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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MAHAVIR PRASAD & SHRI B.M. BIYANI
Per B.M. Biyani, A.M.:
These are the two appeals filed by the assessee as per details given below: (i) ITA No. 838/Ind/2018 is directed by assessee against the order dated 25.09.2018 of learned Commissioner of Income-Tax (Exemption), Bhopal [“Ld. CIT(E)”] u/s 12AA(1)(b)(ii) of the Income Tax Act 1961 [“the act”]. This appeal was originally dismissed by Tribunal vide order dated 22.10.2019 for non-prosecution by the assessee. Subsequently, the said order was re-called in M/A No. 5/Ind/2020 vide order dated 17.12.2020. Accordingly, the appeal has been re-fixed for hearing.
ITA No.838/Ind/2018 & ITANo.340/Ind/2020 Mahavir Kund Kund Kahan Trust
(ii) ITA No. 340/Ind/2020 is directed by assessee against the order dated 23.09.2020 of learned Commissioner of Income-Tax (Exemption), Bhopal [“Ld. CIT(E)”] u/s 12AA(1)(b)(ii) of the Income Tax Act 1961 [“the act”]. The registry has informed that this appeal was required to be filed by 22.11.2020 but the same has been filed on 01.12.2020 after a delay of 9 days. It is observed that the filing of appeal is during Covid-19 pandemic period and the Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications has granted suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws. Therefore, this is no delay in fact. We confronted the Ld. DR who agreed this and did not have objection. In view of this, the appeal is proceeded with for hearing.
ITA No. 838/Ind/2018 challenges the non-grant of registration u/s 12AA(1)(b)(ii) by Ld. CIT(E) on the application filed by assessee in Form No. 10A dated 31.03.2018 and ITA No. 340/Ind/2020 involves a similar grievance but on the application filed by assessee in Form No. 10A dated 26.12.2019. Since both of these appeals are of the same assessee and involve identical issue for adjudication, these appeals were heard together and being disposed of by this common order. First we take up ITA No. 838/Ind/2018 and thereafter ITA No. 340/Ind/2020.
ITA No. 838/Ind/2018:
The assessee is a public trust registered under the Madhya Pradesh Public Trust Act. It is a religious-trust established for various objects set out in the registered Trust-Deed dated 09.05.2017. The objects include working for Jain religion and towards this, publish religious books, establish libraries, schools, etc. On 31.03.2018, the assessee filed application to the Ld. CIT(E) in Form No. 10A for grant of registration u/s 12AA of the Act but the Ld. CIT(E) rejected application vide order dated 25.09.2018 by making following observations:
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(i) Trust-deed does not contain any Investment Clause, Dissolution Clause, Amendment Clause, Utilization Clause, Beneficiary Clause. (ii) Objects are for the benefit of a particular community and not for public at large. (iii) The activities are meagre (iv) Audit-Report for Financial Year 2017-18 has not been submitted.
Aggrieved by the aforesaid order dated 25.09.2018 of Ld. CIT(E), the assessee has filed this appeal and now before us.
Ld. AR submitted that all of the objections raised by Ld. CIT(E) are either factually wrong or are not in accordance with the law. Although Ld. AR made an elaborate submission, we sum up the submissions of Ld. AR precisely as under:
(i) Objection No. 1 - Trust-deed does not contain any Investment Clause, Dissolution Clause, Amendment Clause, Utilization Clause, Beneficiary Clause:
Ld. AR carried our attention to Page No. 15 of the Paper-Book and demonstrated that the Para No. 8 of the Trust-Deed contains a clause titled “Investment of trust fund” which is “Investment Clause” required by Ld. CIT(E). Ld. AR, thereafter, carried our attention to Page No. 20 of the Paper-Book to show that Para No. 15(B) of the Trust-Deed titled “Special Important Rules” contains a clause saying “This trust will be permanent, no one will have the right to abolish it.” Analysing this Clause, Ld. AR submitted that the assessee is a permanent trust and it cannot be dissolved by anyone. According to Ld. AR, this clause meet the requirement of Dissolution Clause. Ld. AR also submitted that with the introduction of new section 115TD read with section 13(1)(d) in Income-tax Act, 1961, there exits adequate over-riding provisions in the Income-tax Act law to deal with the dissolution of trusts, therefore incorporation or non-incorporation of a Dissolution Clause in the Trust-Deed does not make any difference for the Page 3 of 12
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purposes of Income-tax Act, 1961. Regarding “Amendment Clause”, the Ld. AR carried our attention to Page No. 21 of the Paper-Book to show that Para No. 15(H) and 15(I) of the Trust-Deed titled “Special Important Rules” contains adequate provisions for amendments. Ld. AR also submitted that section 12A of the Income-tax Act, 1961 contains a specific provision requiring re-registration of trust in the event of any amendment or modification. Therefore, according to Ld. AR, incorporation or non-incorporation of Amendment Clause in the Trust-Deed does not make any difference for the purposes of Income- tax Act, 1961. Regarding “Utilization Clause”, Ld. AR carried our attention to Page No. 16 of the Paper-Book to demonstrate that the Para No. 9 of the Trust-Deed captioned as “Utilisation of the fund of the trust” deal with utilization aspect. Hence this is the “Utilisation Clause” required by Ld. CIT(E). Finally, regarding “Beneficiary Clause”, the Ld. AR submitted that the trust is a Public-Trust registered under the provisions of Madhya Pradesh Public Trust Act and therefore entire public is beneficiary.
(ii) Objection No. 2 - Objects are for the benefit of a particular community and not for public at large:
Ld. AR made a very concrete submission that the assessee-trust is a pure religious-trust. Ld. AR submitted that even in Form 10A dated 31.03.2018, the assessee has selected the category of “Religious” against the field titled “Type of Trust/Institution”. Ld. AR submitted that a religious-trust, by its very nature, is always for propagation of a specific religion and same is the case with the assessee-trust. However, simply because the assessee exists for propagation of Jainism, there should not be an inference that it is restricted for a particular community. Ld. AR submitted that nowhere the trust-deed specifies a bar that it is open only to select persons and shuts its doors to others. Ld. AR submitted that the assessee-trust is open to all persons of the society who so ever has interest or faith in the activities Page 4 of 12
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carried out by it and accordingly it is registered as public trust under Madhya Pradesh Public Trust Act too. On a query by bench regarding the restrictions placed in the trust-deed as to the manner of worship, etc., the Ld. AR submitted that those restrictions have been put in to abide by the established standards of purity and piousness as required by Jain religion because the trust is repeatedly admitting that it is a religious-trust for propagation of Jain religion. Continuing his arguments, Ld. AR submitted that if the contention of revenue that a trust propagating a specific religion or putting certain restrictions in the trust-deed as to the manner of worship, etc. would not be eligible for registration u/s 12AA is accepted, there would be no single religious-trust in the country eligible for grant of registration u/s 12AA.
For the sake of completeness of his arguments, Ld. AR also submitted that there is a big difference in “religious trust” and “charitable trust”. Ld. AR submitted that the religious-trusts are, by their very nature, for propagation of a specific religion and it is only those persons who have interest or faith in the religion may generally be motivated to access the activities. But, however, charitable trusts are involved in charitable activities and such charitable activities have necessarily to be for the benefit of public at large. According to Ld. AR, the Parliament is very much aware of such difference and that is the precise reason that even the Parliament has made the following provision in section 13(1)(b):
“13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof— (a) XXX (b) In the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;” Page 5 of 12
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Ld. AR submitted that on a plain reading itself, it is very much clear that section 13(1)(b) is applicable “to a trust for charitable purposes or a charitable institution”. Ld. AR submitted that it may so happen that a trust may be a combined trust i.e. charitable plus religious and in that case there may be a question of dispute as to whether the restriction imposed in section 13(1)(b) shall apply or not, but even that question does not arise in the present appeal. According to Ld. AR, in the present appeal, the assessee is a pure religious trust and therefore it is very much clear that section 13(1)(b) is not applicable at all.
Ld. AR further relied upon the decision of ITAT, Indore in Dawoodi Bohra Jamat Vs. CIT, Ujjain (2010) 123 ITD 452 (Indore) order dated 28.03.2008 wherein it was held thus:
“18. On consideration of the rival submissions and the material on record, we are of the view that the objects of the assessee-trust are solely religious in nature and as such the finding of the Ld. CIT in the impugned order that the objects of the assessee are charitable in nature is not justified. The findings of the ld. CIT to this extent are set aside. 19. The learned counsel for the assessee further submitted that since the assessee-trust is a public religious trust, provisions of section 13(1)(b) of the Act are not attracted. The learned counsel for the assessee in support of his contention relied upon the decision of Hon'ble High Court of Gujarat in the case of Barkate Saifiyah Society (supra) in which it was held that section 13(1)(b) applies only to the trusts which are purely for charitable purposes and in that case the assessee-trust was charitable us well as religious in nature. Therefore, the question was answered in favour of the assessee and against the revenue. The-learned counsel for the assessee also relied upon the decision of the Hon'ble High Court of Gujarat in the case of Chandra Charitable Trust (supra) in which it was held "if objects of the assessee are not only to propogagte Jainism, to help and assist maintenance of temple, Sadhus, Sadhvis, Shraviks and Shravkas and other goals are also set out in the trust deed, the trust is a charitable as well as religious trust and section 13(1)(b) would not apply." The learned Departmental Representative relied upon the order of the ld. CIT. Page 6 of 12
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In view of our finding above that the assessee is a religious trust, the provisions of section 13(1)(b) are not applicable because the same are applicable in case of trust being established for charitable purposes. The decisions referred to by the learned counsel for the assessee squarely apply to this case. The findings of the CIT that the provisions of section 13(1)(b) apply to the assessee-trust is, therefore, set aside.”
Ld. AR also made an alternative submission that even otherwise section 13(1)(b), which denies exemption u/s 11 or 12 to a trust established for a particular religious community or caste, is not relevant at the stage of grant of registration. According to Ld. AR, the restriction imposed u/s 13(1)(b) is relevant on a year-to-year basis for computation of taxable income or completion of assessment by AO but certainly not relevant at the time of grant of registration by Ld. CIT(E). Ld. AR submitted that this proposition is well-settled by numerous decisions including following:
(a) CIT Vs. Bigabass Maheshwari Sewa Samiti (2008) 14 DTR 29 (Raj HC) (b) St. Joseph Academy Vs. DIT(Exemption) (2015) 153 ITD 669 (ITAT- Hyd) (c) Bhagwan Mahavir Purusharth Prerna Nidhi Nyas Vs. CIT (2012) 144 TTJ 379 (ITAT-Jpr)
(iii) Objection No. 3 – The activities are meagre:
Ld. AR submitted that the trust is a new entity incorporated on 09.05.2017 and the application for grant of registration was filed on 31.03.2018 i.e. within the first financial-year itself. Ld. AR submitted that being first financial year, the activities of assessee were bound to be meagre. Ld. AR submitted that the activities of assessee would grow with the passage of time only. Ld. AR also submitted that even otherwise the magnitude of activities is not relevant for grant of
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registration u/s 12AA, what is relevant is the genuineness of activities. Ld. AR submitted that the Ld. CIT(E) has nowhere found any activity of the assessee which is non-genuine.
(iv) Objection No. 4 - Audit-Report for Financial Year 2017-18 has not been submitted:
Ld. AR submitted that the assessee was incorporated on 09.05.2017 and filed application in Form No. 10A for registration on 31.03.2018 itself. Ld. AR posted a question that the financial year 2017-18 is the first financial year which has ended on 31.03.2018 and in such circumstance, how can audit-report be filed with the application dated 31.03.2018? Ld. AR submitted that subsequently the accounts were audited and audit-report dated 14.08.2018 was submitted to Ld. CIT(E) in the course of hearing fixed by him and a copy of the same is placed at Page No. 23 of the Paper-Book. According to Ld. AR, the audited accounts were available with the Ld. CIT(E) before passing order.
With these submissions, the Ld. AR argued that the Ld. CIT(E) has wrongly rejected the application of assessee. Therefore, the Ld. AR prayed to direct the Ld. CIT(E) to grant registration as applied for by the assessee in Form No. 10A dated 31.03.2018.
Per contra the Ld. DR relied upon the order of Ld. CIT(E) and argued that the registration has been rightly refused to the assessee. Ld. DR vehemently argued that the assessee is established for the publicity and promotion of Jain religion only and therefore it is not for the benefit of public at large. With these submissions, Ld. DR requested to uphold the rejection of registration done by Ld. CIT(E).
We have heard both sides at length, considered their rival contentions as also perused the material held on record, the relevant provisions of
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Income-tax Act, 1961 and the legal precedents. After a careful consideration, we observe as under:
(i) Objection No. 1:
Ld. AR has given a detailed submission on this point, which we have already narrated in the preceding paragraphs. Without repeating the same for the sake of brevity, we observe that the objection raised by Ld. CIT(E) is either incorrect or does not come in the way of grant of registration. Therefore, we do not agree with this objection of Ld. CIT(E).
(ii) Objection No. 2:
At the outset we make it clear that both sides agree on the nature of assessee-trust i.e. it is a religious-trust and neither a charitable trust nor a charitable-cum-religious trust. This fact is clearly borne out by the application in Form No. 10A and also neither disputed by Ld. CIT(E) nor by Ld. DR. Having found so, we deal with the submissions one by one. Firstly we agree with the submissions of Ld. AR that a religious-trust is inherently for the propagation of a specific religion and the persons having interest or faith in that religion would generally be motivated to access that trust. But to say that a religious- trust like the assessee created for the propagation of Jain religion is automatically not for public and therefore ineligible for registration, would not be a correct interpretation of the fact or law unless a specific restriction is found in the trust-deed. In fact, the Ld. DR has not pointed any clause in the registered-deed held on record which restricts the benefits of assessee-trust to a particular community or caste. Secondly, we find much strength in the submission of Ld. AR that if the contention of revenue that a trust propagating a specific religion or putting certain restrictions in the trust-deed as to the manner of worship, etc. would not be eligible for registration u/s 12AA is accepted, there would be no single religious-trust in the country Page 9 of 12
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eligible for grant of registration u/s 12AA. Thirdly, we also observe that the section 13(1)(b) is applicable only “to a trust for charitable purposes or a charitable institution”. On a careful reading of the wording of section 13(1)(b), we observe that section 13(1)(b) is not applicable to a pure religious-trust. This proposition is clearly held by this ITAT Indore Bench in Dawoodi Bohra Jamat Vs. CIT, Ujjain (2010) 123 ITD 452 (supra) as well as Shree Rishabdev Chhanganiram Pedi Dharmik Evam Parmarthik Trust, Ujjain Vs. CIT, Ujjain in ITA No. 790/Ind/2017 order dated 04.11.2009.
Lastly, we also agree with the alternative submission of Ld. AR that in any case, section 13(1)(b) is not relevant at the stage of grant of registration which is supported by various legal precedents cited by Ld. AR and narrated in earlier paragraphs.
(iii) Objection No. 3:
We find weightage in the submission of Ld. AR that the trust was newly incorporated on 09.05.2017 and the application for grant of registration was filed on 31.03.2018 i.e. within the first financial-year itself. Therefore, the activities of assessee have to be meagre. We further agree with the submission of Ld. AR that the magnitude of activities, whether meagre or substantial, is not relevant for grant of registration u/s 12AA.
(iv) Objection No. 4:
Ld. AR is justified in submitting that the assessee was incorporated on 09.05.2017 and the application in Form No. 10A was filed on 31.03.2018. Hence there cannot be audited accounts alongwith the application. We also observe that the assessee has, however, submitted audited accounts and audit-report dated 14.08.2018 to Ld. CIT(E) in the course of hearing fixed by him for grant of registration and the Ld. CIT(E) was having those audited accounts before passing
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order. Hence simply raising objection about the non-filing of audited accounts with the application in Form No. 10A, is not a judicious act of Ld. CIT(E).
In view of foregoing discussions, we are of the considered opinion that the objections raised by the Ld. CIT(E) are not adequate to reject the registration u/s 12AA. We also observe that the assessee is a public religious trust and deserves the registration u/s 12AA. Hence we direct the Ld. CIT(E) to grant the registration as applied for by the assessee in application dated 31.03.2018. With this, ITA No. 838/Ind/2018 is allowed.
ITA NO. 340/Ind/2020:
The facts related to this ITA are such that the assessee filed application in Form No. 10A dated 26.12.2019 for grant of registration. The Ld. CIT(E) issued certain notices calling for details / documents from the assessee and the assessee complied with those notices. However, the Ld. CIT(E) observed that the assessee has not filed (i) Registration-Certificate duly registered with Registrar of Societies / Public Trust, and (ii) Income & Expenditure Accounts and Receipt & Payment Account which were necessary in terms of Rule 17A. Therefore, the Ld. CIT(E) rejected application by summarily by observing as under:
“The applicant has failed to submit the above documents which were the primary requirement of Rule 17A of IT Rules. Thus, failed to fulfil the conditions of Rule 17A as stated above. Hence the genuniness of activities, in pursuit of achieving the objects of the society, is not ascertainable due to incomplete documents.” 11. During hearing before us, the Ld. AR could not demonstrate by bringing on record any evidence to convince that these documents were in fact filed before the Ld. CIT(A). Therefore, we agree that the Ld. CIT(E) could not step to satisfy himself about the genuineness of activities of the assessee and rejected application summarily in terms of Rule 17A without going into the merits of the application. We do not find any infirmity in the order of Ld.
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CIT(E). Accordingly, we dismiss this appeal i.e. ITA No. 340/Ind/2020 of assessee.
In the result, ITA No. 838/Ind/2018 is allowed and ITA No. 340/Ind/2020 is dismissed.
Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 15.07.2022
Sd/- Sd/-
(MAHAVIR PRASAD) (B.M. BIYANI)
Judicial Member Accountant Member
Indore, Dated : 15th July, 2022 Patel/ Sr. P.S. Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of dispatch of the Order
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