THE AHBAB BAHU UDDESHIYA EDUCATION SOCIETY ,NAGPUR vs. CIT(EXEMPTIONS ), PUNE

PER G. MANJUNATHA, A.M.

The present appeal filed by the assessee is against order dated

18th April 2018, passed under section 12AA(1)(b)(ii) of the Income Tax

Act, 1961 (for short “the Act”) r/w rule 17A of the Income Tax Rules,

1962, by the learned Commissioner of Income Tax (Exemp.), Pune,

rejecting the application filed by the assessee for registration of trust

under section 12AA of the Act. The grounds raised by the assessee are

extracted below:-

2 The Ahbab Bahu Uddeshiya Education Society

1.The order passed by the learned CIT (Exemption) under section 12AA(I)(b)(ii) is bad in law.

2.The learned CIT (Exemption) erred in denying registration to the appellant trust under section 12A of the Act without appreciating that the object of the trust was to impart "education" which is a "charitable purpose" as per section 2 (15) of the Act and the appellant trust has complied with all the requirements of registration under section 12A of the Act.

3.The learned CIT (Exemption) erred in not appreciating various clauses of the Trust Deed, wherein clauses 3(b), 3(c) clearly states that the object of the appellant trust was to impart secular education to all persons irrespective of religion, caste, community or social status.

4.Without prejudice to aforesaid grounds, the learned Cl'T (Exemption) erred in applying provisions of section 13at the stage of disposing off application of appellant trust seeking registration under section 12A of the Act.

5.The appellant craves leave to add, alter, vary, omit, amend or delete one or more of the above grounds of appeal before, or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide this appeal according to law.”

Uddeshiya Education Society, Nagpur, is registered with the Asstt.

Charity Commissioner, Nagpur, with the main object of imparting

education by establishing Schools, Colleges and other institutions for

the benefit of general public and in particular minority community. The

assessee has filed application in Form no.10A for registration of the

trust / society under section 12A of the Act, on 9th October 2017. The

aims and objects of the assessee trust / society, as per registered

Memorandum of Association, are as follows:-

3 The Ahbab Bahu Uddeshiya Education Society

AIMS & OBJECTS OF THE SOCIETY

3) OBJECTS

a) Objects shall be to achieve the educational and all other goals of the society in general and Muslim Minority Community in particular as under:–

b) To establish, extend, construct, alter, consolidate, support, develop, conduct, endow, administer, schools, colleges & other institutions to impart ethical education and libraries, Hotels and reading rooms for general use including the field of Medical & technical Education.

c) To support & promote the advancement of secular ideas and other academic activities in all its branches, particularly schools, colleges, cultural, recreational, medical, technical and social science centres.

d) To provide and encourage medical assistance in the form of hospitals, clinics and similar centers for all persons irrespective of religion, caste community or social status.

To print, publish & exhibit journal, periodicals, books, e) lectures and other reading and pictorial matter fo the diffusion of useful knowledge and in keeping with religious, cultural and moral ideals of the' Society.

f) To hold and conduct classes, lectures, conferences seminars competitions and to gives scholarships, freeships, diplomas, certificates and awards as and when required by the needy people & unemployed persons including deprived women, widows, poor, below poverty line, & destitute to secure their employments in various fields through different schemes envisaged by the Government.

g) To provide residential accommodation, either free of cost or consideration and to educate, tradition and assist financially or otherwise in the education and training of teachers, staff, students and orphans f the beneficial purposes of the Society.

h) (i) To receive contribute / subsidy / grant and asset from the Government, Ahbab Co-operative Housing Society Ltd and others for charitable purposes.

(ii) To raise funds and to receive and use any Gift, Zakat, Fitra, donation subscriptions, contributions & endowment in cash or other movable or immovable property of all descriptions and to undertake and carry out the offices, duties and functions of

4 The Ahbab Bahu Uddeshiya Education Society

Trustees, Managers, and administrator solely or jointly with others, in respect of any such gifts, donations and foundations whether vested directly in the Society or otherwise.

h) To subscribe or give donations to and financial or otherwise to assist or other Society or Trust with similar objects.

i) To purchase/ take over and/or administer all or any part of the movable and immovable assets and/or unregistered vested in any person or person or body or housing society and such institution and or properties to be managed by eh above Society.

j) To invest the funds of the Society in whole or part towards the attain of the above objects as long as the institutions administer by the So remain singly or collectively under the management of the Society.

k) To do all such 'other lawful acts and deeds as are essential or conducive to the attainment of the objects of the Society.

l) To frame the rules for conduct of employees.

m) To become the member of the Ahbab Co-op. Housing Society Nagpur-13, and the membership will be represented through the Pre or any other member as designated by the Governing Body of the Society.

n) The Ahbab Bahu Uddeshiya Education Society is belonging to minority community and it is the Muslim minority institution and it will accomplish its objects by virtue of rights of Muslim Minority Institution in teh best interest of the people as enshrined under Article-30 of the constitution of India.”

Commissioner of Income Tax (Exemp.), Pune, the assessee was called

upon to file necessary documents in support of its application for

registration of trust / society. On a perusal of the application filed by

the assessee along with evidences, the learned Commissioner of

Income Tax (Exemp.), Pune, observed that two clauses in particular

clause-(m) and clause-(n) indicate that the benefit of the society /

5 The Ahbab Bahu Uddeshiya Education Society

trust are limited to the members of the Ahbab Co-operative Society

and the society is established for the purpose to accomplish its objects

by virtue of rights of Muslim minority institution in the best interest of

the people as enshrined under Article-30 of the Constitution of India.

The learned Commissioner of Income Tax (Exemp.), Pune, further

observed that the purpose of the trust is to establish a School for co-

operative housing society and claiming exemption with respect of

donation which is evident from the fact that release deed executed in

favour of the assessee clearly shows that society is formed for the

purpose of importing education among the children of housing co-

operative society and, therefore, it is evident from the fact gathered

during the proceedings that the trust is formed for the benefit of a

particular community but not the general public at large, therefore, he

opined that registration under section 12A of the Act cannot be

granted to a trust or institution which is formed for the benefit of a

particular community, caste or creed or society and accordingly

rejected application filed by the assessee under section 12A of the Act.

to the Memorandum of Association submitted that nowhere in the

objects of the society, it is stated that it existed only for a particular

community but the object clearly establishes the fact that the society

is formed for the purpose of imparting education by establishing

6 The Ahbab Bahu Uddeshiya Education Society

Schools, Colleges and other institutions for the benefit of general

public at large irrespective of religion, caste, community and creed or

social status. The learned Authorised Representative further submitted

that the learned Commissioner (Appeals) has incorrectly appraised the

fact by referring to a clause which does not state the benefit of society

is limited to members of housing co-operative society and its children.

The learned Authorised Representative further submitted that even

though the society has the words “Muslim Minority Community” in its

free amended Memorandum of Association, but later on, on the basis

of suggestion of the Income Tax Officer, the object clause has been

amended so as to remove the word “Muslim”. The learned Authorised

Representative further submitted that even under Article-30 of the

Constitution of India, the minority communities are allowed to set-up

their own educational institutions for the benefit of minority

community, therefore, the learned Commissioner of Income Tax

(Exemp.), Pune, erred in holding that the society is formed for the

benefit of a particular community on the basis of certain clauses in the

Memorandum of Association and release deed, but fact remains that

the release deed was executed by the housing society to transfer the

right of property in favour of the society to enable to construct Schools

and Colleges for the benefit of general public including the members of

housing society. He further submitted that the learned Commissioner

of Income Tax (Exemp.), Pune, at the time of registration, is required

7 The Ahbab Bahu Uddeshiya Education Society

to look into its objects and activities of the society and if the objects of

the society are in charitable nature and its activities are carried out in

accordance with its objects, then, there is no reason for the

Commissioner to deny the benefit of registration under section 12A of

the Act. In this regard, he relied upon the decision of the Hon’ble

Gujarat High Court in CIT(E) v/s Bayath Kutchhi Dasha Oswal Jain

Mahajan Trust, [2016] 243 taxman 60 and the decision of the

Tribunal, Pune Bench, in Diocese of Pune (CNI) v/s CIT, [2015] 63

SOT 554 (Pn.).

supporting the order of the learned Commissioner of Income Tax

(Exemp.), Pune, submitted that the facts gathered during the

proceedings, clearly proves that the society is formed for the benefit of

a particular society which is evident from the fact that to get the

benefit of the society, the membership of the housing society is

necessarily to be taken. The learned Departmental Representative

further submitted that when the trust is formed for a particular

community or caste or creed, it loses its charitable nature, therefore,

the learned Commissioner of Income Tax (Exemp.), Pune, was right in

rejecting the registration under section 12A of the Act.

orders of the authorities below and the material placed on record, we

8 The Ahbab Bahu Uddeshiya Education Society

find that provisions of section 12AA of the Act prescribes the procedure

for registration of trust / institution. As per the said provision, the

Commissioner, before registration of a trust, shall call for such

documents or information as he thinks necessary in order to satisfy

himself about the genuineness of the activities of the trust or

institution and the objects of the trust. If the objects of the trust are in

charitable nature and its activities are carried out in accordance with

its objects, then, the learned Commissioner of Income Tax (Exemp.),

Pune, is required to grant registration under section 12A of the Act. In

this case, on a perusal of the order passed by the learned

Commissioner of Income Tax (Exemp.), Pune, we find that he has

rejected registration under section 12A of the Act, on the ground that

the society is formed for the benefit of a particular society irrespective

of caste, community, creed, etc. The learned Commissioner of Income

Tax (Exemp.), Pune, has given two reasons for rejecting the

application filed by the assessee. According to him, to get the benefit

of the trust, it is necessary to become a member of the co-operative

housing society and the society is formed to accomplish its objects by

virtue of rights of Muslim minority institution in the best interest of the

people as enshrined under Article-30 of the Constitution of India. The

learned Commissioner of Income Tax (Exemp.), Pune, further opined

that there is a condition in the release deed executed by the housing

society that considering the need of education among the children of

9 The Ahbab Bahu Uddeshiya Education Society

the above co-operative housing society the society, has donated the

land and property of the housing society in favour of the assessee.

Therefore, he opined that the society is formed for the benefit of a

particular community and accordingly, it is not eligible for registration

under section 12A of the Act as public charitable trust.

of the Act. At the time of registration, the Commissioner has to satisfy

about the objects of the trust and its activities. If the objects of the

trust are charitable in nature and its activities are carried out in

accordance with its objects, then there is no further requirement of

examination of other aspects including application of other provisions

of the Act. In this case, on a perusal of the details filed by the

assessee, including its Memorandum of Association, we find that the

objects of the society are charitable in nature and benefits of the

society is for general public irrespective of caste, creed and social

status. Although, the object clause specifies that the benefit of the

society in particular for Muslim minority community, the word “Muslim”

has been deleted from the objects by amending its Memorandum of

Association. We further noticed that as per Article-30 of the

Constitution of India, minority communities are allowed to start their

own education institution for the benefit of minority community. When

the Constitution of India permits to establish a trust or society for the

10 The Ahbab Bahu Uddeshiya Education Society

benefit of the minority community and the objects of the trust are in

consonance with the Constitution of India to protect rights of the

minority community as privileged under Government rules, orders and

recommendations, then there is no reason for the learned

Commissioner of Income Tax (Exemp.), Pune, to delay the benefit of

registration merely for the reason that the trust / institution is formed

for the benefit of a particular community. We further noticed that in

the object clause, nowhere it was stated that the benefit of the society

is limited to a particular community, more particularly to the members

of housing society. Although, there is a condition in the Memorandum

of Association in respect of membership which is limited to members

of the housing society, but for the purpose of registration under

section 12A of the Act, what is required to be seen is that the object

but not the rules which governed the functioning of the society. In this

case, the objects of the trust are clearly in the nature of charitable and

the activities of the trust are carried out in accordance with its objects,

which is evident from the fact that the admission in Schools is open to

general public irrespective of caste, community, creed, as evident from

the fact that the Schools has given admission to various communities

children. Therefore, we are of the considered view that there is no

reason for the learned Commissioner of Income Tax (Exemp.), Pune,

to deny the benefit of registration under section 12A of the Act.

11 The Ahbab Bahu Uddeshiya Education Society

upon the decision of the Hon’ble Gujarat High Court in Bayath Kutchhi

Dasha Oswal Jain Mahajan Trust (supra). We have gone through the

decision of the Hon’ble Gujarat High Court in Bayath Kutchhi Dasha

Oswal Jain Mahajan Trust (supra), wherein the Hon’ble Court has

observed that where trust has large number of other objects for the

benefit of general public, apart from the objects that benefit the

religious community, the Tribunal was correct in allowing the

registration under section 12A of the Act. The relevant portion of the

order is extracted below:-

“As noted, in the present case the Commissioner referred to the social activities clause contained in the constitution of the trust to come to the conclusion that the objects of the trust were confined for the benefit of a religious community. The Court, however, noticed that there were large number of other objects which were for the benefit of general public.

It is seen that, the Commissioner focused his attention to a particular clauses of the objects of the trust to come to the conclusion that the same were for the benefit of a certain religious communities only, in the process ignoring various other objects, for e.g., the trust would engage itself in activities relating to education by maintaining and running education centers, infant schools, primary, secondary and high schools, colleges etc., to run hostels, training centers for creating awareness in the common people and to make the education available for the public. It would also engage in imparting training in computers. The trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise the trust could engage in rural development schemes. The trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Further, it had done activities such as running cow shelters, to provide food, cloth and financial help for economically weaker persons, to help during natural or other calamities, to serve humans and animals etc. [Para 7]

12 The Ahbab Bahu Uddeshiya Education Society

Thus, 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, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record.”

Samaj Trust, 221 taxmann 75 (Guj.), held that question as to whether

trust is created or established for the benefit of any particular religious

community or caste or creed would be relevant only when income of

the trust is being assessed in terms of section 11 of the Act. However,

at the time of disposing off application of a trust, seeking registration,

the Commissioner has to merely decide whether the said trust has

fulfilled necessary requirements of registration as provided under

section 12A of the Act.

the case laws discussed above, we are of the considered view that the

learned Commissioner of Income Tax (Exemp.), Pune, erred in

rejecting the application for registration under section 12A of the Act,

when the objects of the trust are charitable in nature and its activities

are carried out in accordance with its object. Therefore, we set aside

the order of the learned Commissioner of Income Tax (Exemp.), Pune,

and direct him to grant registration under section 12A of the Act.

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Order pronounced in the open Court on 26.10.2018

Sd/- Sd/- SANDEEP GOSAIN G. MANJUNATHA JUDICIAL MEMBER ACCOUNTANT MEMBER

NAGPUR, DATED: 26.10.2018

Copy of the order forwarded to:

(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary

(A.R./Sr. P.S./P.S.) ITAT, Nagpur