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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA KAMBLE, JUDICIAL MEMBER (Assessment Year: - ) Brahmakshatriya Kanji Damji Vs. Hindu Sarvajanik Dharamshala CIT (Exemption) Palitana, Ahmedabad Sarvajanik Dharamshala Palitana, Chamundakrupa, Opp. Bhagimi Tramandal Sarvoday Society, Palitana, Bhavnagar-364270 [PAN : AAETB 7023 J] (Appellant) .. (Respondent) Appellant by : Shri Mohit Balani, AR Respondent by: Shri Aarsi Prasad, CIT-DR Date of Hearing 03.12.2024 Date of Pronouncement 09.12.2024 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the Assessee-trust against the order dated 19.02.2024 passed by the Commissioner of Income-tax (Exemption) Ahmedabad, (in short ‘the CIT(Exemption)’), rejecting the application for registration u/s 12A(1)(ac)(ii) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The brief facts of the case are that the assessee had filed an application seeking registration of the Trust under Section 12AB of the Act in Form No.10AB under Rule 17A of the I.T. Rules, 1962 on 23.08.2023. The ld. CIT (Exemption), after verifying the documents submitted by the assessee, found that objects of the assessee-trust were for the benefit of Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana Vs. CIT (E) Asst. Year : - - 2– particular religious community. He accordingly, held that the assessee was not entitled to exemption in terms of Section 13(1)(b) of the Act, and therefore for this reason, he denied the grant of registration to the assessee- trust under section u/s 12A of the Act.
Aggrieved with the order of the ld. CIT(Exemption) rejecting the application of the assessee for registration u/s 12A of the Act, the assessee is now in appeal before the Tribunal.
Before us, the ld. AR argued that what is to be examined is whether the trust had charitable objectives or not and qualified as charitable entity which existed for serving public at large and nothing beyond it. The ld. AR argued that the overall objectives need to be considered. On the other hand, ld. DR supported the order of the ld. CIT(Exemption). We have examined the decision of the ld. CIT (E) in the background of the facts of the case. For the sake of ready reference, the decision of the ld. CIT(Exemption) is reproduced as under:-
“7. The submission of the applicant dated 29.01.2024 is considered but the same is not found acceptable as the applicant itself has admitted that the trust is engaged in doing the activities for the welfare of Hindus and also supports the objects of trust.
7.1 Further, the applicant has claimed that Hindu does not denote a specific community but rather represents a religious affiliation. The point of view of the applicant is not found acceptable because there are other religions i.e. Islam, Christianity, Bhodh, Sikh Jain etc. in India, if the said view of trust is accepted then every trust will start doing charitable activities for their respective religion/community/caste and not the benefit of public at large. Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana Vs. CIT (E) Asst. Year : - - 3– 7.2 The objects of the trust does not speak specifically that the institution is created or established for the benefit of Scheduled Tribes (ST) Scheduled Castes (SC), and Other Backward Classes (OBC). Hence, the trust does not fall in the exception laid down under the provisions of explanation (2) to clause (b) of sub-section (1) of section 13 of the Act.
7.4 The objects of trust are Charitable in nature and the same are found to be for the benefit of Particular religious community i.e. Hindu. Further on verification of the application for registration or approval in Form 10AB, the applicant has reported at point number 3 i.e. Nature of activities as "Religious cum Charitable and as per the Registration Certificate issued by the Deputy Charity Commissioner, Bhavnagar trust is registered on 05.12.1962.
For the purpose of ready reference provision of sec 13(1)(b) of the Act are reproduced as under:
(1) Nothing contained in or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof -
(a) any part of the income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public;
(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; Therefore, the provision of sec 13(1)(b) of the Act is applicable in a case of charitable trust/institution created or established after commencement of this Act and is created or established for the benefit of any particular religious community or caste. 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, Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana Vs. CIT (E) Asst. Year : - - 4– 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. Therefore, in this case there is clear violation of section 13(1)(b)) of Income Tax Act, 1961.
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 and held as under:
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 chariable purpose which is established for the benefit of any particular religious community or caste.”
From the above referred discussion and objects of the applicant/assessee it is evident that it is not a religious trust, but it is a charitable trust and above referred objects, which are in the nature of charitable is restricted to benefit of a particular religious community or caste "Hindu" and therefore as per law laid down by the Hon’ble Apex court in the above referred cases, the provision of sec 13(1)(b) would be applicable and therefore the applicant/assessee would not be eligible for exemption u/s 11 of the Act.
Therefore in the facts and circumstances of the case, applicant/assessee cannot be granted registration u/s 12A of the Act.
In view of the above, the present application filed in Form No. 10AB u/s 12A(1)(ac)(iii) of the Act is rejected and provisional registration stands cancelled. Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana Vs. CIT (E) Asst. Year : - - 5–
Further, the applicant should compute its tax liability under section 115TD of Income Tax Act 1961 read with Rule 17CB of IT Rules and report the same in return of Income. It should also pay the tax so computed within timeline provided under section 115TD(5) of Income Tax Act, 1961. In case applicant is filing appeal against this order u/s. 253 of IT Act 1961, proof of filing of appeal should be provided to AO to get benefit of extended time limit provided us. 115TD(5) of IT Act 1961.”
We find that ld. CIT(E) has not considered the interpretation of Hon’ble Supreme Court in the case of Shastri Yagnapurush Dasji V. Muldas Bhudardas Vaishya (1966 AIR 1119) and also the judgment of Hon’ble jurisdictional High Court in the case of CIT (E) V. Jamiatul Banaat Tankaria (168 Taxman 35) with regard to interpretation of Section 13(1)(b) while issuing registration u/s 12A of the Act. Hence, keeping in view the facts of the case and the provisions of the Act, we direct the ld. CIT(Exemption) to pass an order afresh after considering the above quoted judgements.
In the result, the appeal of the assessee is allowed for statistical purposes.