TREHAN SEVA BHARTI CHARITABLE TRUST,ALWAR vs. CIT(E), JAIPUR, JAIPUR

PER GAGAN GOYAL, A.M: This two appeals by the assessee is directed against the order of Ld. CIT(E), Jaipur dated 26.07.2024 passed u/s. 12AB (1) (b) (ii) (B) and 80G (5) of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal vide as under:

2. The Ld. CIT(E) has further erred on facts and in law in cancelling the provisional registration granted by CIT u/s. 12(1) (ac)(vi) of IT Act, 1961.

3. The appellant craves to alter, amend any modify any ground of appeal.

4. Necessary cost be awarded to the assessee.

the assessee has raised the following grounds of appeal:

1. The Ld. CIT(E) has erred on facts and in law in rejecting the application filed by the assessee in Form 10AB seeking approval under clause (iii) of first proviso to section 80G (5) IT Act, 1961 on the ground that (i) approval u/s. 80G cannot be granted without registration u/s. 12AB and (ii) assessee trust contains elements of a religious trust and thus falls out of the scope of section 80G.

2. The Ld. CIT(E) has further erred on facts and in law in cancelling the provisional approval granted by CIT under clause (iv) of first proviso to section 80G(5) of IT Act, 1961.

3. The appellant craves to alter, amend and modify any ground of appeal.

4. Necessary cost be awarded to the assessee.”

A). Not registered under the Rajasthan Public Trust Act, 1959 (RPT) and B). Genuineness of Activities.

In addition to the above, provisional registration granted earlier u/s. 12A (1) (ac)(vi) of the Act vide dated: 21.09.2021 is also cancelled. The assessee being aggrieved with the same preferred the present appeal before us. We have gone through the order of the Ld. CIT(E), Jaipur alongwith the submissions of the assessee and paper book submitted before us.

Procedure for fresh registration. 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall, — (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) [or item (B) of sub-clause (vi)] of the said clause, — (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i), — (A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing, — (I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub- section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard.

“10. The scope and amplitude of section 10(23C) (vi) of the Income-tax Act, the provisos thereunder and the rules and forms applicable thereto, which were the subject-matter of examination in New Noble Educational Society vs. Chief CIT [2011] 334 ITR 303/201 Taxman 33/ 12 taxmann.com 267(AP) and in R. R. M. Educational Society vs. Chief CIT [2011] 339 ITR 323 (AP) can, conveniently, be summarised as under:

19. On a conjoint reading of sub-sections (3) and (4) of section 8 of the A. P. Societies Registration Act, 2001, it is only when the amendment to the objects of a society (educational agency) is intimated and the Registrar, on being satisfied that the amendment is not contrary to the provisions of the Act, registers and certifies such an alteration, would it be a valid alteration under the Act. It is only from the date the Registrar certifies the alteration that the amendment, to the objects of the society, comes into force.

5. Above discussed, judicial pronouncement is specifically applicable to the educational institutions, where a specific law is there to regulate such type of institutions and are in harmony with the provisions of section 12AB (1) (b) (ii) (B) of the Act, i.e. the compliance of such requirements of any other law for the time being in force

by the trust or institution as are material for the purpose of achieving its objects.In the matter under consideration, the Ld. CIT (E), Jaipur is duty bound to establish that how the compliance with RPT Act, 1959 is material for the purpose of achieving its objects. In our opinion, both the statutes, i.e. The Income Tax Act, 1961 and RPT Act, 1959. All the authorities relied upon by the assessee are w.r.t. educational institutions, where context is different, i.e. students at large and issues like capitation fee, allocation of seats, pay scale of teachers and curriculum of the syllabus etc. are in focus. For public benefit and reasonability, such regulations are there, specifically the states where big institutions are indulged in imparting education in the field of Medical, Engineering and Managements etc.

[2022] 143 taxmann.com 276 (SC) New Noble Educational Society vs. CCIT, relevant paras are reproduced as under:

It is held that wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the trust, society etc. This reasoning is reinforced by the recent insertion of another proviso of section 10(23C) with effect from 1-4- 2021. [Para 76]

7. Again referring our considered opinion as discussed (supra) vide para 5, this citation relied upon by the Ld. CIT (E), Jaipur is again w.r.t. an educational institution and our findings (supra) again confirmed. It is also observed that in both the citations discussed (supra) also discussed and relied upon the judicial precedents applicable to educational institutions only. None of the precedents discussed in the case of Aurora Educational Society vs. CCIT and New Noble Educational Society vs. CCIT matches with character of the assessee under consideration, which is being further fortified with the language of the Income Tax Act, 1961 itself as mentioned (supra). Plain reading of section 12AB (1) (b) (ii) (B) of the Actspeaks in a way that compliance of requirement of any other law is required if compliance under the Act is material for achieving its objects.

8. There is no law which is required to be complied with for achieving the objects of the assessee trust. Section 17 of the RPT Act, 1959 requires that trustees of the trust has to apply for registration of a public trust, however, there is no section in the RPT Act, 1959 which prohibits a trust to carry out its objects if it is not registered under the RPT Act, 1959. In our considered opinion, both the statutes have their own provisions and implications and none of them have overriding effect. Even if, the assessee trust is not registered with the RPT Act, 1959 and the concerned officials under the RPT Act, 1959 deems it necessary to get the entity registered under section 17 of the RPT Act, 1959, appropriate action can be taken and against the trustees of the trust. But this issue can’t be a hurdle in getting registration before the Income Tax Department u/s. 12AB of the Act.

(a) In CIT v. Kids-R-Kids International Education & Social Welfare Trust [2018] 99 taxmann.com 384 (Punjab & Haryana), the Punjab and Haryana High Court held that the only requirement for granting registration under section 10(23C) (vi) is the satisfaction of the prescribed authority with regard to the genuineness of the activities of the assessee. Since the Principal CIT had not doubted the genuineness of the activities of the society, the Tribunal rightly directed the Principal CCIT to grant registration under section 10(23C) irrespective of non-compliance of the Right to Education Act, 2009. (b) In Paramount Education Charitable Trust v. CIT [2015] 61 taxmann.com 283 (Chandigarh - Trib.), the assessee-trust filed an application for registration under section 12A. Commissioner rejected assessee's application on ground that assessee- trust was not registered under new Haryana Registration & Regulation of Societies Registration Act, 2012. The Tribunal held that aims and objects of assessee were of general public utility as well as to provide education and were covered by provisions of section 2(15). If the activities of assessee were charitable in nature, registration of assessee couldn't be denied merely on fact that it was not registered under Societies Act. In the light of above, objection of the Ld. CIT (E), Jaipur is dismissed and further directed that registration can’t be denied on this ground. In the result relevant ground raised by the assessee is allowed.

“The applicant showing huge amount as construction of building year to year and furnished only few bills/vouchers, while no land and building is owned. As the applicant neither such land (On which construction made) shown in Balance-Sheet nor furnished ownership of land as asked. Also in reply dated: 25.05.2024 at point no. 15, the applicant itself stated that ‘No movable or immovable properties held in the name of the trust’ Not furnished any other details like plan/MAP, area of construction, photographs of the premise/ building constructed, present and future use of such land/building. In absence of such details, it seems that such construction expenses are not related to the trust and the same are benefited to other persons who owns such land, which is not genuine.

No details of Shri Ram Katha, Sita Rasoi expenses as claimed in the P&L account for F.Y. 2022-23 except few bills of eatable items. Thus, the such activities/expenses are unproved.

The applicant has claimed huge salary expenses to cooks which are not commensurate to the activities.

Not furnished annual accounts for the F.Y. 2023-24, thus not confirmed, whether what actually done in subsequent years.”

The salary expenses are not huge as stated by the Ld. CIT(E), Jaipur. Otherwise also, the Ld. CIT(E), Jaipur is required to verify the genuineness of the activities and if he has any doubt about the same, he should have carried out the physical verification/inspection to ascertain about the same. Following judicial pronouncements are also there to guide in this matter/issue:

[2020] 114 taxmann.com 693 (SC) Ananda Social & Educational Trust vs. CIT “Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration. [Para 9] The purpose of section 12AA is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust is genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. [Para 11] Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, it is viewed that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. [Para 12]” [2012] 25 taxmann.com 376 (Del.)DIT vs. Foundation of Ophthalmic & Optometry Research Education Centre Facially the provision of section 12AA would suggest that there are no restrictions of the kind which the revenue is reading into in the instant case. In other words, the statute does not prevent or enjoin the Commissioner from registering a trust based only on its objects, without any activity, in the case of a newly registered Trust. The statute does not prescribe a waiting period, for a trust to qualify itself for registration. [Para 10] If the revenue's contentions are correct then, necessarily, a condition would have to be read into the provision that the Commissioner should be satisfied that the Trust is in fact engaged in charitable activities which would in turn inject considerable deal of subjectivity. If such flexibility is introduced there is possibility that, it would be susceptible to varied interpretation by the different authorities; some would be satisfied with activity of few months, while others may wish to examine the activities of the organization for longer time. [Para 11] For the above reasons, the Tribunal is right in holding that while examining the application under section 12AA(1)(b), read with section 12A, the concerned Commissioner/Director is not required to examine question whether the trust has actually commenced and has, in fact carried on charitable activities. [Para 12]

4. The Tribunal has noticed that the assets of the assessee, i.e., its land and building etc. had been created out of the donations received for the setting up of the school of the society and the objection of the CIT(E) that the assessee had amassed capital funds to the tune of Rs. 5.59 crores and fixed assets to the extent of Rs. 5.85 crores neither impinged on the objects nor the genuineness of the activities of the assessee. The object of the society is 'To Promote the Quality and Scope of Education in Rural Area and Manage the affairs of Sadhu Singh Rural Public School, Mukand Pur.' Therefore, the contention of the assessee that the corpus got created from such donations as received for the setting up of the school, had not been rebutted by producing any material to the contrary on record. Regarding creation of assets, the Tribunal had recorded nothing had been brought on record to show that the assets of the assessee were meant for any purposes other than its aims and objects which included managing the affairs of the school and that as per the balance sheets, the entire expenditure incurred by it had been for the purposes of school only. Further, at the time of considering the grant of registration, only the objects and genuineness of the activities of the assessee were to be got verified. Accordingly, the Tribunal directed the CIT (E) to grant registration to the respondent. The relevant findings recorded by the Tribunal in paras 6 to 8 of the order read thus: — 6. While refusing registration to the assessee society, the Objection raised by the ld. CIT(E) is that the applicant has amassed capital funds to the tune of Rs. 5.59 crore and fixed assets to the extent of Rs. 5.85 crore. This observation, it is seen, impinges on neither the objects of the applicant, nor the genuineness of its activities. It has been submitted before us that the assets of the applicant, i.e., its land and building etc., have been created out of donations received for the setting up of the school of the society. As per Object (APB-1), as set out in the Memorandum of Association of the applicant society, the applicant is "To Promote the Quality and Scope of Education in Rural Area and Managed the Affairs of Sadhu Singh Rural Public School, Mukand Pur". In its reply (APB 23-29) (Dated 12.08.2016) to the Questionnaire (APB 21-22) (Dated 04.08.2016) the applicant stated that the details of donations received were being Annexed. The contention that the corpus got created from such donations received for the setting up of the school, has not been rebutted based on anything to the contrary on record. And be that as it may, the fact remains that the observation in this regard in the impugned order fails to carry out the statutory mandate of satisfaction regarding the objects and genuineness of activities of the applicant. It is, therefore, superfluous and not detrimental to the applicant's claim for registration.

A). Approval u/s. 80G of the Act can’t be granted with having registration u/s. 12AB of the Act & B). Religious Trust are not eligible u/s. 80G (5) of the Act.

First objection is no more relevant as pertaining to registration u/s. 12AB of the Act (supra) has already been decided in favour of the assessee. As far as second objection is concerned, we placed our reliance on the law declared by the Hon’ble Apex Court in the case of CIT vs. Dawoodi Bohara Jamat[2014] 43 taxmann.com 243 (SC)/ [2014] 222 Taxman 228 (SC), held as under:

“Under the scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions available to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by the said trust are the subject- matter of exemptions from the taxation under the Act. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemption under sections 11 or 12 by the assessee and the grant or rejection of such application by the Commissioner. A conjoint reading of sections 11, 12, 12A and 12AA makes it clear that registration under sections 12A and 12AA is a condition precedent for availing benefit under sections 11and 12. Unless an institution is registered under the aforesaid provisions, it cannot claim the benefit of sections 11 and 12. Section 13 enlists the circumstances wherein the exemption would not be available to a religious or charitable trust otherwise falling under section 11 or12 and, therefore, 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. [Para 16] Determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact. It is a question which requires examination of legal effects of the proven facts and documents, that is, the legal implication of the objects of the respondent-trust as contained in the trust deed. It is only the objects of a trust as declared in the trust deed which would govern its right of exemption under section 11 or 12.

It is the analysis of these objects in the backdrop of fiscal jurisprudence which would illuminate the purpose behind creation or establishment of the trust for either religious or charitable or both religious and charitable purpose. Therefore, the High Court has erred in refusing to interfere with the observations of the Tribunal in respect of the character of the trust. [Para 26] Having said so, it is necessary to examine the question, whether the Courts below were justified in coming to the conclusion that the assessee-trust is a public religious trust and therefore, outside the purview of section 13(1)(b) and eligible for exemption under section 11. [Para 27] The objects of the assessee-trust are not indicative of a wholly religious purpose but are collectively indicative of both charitable and religious purposes. It is expedient to comprehend the objects of the assessee-trust with reference to the construction of the expressions 'charitable purpose' and 'religious purpose.' [Para 28] The phrase charitable purpose is expansive and inclusive. The expression 'charitable purpose' is defined in the dictionary clause of the Act under section 2(15). [Para 29] According to section 2(15), the expression 'charitable purpose' has been defined by way of an inclusive definition so as to include relief to the poor, education, medical relief and advancement of any other object of general public utility. A catena of decisions of this Court which have interpreted the said provision and especially the expression 'any other object of general public utility' have observed that the said expression is of the widest connotation. The word 'general' in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose. The said expression would prima facie include all objects which promote the well being of the general public. It cannot be said that a purpose would cease to be charitable even when public welfare is intended to be served. [Para 30] In certain cases, the activities of the trust may contain elements of both: religious and charitable and thus, both the purposes may be over lapping. More so when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community and also public at large. For example, the practice of optional charity in the form of Khairat or Sadaquah under Mohammadan Law would be covered under both charitable as well as religious purpose. Further, while providing food and fodder to animals especially cow is religious activity for Hindus, it would be charitable in respect to non- Hindus as well. [Para 36] Unquestionably, objects which provide for the activities completely religious in nature and restricted to the specific community of the respondent-trust are objects with religious purpose only. However, in respect to the other objects, the fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in colour. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. [Para 38] The activity of providing for food on certain specific occasions and other religious and auspicious events of the Dawoodi Bohra community do not restrict the benefit to the members of the community. Neither the religious tenets nor the objects as expressed limit the service of food on the said occasions only to the members of the specific community. Thus, the activity of Nyaz performed by the respondent-trust does not delineate a separate class but extends the benefit of free service of food to public at large irrespective of their religion, caste or sect and thereby qualifies as a charitable purpose which would entail general public utility. [Para 39] Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of section 2(15) of the Act. The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The Madarsa as a Mohammadan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the said object would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character. [Para 40] Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of section 13. The activities of the trust under such objects would therefore be entitled to exemption accordingly. [Para 41] Further, one has to examine the objects under the provisions of section 13(1)(b) of the Act. It becomes amply clear from the language employed in the provisions that section 13 is in the nature of an exemption from applicability of sections 11 or 12 and the examination of its applicability would only arise at the stage of claim under sections 11 or 12. Thus, where the income of a trust is eligible for exemption under section 11, the eligibility for claiming exemption ought to be tested on the touchstone of the provisions of section 13. In the instant case, it being established that the respondent-trust is a public charitable and religious trust eligible for claiming exemption under section 11, it becomes relevant to test it on the anvil of section 13. [Para 42] Thus, the second issue which arises for consideration, whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under section 11 in view of provisions of section 13(1)(b). [Para 43] In the instant case, the Tribunal has found on facts after analysing the objects of the trust that the respondent trust is a public religious trust and its objects are solely religious in nature and being of the opinion that section 13(1)(b) is solely meant for charitable trust for particular community, negated the possibility of applicability of section 13(1)(b) at the outset. The High Court has also confirmed the aforesaid view in appeal and observed that section 13(1)(b) would only be applicable in case of income of the trust for charitable purpose established for benefit of a particular religious’ community. The said view may not be the correct interpretation of the provision. [Para 44] 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. [Para 45] The trusts with composite objects would not be expelled out of the purview of section 13(1)(b) per se. The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious’ community or caste. That is to say, it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious’ community or class or serves across the communities and for society at large. The section of community sought to be benefited must be either sufficiently defined or identifiable by a common quality of a public or impersonal nature. [Para 46] In the present case, the objects of the respondent trust are based on religious tenets under Quran according to religious faith of Islam. As already noticed that the perusal of the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a particular religious’ community. The objects, as explained in the preceding paragraphs, do not channel the benefits to any community if not the Dawoodi Bohra Community and thus, would not fall under the provisions of section 13(1)(b). [Para 49] In that view of the matter, it is held that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under section 11. [Para 50]”.

Order pronounced in the open court on 15thday of January 2025. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 15/01/2025 Copy of the Order forwarded to: 1. अपीलाथ�/ The Appellant , 2. �ितवादी/ The Respondent. आयकर आयु� CIT 3. 4. 5. गाड� फाइल/ Guard file.