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Facts
The assessee, a Trust, applied for final registration under Section 12AB of the Income Tax Act. The CIT(E) denied registration, contending that some of the Trust's objects were restricted to a particular community, thereby attracting the provisions of Section 13(1)(b) and disentitling it from exemption under Section 11.
Held
The Tribunal held that Section 13(1)(b) applies at the stage of granting exemption under Section 11, not at the time of granting registration under Section 12AB. Citing judicial precedents, the Tribunal found that a trust with mixed objects (some for a specific community, some for the general public) is eligible for registration. The CIT(E) was directed to grant final registration.
Key Issues
Whether registration under Section 12AB can be denied for a trust with mixed objects based on Section 13(1)(b), and whether Section 13(1)(b) applies at the registration stage or the exemption stage.
Sections Cited
12AB, 13(1)(b), 11, 12A, 13
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Gohilwad Vankar Samaj CIT(Exemption), Seva Trust Ahmedabad Sidharth Society Vs Behind Vishramvadi, Bhavnagar Chitra S.O. Bhavnagar Sihor-363240, Gujarat PAN: AACTG5812E (Respondent) (Appellant) Assessee Represented: Shri Mohit Balani, A.R. Revenue Represented: Shri V Nandakumar, CIT-DR Date of hearing : 18-03-2025 Date of pronouncement : 03-04-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee Trust as against the appellate order passed by the Commissioner of Income Tax (Exemption), Ahmedabad denying registration under section 12AB of the Act since violation of provisions of Section 13(1)(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and therefore the Trust is not entitled for exemption under section 11 of the Act.
Page No 2 Gohilwad Vankar Samaj Seva Trust vs. CIT(E)
Brief facts of the case is that the assesse is a Trust constituted on 23-06-2022. The assessee applied for Provisional Registration and the same was granted on 08-02-2021 under section 12A(1)(ac)(vi) for the period commencing from Asst. Years 2022-23 to 2024-25. The Assessee filed Form 10AB u/s. 12A(1)(ac)(iii) on 23-02-2023 for final registration. The Ld. CIT(E) issued a show cause notice, looking into the objects of the Trust, whether provisions of Section 13(1)(b) of the Act is applicable to the Assessee Trust, since the objects are meant for particular community as follows: 2 Objects:-
1. 1. To do various works and activities for overall development of Gohilwad Vankar Samaj/Caste.
2. To undertake all activities for the academic development of the caste.
3. To undertake all activities for the medical services for caste people 4. To conducting activities for spreading knowledge among the caste, to conducting various spiritual and religious activities, to organizing lectures of scholars and saints, knowledge camps etc.
5. To construct "Gohilwad Vankar Caste Vadi" and "Vishram Vadi" for caste, Run and maintain vadi.
6. To carry out various social education and cultural activities.
7. To remove social evils from the caste, to make necessary amendments in the constitution of the caste and also to implement it by publishing magazine/books.” 2.1. Though the assessee responded but not to the specific query, Ld. CIT(E) held that the charitable activities enumerated by the Trust are restricted to the benefit of a particular religious Page No 3 Gohilwad Vankar Samaj Seva Trust vs. CIT(E) community or caste namely “Gohilwad Vankar Samaj”. Therefore the provisions of Section 13(1)(b) will be applicable and assessee is not entitled for exemption u/s. 11 of the Act. Therefore denied registration u/s. 12AB of the Act.
3. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:
1. Learned CIT(E) has erred in law and on facts of the case in rejection the provisional registration of the Appellant u/s. 12AB of the Act.
2. Your appellant reserves the right to add, delete, modify or revise any ground of appeal.
We have heard rival submissions and perused the materials available on record. In the present case, the objects (extracted in Para 2 hereinabove) of the Trust namely 1 to 5 are relating to particular caste or community, however objects No. 6 & 7 are not relating to particular community but public at large. Thus the objects enumerated are both religious to particular community and charitable to public at large in nature, which are mixed objects.
4.1. Therefore the solitary question that arise for consideration is whether a Trust created before 01-04-2021 can be denied registration under section 12AB of the Act and by invoking the provisions of Section 13(1)(b) of the Act? This issue is no more res- integra since the Jurisdictional High Court Judgment in the case of CIT(E) vs. Jamiatul Banaat Tankaria reported in [2024] 168 taxmann.com 35 held that the provisions of Section 13 of the Act would be attracted only at the time of assessment since the quantum of expenses made for religious and common purposes can Page No 4 Gohilwad Vankar Samaj Seva Trust vs. CIT(E) be determined from Profit and Loss accounts only and not at the time of granting registration u/s. 12A of the Act following Jurisdictional High Court decision in the case of CIT v. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust and by observing as follows:
“5. Learned Senior Standing Counsel Ms. Maithili Mehta for the Appellant revenue submitted that the order of ITAT is erroneous because the ITAT has erred by misinterpreting the decision of Hon'ble Supreme Court in Dawoodi Bohara Jamaat (supra) and has wrongly noted that the Hon'ble Supreme Court has held that Section 13(1)(b) would apply only at the time of grant of exemption u/s 11 and not at the time of grant of registration u/s 12A of the Act. Further, the ITAT has not considered the fact that decision of Hon'ble Supreme Court in Dawoodi Bohara Jammat (supra) was rendered in case of a composite trust/institution i.e. a trust which was both charitable as well as religious trust.
6. We have noticed that the ITAT has decided the issue as under: "5. We have gone through the decision of Hon'ble Apex Court in the case of Dawoodi Bohara Jamat (supra) and we find that the ld. CIT (Exemption) has totally mis-appreciated the decision rendered by the Hon'ble Apex Court in the said case. The Hon'ble Apex Court, we find, in the said case had categorically held that Trust with charitable objects, which existed for the benefit of a particular religious community qualified as charitable entity serving the public at large and this was sufficient for grant of registration under Section 12A of the Act, and the provisions of Section 13(1)(b) of the Act would be attracted only at the time of granting exemption to the assessee, wherein if it was found that the must existed for the benefit of a particular religious community only, the exemption under section 11 was to be denied to the assessee. The Hon'ble Apex Court, therefore, categorically found that as per the provisions of law, section 13(1)(b) could not be applied for denying the grant of registration, but was to be applied only while granting denying exemption to the assessee.
6. It is pertinent to note that the Hon'ble Apex Court has categorically held in the said decision that section 13(1)(b) comes into picture and is to be applied only when the eligibility of exemption of income in terms of provisions of section 11 is to be determined and not at the time of gram of registration. The Hon'ble Apex Court has categorically stated that the assessee has to first cross the hurdle of being eligible to Page No 5 Gohilwad Vankar Samaj Seva Trust vs. CIT(E) exemption under section 11 by obtaining a certificate of registration under section 12A in this regard. Having crossed this hurdle, only then the provisions of section 13(1)(b) would come into picture, and a trust which is for the benefit of particular community, but it objects are otherwise charitable, is a valid trust for the purpose of grant of registration.
The Id CIT(Exemption), in the present case, we find, has only picked a portion of the order of tire Hon'ble Apex Court, wherein it has been held that the provisions of section 13(1)(b) of the Act would be applicable to a trust with mixed objects i.e. both charitable and religious. But he has failed to take note of the finding of the Hon'ble Apex Court that section 13(1)(b) would apply only at the time of grant of exemption under section 11, and not at the time of grant of registration under section 12A of the Act.
Our view is further supported by the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust, (2017) 8 ITR-OL 494 (Guj) wherein on the issue of denial of grant of registration u's 12A of the Act by invoking section 13(1)(b) of the Act, it was categorically held that the provisions of section 13 would be attracted only at the time of assessment and not at the time of grant of registration. The relevant finding of the Hon'ble High Court at para 8 of his order is as under. "8. 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 earned out only for such purposes would be entering in the realm of granting exemptions in terms of section 13 of the Act, 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."
Even otherwise, we have gone through the objects of the trust, which were placed before us in the “statement of facts” which are as under: "1. Propagation and campaign of any sort of Religious and worldly cultivated activities, Gaining and education, to maintain and administer Urdu English & Arabic Language cultivation and training, Cultivation of craft and industrial training.
Page No 6 Gohilwad Vankar Samaj Seva Trust vs. CIT(E)
2. To do welfare activities for upbringing and development of each section of the society.
To establish Children Nurseries, Primary schools, High schools, Colleges, Madressa, Masjid boarding houses, Hospitals, Dispensaries etc. And for that accommodating fixed assets and to manage the same thereby. And to do every land of charitable activities.
4. To make necessary arrangements for accommodation of poor people. 5. To help the Blind, Weak, Feverish people and those poor people who cannot run their lives. 6. To give Scholarships to Muslims Students for their studies and do make provisions so as they can get the religious education. 7. To give medical assistance in the events of requirement irrespective of caste and creed and to organise medical camps. 8. To help the post, unhappy, orphan and economical poor classes and to help in burial and funerals. 9. Cottage Industries, Rural Industries, Women Industries and to run each such activities to remove unemployment with the help of the government" 10. The Ld. CIT(Exemption) has referred to object at S. no 6 which is scholarship to Muslim students for their studies and to make provision so can get religious education for arriving at his finding that the objects are for the benefit of a particular religious community so as to invoke section 13(1)(b) of the Act. Further we find that the Ld. CIT(Exemption) notes that otherwise the objects are chartable in nature except for the aforestated object. As per section 13(1)(b) exemption u/s 11 is dented if the trust is created or established for the benefit of a particular religious community. With majority of the objects found to be not catering to a particular community and no finding of the assessee actually catering for the benefit of a particular community, there is no case for invoking section 13(1)(b) of the Act in the present case. Therefore, we hold that even on merits the Ld.CIT(Exemption) was wrong in holding that section 13(1)(b) was applicable in the facts of the present case.
Page No 7 Gohilwad Vankar Samaj Seva Trust vs. CIT(E)
In view of the above, we hold that the objects of the trust are not wholly for the benefit of a particular religious community, but are largely charitable in character for general public at large, and for the purpose of granting registration under section 12A, the provision of section 13(1) (b) cannot be referred to, which is to be applied only when granting the exemption to the trust.
The order of the ld.CIT(Exemption) denying grant of registration is accordingly set aside, and the Ld. CIT (Exemption) is directed to grant the assessee-trust registration under Section 12A of the Act.
In the result, the appeal of the assessee is allowed." 7. In view of the findings recorded by the Tribunal, supported by decision of this Court in case of Commissioner of Income-tax (Exemptions) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (2017) 8 IRT-OL 493 (GUJ)/[2016] 74 taxmann.com 199/243 Taxman 60 (Gujarat) that the objects of the trust are not holly for the benefit of a particular religious community, but are largely charitable in character for general public at large and for the purpose of granting registration under 12A of the Act, the provision of section 13(1)(b) cannot be referred to. Section 13(1)(b) is to be applied while granting exemption to the trust. In view above finding, we do not find any question of law much less any substantial question of law arises for consideration.” 5. The above judgments will hold good to a Trust created before 01-04-2021. Since the assessee has to first cross the hurdle of being eligible to exemption under section 11 by obtaining a certificate of registration under section 12A of the Act. Having crossed this hurdle then after the provisions of Section 13(1)(b) will get attracted whether the trust spended for the benefit of particular community, when the trust having mixed objects in it. Therefore respectfully following the above judicial precedents, the grounds raised by the assessee is hereby allowed. The matter is restored to the file of Ld. CIT (Exemption) with a direction to grant Final Registration u/s. 12AB of the Act, after giving due opportunity of hearing to the assessee and in accordance with law.
Page No 8 Gohilwad Vankar Samaj Seva Trust vs. CIT(E)
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 03-04-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 03/04/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद