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Facts
The appellant, a charitable trust, applied for registration under Section 12AB of the Income Tax Act, 1961. The CIT(E) rejected the application, citing that the trust was applying its income for the benefit of a particular caste/religious community and not for its stated objects. The trust appealed this decision.
Held
The Tribunal set aside the impugned order and restored the application to the files of the CIT(E) for fresh adjudication. The CIT(E) was directed to decide the matter afresh after providing a reasonable opportunity to the applicant. The trust was also directed to pay a cost of Rs. 2,000/- for failing to produce necessary documents.
Key Issues
Whether the trust applied its income for the benefit of a particular caste/religious community, thus violating the provisions of Section 12AB and Section 13(1)(b) of the Income Tax Act. Whether the trust's activities were in line with its stated charitable objects.
Sections Cited
12AB, 13(1)(b)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B-Bench” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA. No. 87/JPR/2024
vkns'k@ORDER PER: NARINDER KUMAR, JUDICIAL MEMBER.
Appellant claims itself to be a charitable trust. It is said to have been created on 16.12.2018. The objects set to be achieved by the trust are stated to be promotion of education, yoga, preservation of the environment (including watersheds, forests and wildlife). Advancement of any other object of general public utility is also set to be achieved.
Bharitaya Jain Sanghanatana vs. CIT(E) 2. On 29.06.2023, the appellant-applicant, through authorized representative, submitted an application, online, in Form No. 10AB seeking its registration u/s 12AB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Learned CIT(E) processed the application. Ultimately, vide order dated 29.12.2023, he rejected the prayer for registration of the trust. As per impugned order, following two grounds are said to be the basis of rejection of the prayer: (i) Part of the income of the applicant trust was being applied for the benefit of caste/religious community; (ii) Income of the applicant trust was not being applied for the object of the trust. Feeling aggrieved by the impugned order, the applicant trust is before this Appellate Tribunal.
Arguments heard. File perused.
It may be mentioned here that earlier on 07.08.2024 on behalf of the appellant, a paper book was submitted with Index depicting 21 documents. Today, fresh Index to the said paper book consisting of only 20 documents has been furnished. Copy supplied to Ld. DR for the Department.
Bharitaya Jain Sanghanatana vs. CIT(E) Objects of the appellant-Trust 5. So far as objects of the appellant trust are concerned, on behalf of the appellant reference has been made to copy of the trust deed dated 28.11.2018. Learned AR for the appellant has specifically referred to only clause (c) and (e), available at page no. 22 of the deed. But, we are inclined to reproduce all the objectives of the said trust, as per the said trust deed. Relevant portion of the trust reads as under:- “2. The name of the Trust shall be Bharatiya Jain Sanghatana, Kota Chapter with its office "Kewalya" B-357(D-2) Talwandi, Kota (Rajasthan) Pin- 324005. The name of the trust shall be abbreviated as BJS, Rajasthan for the purpose of Bank account or correspondence etc. "The Trust Fund" shall mean the said sum of 15,500/- (Rupees Fifteen Thousand Three Hundred only) and all investments and any money or any property which may be paid or transferred to the Trustees at any time to be held by them on the trusts hereby declared and the investments representing the same. The Trustees shall apply or utilise the income and/or the corpus of the Trust Fund for all or any of the aforesaid purposes in India as they may determine and without prejudice to the generality of the foregoing the Trustees will have powers to do anything for advancement of the purposes aforesaid and without any distinction of caste, creed or sex.
The Trust shall adopt charitable objects as per charter of Bhartiya Jain Sangatata, Pune. All the chapters of Rajasthan shall comprise into this trust, a. To achieve all-round development, growth and progress of the people through promotion of education, health, upliftment of self, moral foundation and by promotion of moral values and social and physical aspects of life. b. in coder to awaken the potentialities of Indian people and to create the stream of potentialities among them, to help the private social c. To assist public and private organizations devoted to social cause and, further, to assist in implementing the programmes which shall be useful to different social streams in India. d. To achieve coordination and cooperation between governmental and non- governmental institutes of national Importance doing work in education and research. e. To fill up the lapses in the field of national development and particularly, in the field of conflicts arising out of cultural and racial diversity. f. To provide succor and relief to people affected by unnatural and unnatural disasters through relief and rehabilitation. g. To provide support to trade, finance, business, entrepreneurs and start ops to Improve skills, knowledge by way of training, work-shops, programs and all type of such activities with an object of improving capabilities, maturity, employment and all type of support services.”
In order to achieve the above objects, the trust deed provides to undertake the following programmes, among other things: i. Start and conduct orphanages, ashrams, and rescue-homes for orphans, destitute children and women, widows, the disabled and the helpless for their care, protection and rehabilitation. ii. Start, conduct and manage hospitals, health centers, maternity homes, dispensaries, clinics, ambulance facilities, etc. and provide the poor Wand the needy with medicines and medical facilities gratis or on nominal charges. iii. Start and conduct institutes for promotion of science, literature, fine arts, commerce, industry, technology and engineering, as well as for training students to be self-reliant citizens of India and help other institutions with similar objects. iv. Start and conduct pre-primary, primary, secondary schools and colleges in all faculties of education through formal, non-formal and open streams with residential and non-residential facilities.
Bharitaya Jain Sanghanatana vs. CIT(E) v. Assist victims and people affected by communal riots, atrocities, social unrest as well as natural calamities (example: earthquakes, floods, drought, volcanoes, etc.) vi. To assist social and developmental activities of governmental and private institutes working in the fields of education, family planning. medical services, and other welfare activities. vii. Start research and development centers in the field of economics, social sciences, medicine, science and industry, and other faculties and to impart education in these subjects.”
Learned CIT(E) observed in para 2.8 of the impugned order that the application seeking registration u/s 12AB of the Act, deserved to be rejected as the appellant was doing charitable activity for a particular caste, and in practice discriminating on the basis of caste/religion, and providing benefit to a particular religious community, which made the applicant non charitable, and further that it was a case of specific violation of clause (d) of Explanation available u/s 12AB and also violation of section 13(1)(b) of the Act.
Clause (d) available in the Explanation to section 12AB provides that in case any trust or institution established for charitable purpose created or established after commencement of the Act has applied any part of its income for the benefit of any particular religious community or caste, it would amount to specific violation.
Bharitaya Jain Sanghanatana vs. CIT(E) Clause(b) of Sub-section (1) of Section 13 of the Act provides as to in which circumstances provisions of section 11 shall not apply. Section 11 provides as to which of the income shall not be included in the total income of the previous year of the person in receipt of the income , in case of income from property held for charitable or religious purposes. Sub-section (4) of Section 12AB of the Act, empowers a Principal Commissioner or Commissioner to pass an order for cancelling the provisional registration of a trust or any institution in case of any specific violation. Trust had applied for registration under section 12 AB. There was no allegation leveled by anyone that the trust was indulging in any specific violation or that cancellation of its provisional registration was called for. As regards violation of provisions of Section 13(1)(b) of the Act, observed by Learned CIT(E), in the impugned order, said provision would come into application at the time of computation of total income even in case of trust for charitable purpose. Matter before Learned CIT(E) was not for or at the stage of computation of total income of the trust. The only prayer was for registration under section 12 AB of the Act. No prior notice is said to have been issued by the CIT(E) to the Trust for consideration of the point of any specific violation calling for cancellation Bharitaya Jain Sanghanatana vs. CIT(E) of even the provisional registration. So, it is beyond comprehension as to how the issue of application of section 11 was considered at the time of registration of the Trust. Application of income of the Trust for its activities as per its objects or not? 8. As per record, reply of the applicant was called for, and the applicant trust furnished it twice, firstly, on 02.11.2023, secondly, on 26.12.2023. Copy of reply dated 02.11.2023, has not been made available by the applicant trust to this Appellate Tribunal, for the reasons best known to the appellant trust. However, from para 2.2 of the impugned order, it transpires that on receipt of reply dated 02.11.2023 from the applicant in respect of certain activities said to have been undertaken by the said trust during the period from 01.03.2022 to 31.03.2023, the applicant-trust submitted information, in the form of a table having organized Diwali Milan Pratibha Samman/programme on 15.10.2022, as one of the activities undertaken by the said trust. As observed by Learned CIT(E), no details regarding beneficiary of said activity was furnished, and as such notice dated 08.12.2023 was issued to the applicant trust to provide details of the persons facilitated in Bharitaya Jain Sanghanatana vs. CIT(E) ‘Pratibha Samman Sammaroh’. Applicant was also called upon to submit provisional Income and Expenditure Account for the financial year 2023-24 and bank statement for the last 3 years. Ld. CIT(E) mentions that the applicant trust failed to submit Income and Expenditure Account for the financial year 2023-24. The applicant trust surprisingly also denied to have arranged any ‘Pratibha Samman Sammaroh’ activity, even though earlier in the reply dated 02.11.2023, it was specifically shown at serial No. 11 of the table depicting list of the programmes implemented and that on 15.10.2022 ‘Pratibha Samman Sammaroh’ was arranged. As per the impugned order, as regards the Income and Expenditure account, the applicant had requested Learned CIT(E) to allow time somewhere in the first week of January, 2024. However, keeping in view the time line for the disposal of such application, Learned CIT(E) proceeded to dispose of the application. In the paper book submitted before this Appellate Tribunal, at page 90 is available copy of Income and Expenditure Account for the year ending 31.03.2023. The applicant trust should have submitted said statement before Learned CIT(E) for effective adjudication of the matter. However, if we believe what is recorded in the impugned order, it appears Bharitaya Jain Sanghanatana vs. CIT(E) that the applicant trust failed to produce the same, in reply to the notice dated 08.12.2023, and no satisfactory justification appears to have been put forth in seeking adjournment to submit the same in the first week of January, 2024.
Not only this, the applicant trust also failed to submit before Learned CIT(E) its books of accounts. The applicant trust should have submitted the same, but it failed to do so and that too without any satisfactory justification for seeking adjournment for the first week of January, 2024.
Since we find that production of the above said record before Learned CIT(E) was necessary for adjudication of the issues involved on the point of registration of the trust, we deem it a fit case to remit the matter to Learned CIT(E) so as to allow the applicant trust , another opportunity to produce the books of accounts & Income and Expenditure Account. Whether a case of substantial payments to persons of Jain community? 11. Before Learned CIT(E), one statement of bank account was furnished by the applicant trust. On its perusal, Learned CIT(E) found that substantial payments were made to persons of Jain community. Thereupon, Learned CIT(E) asked for details of the said payments and for their justification, having regard to the objects of the said trust.
Bharitaya Jain Sanghanatana vs. CIT(E) In response, the applicant trust submitted a list of 19 students who had participated in the programme arranged in connection with Sambal Scholarship Award. Said information is available in tabular form at pages 8 and 9 of the impugned order.
In reply to a show cause notice, the applicant trust submitted on 26.12.2023 that the scholarship was not only for Jain students. In this regard, reference was made to the pamphlet/screenshot for announcement. In the course of arguments here, reference has been made to the information circulated in connection with scholarship programme. Same is available at page 196 of the paper book. The contention is that from this document, it cannot be said that scholarship was only for Jain students.
Having gone through the advertisement in connection with scholarship programme inviting applications for the said benefit, it cannot be said that students belonging to Jain community only were invited to apply for scholarship. Even otherwise, in the impugned order, Learned CIT(E) mentioned about response from the applicant trust that one of the 20 applications for said scholarship, one application was declined because the applicant -a Jain student- did not qualify the prescribed norms.
Bharitaya Jain Sanghanatana vs. CIT(E) Even otherwise, as claimed by the applicant, one of the applicants, namely, Shard Purswani did not belong to Jain community. There is nothing in the impugned order to suggest that Learned CIT(E) disbelieved said explanation submitted by the applicant trust.
In para 2.5 of the impugned order, Learned CIT(E) observed that the funds of the trust were mainly used for benefit of Jain caste/community. However, we find that when books of accounts and Income Expenditure Account for the financial year 2023-24 were not made available, the matter needs to be re-looked by Learned CIT(E), for any adjudication of this issue. Even as regards the observation made in the impugned order that out of total expenses 92% expenses were incurred for the benefit of Jain students, same can be adjudicated effectively only on production of the entire requisite record. As noticed above, we are inclined to remit the matter to Ld. CIT(E) for reconsideration on production of the requisite record. Objects of the applicant trust 15. As regards the observations made by Learned CIT(E) in para 3.2 of the impugned order that the objects of the applicant trust are not religious in nature, Learned CIT(E) referred to the decision in case of Bharitaya Jain Sanghanatana vs. CIT(E) Commissioner of Income Tax vs. Palghat Shadi Mahal Trust, 254 ITR 212 wherein Hon’ble Apex Court held that any trust making discrimination on the basis of caste or religion, unless covered under explanation, i.e. meant for SC/ST cannot be considered charitable and thus is not eligible for registration under Section 12A. On behalf of the appellant, reliance has been placed on decision in the case of Umaid Charitable Trust vs. The Union of India (Uoi) And Ors. decided by our Hon’ble High Court on 02.05.2008. Therein, it was observed that the line of distinction between religious purposes and charitable purposes is very thin and no water tight compartment between the two activities can be very well established. It was further observed that unless objective of the charitable trust is for spending its income for a particular religion and it is so found in the trust-deed, the Income Tax Department cannot reject the renewal of the trust as charitable trust u/s 80G of the Act, merely because one particular expenditure is for an activity which may be termed as spending for a particulars religion. As noticed above, the observations made by Learned CIT(E) are based on incomplete record i.e. for want of production of complete record by the appellant trust itself.