SHREE NISHKALANK MAHADEV KOLIYAK,BHAVNAGAR vs. CIT(EXEMPTION), AHMEDABAD

The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(E), denying the grant of registration under Section 12AB of the Act.

Before us, the Counsel for the applicant trust submitted that the Mahant family is an employee of the temple and therefore, any expenditure of such employees or their family was well within the objects of the trust. Secondly, the Counsel for the assessee argued that the provisions of Section 13(1)(b) of the Act cannot be applied at the time of grant of registration and various judicial precedents have upheld the principle that Shree Nishkalank Mahadev Koliyak vs. CIT(E) Asst.Year –N.A. - 3– Section 13(1) of the Act cannot be looked into only during the course of assessment proceedings. Thirdly, it was submitted that the trust was formed for carrying out religious activities like organizing food for Sadhu and Sadhvi, arranging for Puja provide food to Sadhu and Sadhvi of our temple to celebrate festivals like Diwali and give sweets to poor and backward children, to undertake conservation and maintenance activities for the temple and also perform Puja in temple every month. Therefore, it is evident that there was no violation of any of the conditions specified in Section 12AB of the Act, so as to deny grant of registration to the applicant trust. It was submitted that Ld. CIT(E) has only denied grant of registration by only stating that applicant trust is a private religious community and in view of the provisions of Section13(1) of the Act, since the object of the trust is for up-keep and rearing of Mahant family, it is a private trust which is not entitled for registration under Section 13(1) of the Act.

We have heard the rival contentions and perused the material on record. It is a well settled law that provisions of Section13(1)(b) of the Act can be invoked only at time of assessment and not at time of grant of registration under Section 12A of the Act. In the case of Bargahe Husaini Trust-Monpar [2024] 165 taxmann.com 141/208 ITD 158 (Ahmedabad - Trib.), the assessee-trust filed application for grant of final registration under section 12A of the Act. The Commissioner (Exemption) observed Shree Nishkalank Mahadev Koliyak vs. CIT(E) Asst.Year –N.A. - 4– that objects of trust appeared to be restricted to benefit of a particular religious community or caste, which was Khoja Shia Ishna Ashari Samaj and thus, Section 13(1)(b) would be applicable and dismissed application for grant of final registration. The Ahmedabad Tribunal held that provisions of section 13(1)(b) of the Act can be invoked only at time of assessment and not at time of grant of registration under section 12A of the Act. Therefore, in view of aforesaid legal position, matter was to be restored to file of CIT (Exemptions), for de-novo consideration. While passing the order, the Tribunal made the following observations:

In the case of Malik Hasmullah Islamic Educational and Welfare Society v. CIT [2012] 24 taxmann.com 93/138 ITD 519 (Lucknow), the ITAT held that since provisions of Sections 11, 12 and 13 are intended for exercise of jurisdiction by an Assessing Officer in an assessment Shree Nishkalank Mahadev Koliyak vs. CIT(E) Asst.Year –N.A. - 5– proceedings, Commissioner is not competent to invoke such provisions for purpose of declining registration under Section 12AA.

In the case of St. Joseph Academy v. DIT (Exemption) [2014] 50 taxmann.com 216/153 ITD 669 (Hyderabad - Trib.), the ITAT held that provisions of Section 13 can be invoked by Assessing Officer while framing assessment and not by Commissioner while considering application for registration under Section 12AA.

In view of the above judicial precedents, looking into the facts of the instant case, we are of the considered view that the provisions of Section 13 of the Act can be invoked only at the time of assessment 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 (Exemptions) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199/243 Taxman 60 (Gujarat)/[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:

In the result, in view of the above observations, the matter is restored to the file of CIT (Exemptions), for de-novo consideration, after giving due opportunity of being heard and with the direction not to disentitle the assessee for grant of registration only on the grounds as mentioned in its order for rejecting the application filed by the assessee trust. CIT (Exemptions) is directed to look into the merits of the activities of the applicant trust and thereafter pass appropriate orders in accordance with law.

In the result, the appeal filed by the assessee is allowed for statistical purposes. This Order is pronounced in the Open Court on 22/01/2025