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Facts
The Assessee Trust sought registration under section 12A of the Income Tax Act. The Commissioner rejected the application citing that one of the trust's objects (benefiting the Dawoodi Bohra community) violated Section 13(1)(b) and investments contravened Section 11(5) of the Act.
Held
The Tribunal noted that the Assessee offered to amend the objectionable clause in the trust deed and remove other violations. Considering this undertaking, the Tribunal set aside the Commissioner's order and remanded the case.
Key Issues
Whether the rejection of 12A registration was justified based on the trust's objects and investments, and if an undertaking to rectify violations is sufficient ground for remand.
Sections Cited
12A, 13(1)(b), 11(5)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 28.09.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (Exemptions) (in short Ld. Commissioner) u/s 12AB of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2025-26.
In this case, the Assessee, has sought for registration u/s 12A of the Act by filing an application in Form no.10AB which was incomplete and un-accompanied with the required documents as observed by the Ld. Commissioner and therefore he in order to verify the said application, vide notice dated 05.07.2024 requested the Assessee to furnish complete set of documents by 08.08.2024 but of not avail, as the Assessee failed to comply and therefore the Ld. Commissioner issued other show cause notices and reminder, in response to which the Assessee made online submission on dated 23.09.2024 (after due date).
On considering the submission of the Assessee, it was seen by the Ld. Commissioner that at point no.1(c) of object of the trust, the trust intends to apply funds for a particular religious’ community (members of the Dawoodi Bohra community in the state of Gujarat and Maharashtra of India) which is in violation of section 13(1)(b) of the Act. The Ld. Commissioner further noticed that various investments made by the trust in various funds were in contravention of section 11(5) of the Act.
The Assessee, though replied and tried to establish that investments made by the Assessee using trust’s fund are fixed deposits made with Bank of India and HDFC Bank, on which TDS has also been deducted, on the interest accrued on the investments.
The Ld. Commissioner, not being satisfied with the reply of the Assessee, ultimately rejected the application filed by the Assessee by observing and holding as under:
“That the submission made by the Assessee neither satisfactory nor conclusive, as the trust deed is the primary document, which verifies the conditions and objects of its trust, on which expenditure is to be made. The Assessee has not presented/submitted any documentary evidence/proof of passing the resolution regarding amendment in trust deed, nor has it provided any proof that it has initiated the process for amendment in trust deed before the charity commissioner. Thus the object as mentioned above, is in clear violation as per section 13(1)(b) of the Act and therefore the application filed by the Assessee for 12A registration is not maintainable, due to abovementioned violation and therefor the application filed by the Assessee is rejected”.
The Assessee, being aggrieved is in appeal before us and on being asked, has submitted that it is ready and undertakes to amend the objects of the trust and will remove the objectionable object i.e. 1(c) as objected by the Ld. Commissioner and other objects as well, which are in violation of the relevant provisions of the Act.
The Ld. D.R., on the undertaking of the Assessee, has suggested that considering the undertaking of the Assessee, the case may be remanded to the file of the Ld. Commissioner for decision afresh but subject to condition of complying with the conditions of undertaking.
We have heard the parties and given thoughtful considerations to the impugned order and submissions made by the parties and peculiar facts and circumstances of the case. The Assessee is ready to remove the objectionable clause specifically 1(c) as objected by the Ld. Commissioner and any other objectionable clause, if any of the objects of the trust and has also given undertaking for doing the same, which is reproduced as under:
8.1 Thus, considering the peculiar facts and circumstances in totality and for the just decision of the case and substantial justice, and considering the undertaking given by the Assessee, we are inclined to set aside the impugned order and remand the instant case to the file of the Ld. Commissioner for decision afresh, suffice to say by affording reasonable opportunity of being heard to the Assessee for removing the objectionable clause i.e. 1(c) of the objects and any other clause of the objects of the Assessee trust , within one month from the date of this order and to establish that the investment made by the Assessee trust in various funds is genuine and not in contravention of the provisions of section 11(5) of the Act. Thus, the case is remanded to the file of the Ld. Commissioner, accordingly.
In the result, the appeal filed by the Assessee stands allowed for statistical purposes. Order pronounced in the open court on 25.03.2025.