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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Smt. Annapurna Gupta & Shri T.R. Senthil KumarShri Umrala Taluka
आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the order dated 23.09.2023 passed by the Commissioner of Income Tax (Exemption), Ahmedabad [herein after referred as CIT[E]] denying Registration under section 12AB of the Income Tax Act, 1961 [herein after referred as ‘the Act’] on the ground that the assessee Trust is carrying out the charitable activities relating to particular religious community.
Page No 2 Shri Umrala Taluka Sardar Patel Prajapati Samaj Trust vs. CIT(E)
Brief facts of the case is that the assessee is a Trust engaged in educational activities since July 1999. The assessee was granted Provisional Registration of Trust on 19-01-2023 by Ld. CIT(E), Ahmedabad. Thereafter the assessee filed application for grant of Final Registration u/s. 12AB of the Act in Form 10AB on 16-03- 2023. On perusal of the application filed by the assessee Trust, the Ld. CIT(E) noted that the objects of the Trust are for the benefit of a particular community or caste namely “Patel Samaj”. After verifying the objects of the Trust, the Ld. CIT(E) issued a show cause notice dated 06-09-2023 as to why not deny registration u/s.12AB of the Act.
2.1. In response, the assessee submitted vide its reply dated 10-09- 2023 that the Trust focuses on child development, education progress and women development activities and other activities as follows: Education:-
1. Child education, primary education and help provide towards higher education.
2. Establishment of boarding, chattralay and its development 3. To provide scholarship to economically backwards students and provides prizes to clever students. 4. Establishment of Book Bank for providing Text book to poor students. All above activities towards child development
We also request to your honour towards seen our social development object
Point No.6 To carry out Group Marriage (samuh lagan) and gives Marriage Gif (Karriyavar), This activities also towards ladies development
Point No.7 To Arrange Vevishal Melo which activity has also support to Ladies Page No 3 Shri Umrala Taluka Sardar Patel Prajapati Samaj Trust vs. CIT(E)
Point No. 10 To carry Financial Support for Poor Family
You are know very well that women have very important role in the development of the society. Thus, we inform you that Our Trust works for Development of Child and women. we also request you to kindly refer Explanation 2 of Section 13 Trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub- section (1).
Hence such denial exemption does not apply to organisations created for the benefit of Scheduled castes, backward classes and Schedule Tribes, or women and children pursuant to Explanation 2 to section 13.
In view of the above, we are kindly request your honour to please sanction our 12A Application.”
The above reply was considered by Ld CIT[E] but the same was not acceptable for the following reasons:
“As per constitution of trust/institution, there are total 19 objects/ objectives of trust, of which 7 objects/objectives are related to education, 2 objects/objectives are related to the medical and health and 10 objects/ objectives are related to Social upliftment programs. Hence, the objects/objectives of the trust are not restricted for the benefit child and women, rather the social, medical and health objectives are more diverse in nature and as per constitution the objectives of this organization are for advancement, awaking and progress in various fields for the Patel community which includes child and women of said community, Further, the applicant has not furnished any documentary evidence to prove that the Patel community falls under the Scheduled Castes, backward classes; Scheduled Tribes thus, the claim of the applicant cannot be accepted.
9. Provision of sec 13(1)(b) of the Act is applicable to the applicant/ assessee. Section 13(1)(b) of the Act stipulates that provisions of sec 11 and 12 would not apply 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 Page No 4 Shri Umrala Taluka Sardar Patel Prajapati Samaj Trust vs. CIT(E)
benefit of any particular religious community or caste. Therefore, the provision of sec 13(1)(b) of the Act is applicable only in a case of charitable trust/institution created or established after commencement of this Act, if the trust/institution is created or established for the benefit of any particular religious community or caste. As per the certificate of registration with Deputy Charity Commissioner, the trust is registered on 23/06/1999. Further, in the present Form No. 10AB filed, the applicant/assessee has mentioned the Nature of activities as "Charitable". Various courts have held that the provisions of sec 13(1)(b) of the Act is not applicable in the case of a religious trust. The provision of sec 13(1)(b) of the Act is applicable to a charitable trust, has been settled by the Hon'ble Supreme Court in the case of CIT vs. Palghat Shadi Mahal Trust, reported in 120 Taxman 889, wherein in the case of a public charitable trust, the Hon'ble Apex court held that where the benefit is available to Muslims from all over the world, none of whom except in Kerala are backward classes, the provision of sec 13(1)(b) would be attracted and therefore the trust is not entitled for exemption u/s 11 of the Act. Even some courts had held that in case of composite trust/institution, i.e. charitable cum religious, the provision of sec 13(1)(b) of the Act is not applicable, However, the said controversy was resolved by the Hon'ble Supreme Court in the case of CIT vs Dawoodi Bohara Jamat, reported in 43 taxmann.com 243, wherein the Hon'ble Apex Court held that the provision of sec 13(1)(b) of the Act is applicable even to a composite trust/institution.”
3.1. Thus the Ld. CIT(E) rejected the Final Registration and also cancelled the Provisional Registration granted u/s. 12AB of the Act to the assessee Trust.
Aggrieved against the same, the assessee is in appeal before us. The Ld. Counsel for the assessee submitted that the activities carried out by the Trust are not relating to particular community but public at large. Thus the case of the assesse Trust squarely covered by various decisions rendered by Co-ordinate Benches of this Tribunal. On similar facts ITAT has held that the provisions of section 13(1)(b) of the Act (which stipulates that the benefit of Page No 5 Shri Umrala Taluka Sardar Patel Prajapati Samaj Trust vs. CIT(E) provisions of section 11 and 12 of the Act is not available in the case of a trust or a charitable institution created or established for the benefit of any particular religious community or caste) would be required to be seen/analyzed only at the time of assessment of such Trust, and section 13(1)(b) of the Act cannot be invoked for the purpose of denial of grant of registration under section 12A of the Act.
In response, the Ld. DR placed reliance on the observations made by the Ld. CIT(E) in the order denying the grant of registration under section 12A of the Act to the assessee and requested to uphold the same.
We have heard the rival contentions and perused the material available on record. 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. In the case of Bhojalram Leuva Patel Seva Samaj Trust [2024] 162 taxmann.com 270 (Ahmedabad - Trib.), the ITAT held that provisions of section 13(1)(b) can be invoked only at the time of assessment and not at the time of grant of registration under section 12A.
6.1. Again, in the case of Jamiatul Banaat Tankaria [2024] 160 taxmann.com 358 (Ahmedabad-Trib.), the ITAT held that where objects of assessee-trust were primarily charitable rather than favouring any specific religious community, Ld. CIT(E) was not justified in denying registration under Section 12A, by invoking Section 13(1)(b) as said provision would be attracted only at the time of assessment and not at the time of grant of registration. In Page No 6 Shri Umrala Taluka Sardar Patel Prajapati Samaj Trust vs. CIT(E) the case of Malik Hasmullah Islamic Educational and Welfare Society, [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 proceedings, Commissioner is not competent to invoke such provisions for purpose of declining registration under Section 12AA. In the case of St. Joseph Academy (2014) 50 taxmann.com 216 (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 (Gujarat) wherein on the issue of denial of grant of registration us 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 Page No 7 Shri Umrala Taluka Sardar Patel Prajapati Samaj Trust vs. CIT(E) carried 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.
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.”
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.
In the result, the appeal filed by the assessee is allowed for statistical purposes.