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Facts
The assessee, Dwarika Greens Foundation, filed an application for registration under Section 12AB of the Income Tax Act. The CIT(E) denied registration, observing that the trust's objects were primarily for the benefit of the residents of the Dwarika Green Society and not for the public at large.
Held
The Tribunal held that the objects of the assessee trust were for the benefit of its members and residents of the society, not for the general public. Therefore, it was not eligible for registration under Section 12AB of the Act.
Key Issues
Whether the objects of the trust are for the benefit of the general public to qualify for registration under Section 12AB of the Income Tax Act, or if they are limited to specific members/residents.
Sections Cited
12AB, 12A, 13(1)(b), 11, 12, 12AA
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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Dwarika Greens Commissioner of Foundation Income Tax C/o. Sarda and Sarda, Vs (Exemption), Sakar, 1st Floor, Ahmedabad Dr. Radha-Krishnan Road, Opp. Rajkumar College, Rajkot, Gujarat 360001 PAN: AADTD5958R (Respondent) (Appellant) Assessee Represented: Shri Vimal Desai, A.R. Revenue Represented: Shri A.P. Singh, CIT-DR Date of hearing : 15-04-2025 Date of pronouncement : 17-04-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the order dated 23.08.2024 passed by the Commissioner of Income Tax [Exemption] denying registration under section 12AB of the Income Tax Act 1961 (hereinafter referred to as ‘the Act’).
Page No 2 Dwarika Greens Foundation. vs. CIT(E)
Brief facts of the case is that the assessee filed Form 10AB for registration of the Trust under section 12AB of the Act on 29-02- 2024. The Ld.CIT(E) observed that the objects of the Trust are for the benefit of the residents of the Dwarika Green Society and its member and are not for the benefit of the public at large. Hence a show cause notice dated 05-08-2024 was issued why not to deny registration u/s. 12AB of the Act.
2.1. In response, the assessee vide letter dated 10-08-2024 replied that the majority of the objects are for the benefit of the residents of the Dwarika Green Society, but Object nos. 5, 6 and 10 are for general public as well as to welfare of animals. However a resolution was passed by the Trust during the meeting held on 08- 08-2024 that the objects of this Trust will be without discrimination of any Caste, Creed, Race or Religion for the benefit of Public at Large. A Notarized Affidavit to that extent was filed by the trustee.
After considering the above reply, the Ld. CIT(E) rejected the Registration by observing as follows: “8 Hence, the objects of the applicant need to be analyzed as to whether they are charitable in nature. The litmus test of a charitable institution is that it should primarily carry on charitable activities Charity is the noble cause meant for the benefit and upliftment of the down trodden poor and the needy. Charity is not a technical concept safeguarded by legal jargons Charity is not an edifice built on logical deliberations Charity is a divine reflection of human civilization which finds ways and means to help the needy, to protect the helpless, to support the poor and to work for the betterment of the society and mankind. So what is necessary is actual work of charity, howsoever humble it might be 8.1 From perusal of above referred objects of the applicant/assessee, it is evident that it is formed as association to protect the business interest and Page No 3 Dwarika Greens Foundation. vs. CIT(E)
welfare of its members and their families and that hardly can be considered as charitable in nature, particularly when the essence of altruism is absent from the same. On further perusal of the audited accounts available on records, the applicant/assessee is established and functioning as welfare association or union and also collecting fees from its members (Club House Rent Income, Membership Fees Society and Maintenance Income). Moreover, the welfare activities adopted for its members are in nature of services being rendered to members as are common in other welfare organizations, which could not be termed for general public utility. Under similar circumstances, the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Truck Operators Association reported in 9 taxmann.com 267 decided the matter in favour of revenue and held as under. "9. On examination of the objects and the purpose of the Association in the present case if emerges that the respondent- Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or non-member to undertake any business activity within the precincts of Hansi Town/village The Association charges fees from its members before the transportation on the basis of the distance involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing. The association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. The welfare activities adopted for the truck drivers, cleaners and mechanics of the truck owners are in the nature of staff welfare activities, as are common in other business organizations which cannot be termed for general public utility" 8.2 Further, if the intention is to benefit a section of the public as distinguished from specified individuals/class/members then the section of the public sought to be benefited must not be identifiable. However, in present case it is clearly identifiable in terms of place of investment/residence and membership. 8.3 Therefore, as the objects are not found to be Charitable in nature and for public at large. I am of the considered opinion that the applicant/assessee is not eligible for registration u/s 12A of the Act Therefore in the facts and circumstances of the case, the applicant/assessee cannot be granted registration u/s 12A of the Act.
Page No 4 Dwarika Greens Foundation. vs. CIT(E)
In view of the above, the present application filed in Form No.10AB u/s 12A(1)(ac) (vi)-ITEM(B) of the Act is rejected.” 4. Aggrieved against the rejection order, the assessee is in appeal before us raising the following Grounds of appeal:
1. The order u/s. 12AB(1)(b)(ii)(B) of the Act is bad in law.
2. The learned CIT(Exemption) has erred in law as well as on facts for rejecting the application for registration u/s. 12A(1)(ac) of the Act.
3. The learned CIT(Exemption) has erred in law as well as on facts in considering the objects of the trust for the benefits of the residents of the Dwarika Green Society and its members and are not for the benefit of the public at large.
We have heard the rival submissions and perused the materials available on record including the Paper Book filed by the Assessee. It is undisputed fact that the assessee Trust was registered under the Bombay Public Trust Act on 23-06-2020 and the activities of the Trust commenced from 26-12-2021 and the new provisions of section 12AB which is applicable from 01.04.2021. Perusal of the above provisions more particularly Clause (d) to Explanation of Section 12AB(4) of the Act clearly lays down that registration of the Trust or Institution established for charitable purpose created or established after the commencement of this Act, wherein the trust has applied any part of its income for the benefit of any particular religious community or caste can be cancelled. In this context perusal of the main objects of the Trust makes it abundantly clear that all the objects enumerated therein are related to members of the Dwarika Green Society which is a specific violation under clauses [c] and (d) to Explanation to Section 12AB(4) of the Act.
Page No 5 Dwarika Greens Foundation. vs. CIT(E)
5.1. Further section 13[1][b] of the Act exclude the benefit of section 11 and 12 to a charitable institution created or established after commencement of the Act, income thereof the trust for the benefit of any particular community or caste. The Hon'ble Supreme Court in the case of CIT vs Dawoodi Bohara Jamat reported in 43 taxmann.com 243, held that the provision of section 13(1)(b) of the Act is applicable even to a composite trust/ institution having both religious and charitable objects, by observing as follows:
"… 45. From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste." 5.2. Thus a conjoint reading of Sections 11, 12, 12A and 12AA of the Act makes it clear that registration under sections 12A and 12AA is a condition precedent for availing benefit under Sections 11 and 12. Unless an institution is registered under the aforesaid provisions, it cannot claim the benefit of Sections 11 and 12. Further Section 13[1][b] prescribes the circumstances wherein the exemption would not be available to a Religious or Charitable trust otherwise falling under Section 11 or 12. Therefore, it requires to be read in conjunction with the provisions of Sections 11 and 12 towards determination of eligibility of a Trust to claim exemption under the aforesaid provisions, while granting registration.
Page No 6 Dwarika Greens Foundation. vs. CIT(E)
5.3. In the present case, Ld CIT [E] has considered the provisions of sec 13(1)(b) of the Act, which is applicable only in a case of Charitable Trust or Institution created or established after commencement of this Act and only for the benefit of the residents of the Dwarika Green Society and its members and thereby denied the registration, which in our considered view is well within the provision of amended law and therefore the order denying registration passed by Ld CIT[E] does not require any interference.
Next coming to the case law relied by the Ld. Counsel for the assessee namely CIT(E) -Vs- Bayath Kutuchhi Dasha Oswal Jain Mahajan Trust wherein Hon’ble Jurisdictional High Court held that the Trust had large number of other objects for the benefit of General Public apart from objects for benefit of Religious Community, therefore held that the Tribunal was correct in allowing Registration to the Trust by observing as follows:
“… 7. It can thus be seen that the Commissioner focused his attention to clause 4.2 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. as per clause 4.1, 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. As per clause 4.3, 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 in clause 4.4 the trust could engage in rural development schemes. As per clause 4.5, the trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Clause 4.6 which pertains to other included activities such as running cow shelters, to provide food, cloth and financial help for Page No 7 Dwarika Greens Foundation. vs. CIT(E) economically weaker persons, to help during natural or other calamities, to serve humans and animals etc.
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. ” 6.1. Thus the ratio of the above judgment will not be applicable to the facts of the assessee case, since the objects of the Assessee Trust which is meant only for the residents and members of the Society not for Public at Large. Thus we don’t find any infirmity in the order passed by Ld. CIT(E) and the same does not require any interference.
In the result, the appeal filed by the Assessee is devoid of merits and the same is hereby dismissed.