, the provisions of section 13(1)(b) of the Act had carved out exception to the exemption available u/s 11 and 12 of the Act. One of those exception is that the exemption u/s 11 and 12 would not be available in case any income of trust or institution is created or established for the benefit of any particular religious, community or caste. The Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohra Jamat, 364 ITR 31 after exhaustively referring to the earlier precedent, held that where the objects of a trust are both charitable and religious, the trust shall be eligible for registration u/s 12AA of the Act. The section only requires to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say, it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large. In the present case, ld. Commissioner of Income Tax (Exemptions) had obviously not embarked upon enquiry into this aspect. Therefore, in our considered opinion, in the interests of justice, the matter requires remission to the file of the ld. Commissioner of Income Tax (Exemptions) for fresh adjudication keeping in view the legal position discussed above after affording reasonable opportunity of being heard to the appellant society. Accordingly, the matter is set aside to the file of the ld. Commissioner of Income Tax (Exemptions) for fresh adjudication.” 8. Thus, in the light of the legal position discussed above, it cannot be said that merely because some of the objects of the appellant society are religious in nature it cannot be said that the objects are not charitable in nature. Thus, the order of the ld. Commissioner of Income Tax (Exemption) on this score cannot be upheld. 9. Secondly, merely because the appellant society is in receipt of income from letting out Event Hall and Bhaktniwas it cannot be said that the activities of the appellant society are not genuine. Because, there is no bar under the law to earn income for the purpose of attaining the main objects of the trust. As regards the applicability of the proviso to section 2(15) of the Act, it is settled proposition of law that what needs to be examined is the dominate and primary purpose of the assessee is a object of the public utility not involving carrying on any activity of the profit within the meaning of section 2(15) of the Act. Even in the activity of carrying on of profit if the entire income from such activity was utilized for various certain charitable purpose for which the appellant society was established it would fully satisfy the conditions laid down u/s 2(15) of the Act in the light of the judgement of

6 ITA No.626/PUN/2020 the Hon’ble Supreme Court in the case of Surat Art Silk Cloth Manufacturers’ Association, 121 ITR 1. As regards to the reasoning of the ld. Commissioner of Income Tax (Exemption) that the appellant society had invested surplus funds of the trust in the form of FDs and applicability of the proviso to section 2(15) of the Act, it is settled proposition that the issue of grant of registration u/s 12AA of the Act and the examination of exemption u/s 11 of the Act are two different and distinct procedures prescribed under the Act. The issues of exemption u/s 11 of the Act cannot be examined at the stage of grant of registration u/s 12AA of the Act because the stage of examination of issues u/s 11 of the Act would arise only after grant of registration u/s 12AA of the Act. This reasoning was applied by the Jurisdictional High Court in the case of CIT (Exemptions) vs. Mumbai Metropolitan Region Development Authority, 115 taxmann.com 71 and Goa Industrial Development Corp. vs. CIT, 116 taxmann.com 42 wherein the Hon’ble Jurisdictional High Court held that the mere introduction proviso to section 2(15) of the Act by itself would not render the activities of the assessee trust as non-genuine activities, so as to, entitle Commissioner of Income Tax (Exemption) to cancel and deny the registration u/s 12AA of the Act. Similarly, the Co-ordinate Bench of the Tribunal in the case of Sarthi Youth Foundation vs. CIT, Exemption vide ITA No.562/PUN/2020 order dated 18.12.2020 after referring to the several judicial precedents held as under :- “9. We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to the grant of registration u/s 12AA of the Act. From the perusal of the impugned order, it is clear that the ld. Commissioner of Income Tax, Exemption, Pune denied the grant of registration u/s 12AA of the Act solely on the ground that the appellant trust had failed to furnish the evidence of expenditure of Rs.6.57 lakhs incurred during the financial year 2018-19. There is no allegation by the ld. Commissioner of Income Tax, Exemption, Pune that the expenditure has been incurred by the appellant trust for objects other than the charitable objects. Nor was it the case of the ld. Commissioner of Income Tax the objects of the trust are not charitable in nature. It is trite law that at the time of grant of registration, the Commissioner of Income Tax is only expected to examine and satisfy himself that the objects of the trust are charitable and its activities are in furtherance of the charitable in nature i.e. satisfy himself about the genuineness of the

7 ITA No.626/PUN/2020 activities carried on by the assessee as held by the Hon’ble Apex Court in the case of Ananda Social and Educational Trust (supra). 10. In the present case as observed by us supra that the exercise undertaken by the ld. Commissioner of Income Tax, Exemption, Pune by calling for the evidence in support of the expenditure is beyond scope of his powers vested with him u/s 12AA of the Act and furthermore the proof of the expenditure is an item of assessment. The grant of registration and the assessment of income the trust are two different distinct procedure prescribed under the Act. In this regard, reliance can be placed on catena of the decisions :- (i) Fifth Generation Education Society vs. CIT, 185 ITR 634; (ii) Shantagauri Ramniklal Trust vs. CIT, 239 ITR 528; (iii) M. Visvesvaraya Industrial Research And Development Centre vs. ITAT, 251 ITR 852; (iv) New Life in Christ Evangelistic Association vs. CIT, 246 ITR 532; (v) N.N. Desai Charitable Trust vs. CIT, 246 ITR 452; and, CIT vs. Vijay Vargiya Vani Charitable Trust, 369 ITR 360. (vi) 11. From the perusal of the impugned order, it is crystal clear that the ld. Commissioner of Income Tax, Exemption, Pune had lost sight distinction between the process of registration and the exemption or assessment of income u/s 11 of the Act. Therefore, the reasoning given by the ld. Commissioner of Income Tax, Exemption, Pune cannot be sustained in law and, accordingly, we set-aside the order of the ld. Commissioner of Income Tax, Exemption, Pune dated 18.09.2020 passed u/s 12AA of the Act and direct the ld. Commissioner of Income Tax, Exemption, Pune to grant the registration u/s 12AA of the Act. Accordingly, the appeal of the assessee is allowed.” 10. To the same effect, the decisions of the Hon’ble M. P. High Court in the case of CIT vs. D.P.R. Charitable Trust, 61 DTR 410 (MP) and CIT vs. Divine Shiksha Samiti, 428 ITR 552 (MP) and the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Manekji Mota Charitable Trust, 267 taxman 16 and even recently the Hon’ble Madras High Court in the case of Thanthi Trust vs. DIT (Exemptions) in Tax Case (Appeal) No.822 of 2018 dated 29th October, 2020 after referring to the above judicial precedents recognized distinction between the claim for grant of registration u/s 12AA of the Act and the claim for exemption u/s 11 of the Act and, accordingly, held that the item of exemption cannot be subject matter of examination at the time of grant of registration. Therefore, in the light of position of law discussed above, the reasoning of the ld. Commissioner of Income Tax

8 ITA No.626/PUN/2020 (Exemption) cannot be upheld. We find from the impugned order except for stating that the activities are not genuine because of the applicability of the proviso to section 2(15) of the Act and the investments in the FDs out of the income there is no other allegation against the appellant society. In the circumstances, we set-aside the impugned order and direct the ld. Commissioner of Income Tax (Exemption) to grant the registration u/s 12AA of the Act. 11. In the result, the appeal of the assessee is allowed. Order pronounced on this 07th day of January, 2021. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 07th January, 2021. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT Exemption, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 4. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 5. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.