Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (in short “Ld. CIT(E)”), Ahmedabad, vide order dated 28.03.2024.
The Assessee has taken the following grounds of appeal:-
“1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in rejecting application for registration u/s 12AB of the Act.
2. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in cancelling the provisional registration of the assessee-trust.
3. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in invoking the provisions of Section 13(1)(b) of the Act without considering that assessee-trust is religious-cum-charitable trust and section 13(1)(b) of the Act is applicable only to the charitable trust.
Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 2– 4. On the facts and circumstances of the case as well as on the subject, the learned Commissioner of Income Tax (Exemption) has erred in not considering that assessee-trust has inadvertently stated ‘nature of activities’ in Form 10AB as ‘charitable’ instead of ‘religious-cum-charitable’.
5. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in holding that assessee-trust has conducted ‘specified violations’ as per the explanation to section 12AB(4) of the Act without considering that objects of assessee trust are not limited to benefit of people following Jainism for a private group but is extended to all the people following Jainism.
6. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
The brief facts of the case are that the assessee filed application for registration under Section 12A of the Income Tax Act in Form 10AB on 28th September 2023, seeking approval under Section 12(1)(ac)(iii) of the Act. The provisional approval was granted on 26th October 2022, covering the assessment years from 2023-24 to 2025-26. Subsequent to this, the applicant was asked to provide additional documentation through a notice dated 20th November 2023. In response, the applicant submitted the requested details on 17th December 2023. Upon review of the applicant's objectives as stated in the Trust Deed, CIT (Exemptions) observed that the primary purpose of the organization was to benefit the Jain community, particularly in times of natural disasters. Consequently, a show-cause notice was issued on 24th January 2024, drawing attention to the restrictive nature of the charitable objectives, which were seen as primarily serving the interests of a particular religious community rather than the public at large. The notice required the applicant to clarify how this alignment with the statutory provisions of Section 12AB(4) was maintained and requested a response by 29th January 2024. The applicant submitted a reply on the due date, asserting that the Trust aims to benefit all of humanity without Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 3– discrimination. However, as per CIT (Exemptions), the assessee failed to adequately address the concerns outlined in the show-cause notice regarding the specific objective that sought to provide aid primarily to the Jain community during natural calamities. The notice noted that the trust deed explicitly states that the organization would focus on aiding the Jain community, further specifying that membership was restricted to individuals from the Shri Shwetambar Murtipujak Tapegachcha Jain Samaj. Given this context, CIT (Exemptions) noted that Section 13(1)(b) of the Act applied to the facts of the assessee. Section 13(1)(b) of the Act states that any income from a trust created for the benefit of a specific religious community or caste is excluded from tax exemptions. As per CIT (Exemptions), the Trust's objectives, as documented, did not reflect a broader charitable intent but rather confined its benefits to the Jain community, hence falling squarely within the purview of Section 13(1)(b) of the Act. CIT (Exemptions) observed that the provisions have been upheld in various judicial decisions, including those by the Hon'ble Supreme Court, which affirmed that trusts serving particular religious communities are ineligible for tax exemptions. Thus, based on the findings and applicable legal provisions, the application filed in Form 10AB under Section 12(1)(ac)(iii) was rejected, and the provisional registration of the trust was cancelled.
Before us, the Counsel for the assessee submitted that Ld. CIT(E) has grossly erred in facts in taking the view that the objectives of the trust are aimed only for benefit of a particular religious community, during the course of calamities. The Counsel for the assessee submitted that this is factually incorrect and the benefits of the trust are not aimed at any Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 4– particular religious community as such. Further, the Counsel for the assessee drew our attention to letter dated 29.01.2024 submitted before Ld. CIT(E) vide which it was submitted that the applicant trust carries out activities for the spiritual benefit of all mankind without discrimination of caste. The applicant trust also produced various documentary evidences in the form of photographs before CIT(E) to demonstrate what the activities of the trust are not aimed for the benefit for any particular religious community. Secondly, the Counsel for the assessee submitted that it is a well settled principle that provisions of Section 13(1)(b) of the Act cannot be invoked at the time of grant of registration under Section 12A of the Act and these provisions can be only invoked / analysed at the time of assessment proceedings.
In response, Ld. D.R. placed reliance on the observations made by Ld. CIT(E) in the order dismissing the application for registration filed by the assessee.
We have heard the rival contentions and perused the material on record.
7. In the case of Bargahe Husaini Trust-Monpar 165 taxmann.com 141 (Ahmedabad - Trib.), the assessee-trust filed application for grant of final registration under section 12A of the Act. The Commissioner (Exemption) observed that objects of trust appeared to be restricted to benefit of a particular religious community or caste, which was Khoja Shia Ishna Ashari Samaj and thus, section 13(1)(b) would be applicable and Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 5– dismissed application for grant of final registration. The Ahmedabad Tribunal held that provisions of section 13(1)(b) of the Act can be invoked only at time of assessment and not at time of grant of registration under section 12A of the Act. Therefore, in view of aforesaid legal position, matter was to be restored to file of CIT (Exemptions), for de-novo consideration. While passing the order, the Tribunal made the following observations:
We have heard the rival contentions and perused the material on record. In the case of Bhojalram Leuva Patel Seva Samaj Trust v. CIT (Exemptions) [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.
8. Again, in the case of In the case of Jamiatul Banaat Tankaria v. CIT (Exemption) [2024] 160 taxmann.com 358/205 ITD 673 (Ahmedabad - Trib.), the ITAT held that where objects of assessee-trust were primarily charitable rather than favouring any specific religious community, 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 time of assessment and not at time of grant of registration. In the case of Malik Hasmullah Islamic Educational and Welfare Society v. CIT [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 v. DIT (Exemption) [2014] 50 taxmann.com 216/153 ITD 669 (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.
9. 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 199/243 Taxman 60 (Gujarat)/[2017] 8 ITR-OL 494 (Guj.) wherein on the issue of denial of grant of registration u/s 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 Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 6– 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 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."
10. 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.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes.
In the case of Shah Gulabchandmulchand Shree Parshwanath Trust, Vapi 165 taxmann.com 731 (Surat-Trib.), the ITAT held that where CIT(E) denied registration under Section 12A to assessee-trust due to one objective benefiting only Jain community, invoking Section 13(1)(b), but overlooked broader charitable objectives since provisions of section 13 can be invoked only at time of assessment and not at time of grant of registration under section 12A, matter would be remanded back to CIT(E) for reconsideration. While passing the order, ITAT made the following observations:
5.1 It is clear from the objects of the assessee-trust that it was not for benefit of only Jain community. The CIT(E) has considered only clause-(F) and not the other clauses for proper appreciation of the issue. The objects also include medical help to the needy patients (clause-G), educational, occupational and medical help (clause- E), welfare activities for upliftment of general public (clause-D) etc. Hence, rejection of registration based on only one clause is not proper. We also find that the decisions relied upon by the Ld.AR of the assessee supports the case of the assessee-trust. The recent decision of the ITAT Ahmedabad in case of Bhojalram Leuva Patel Seva Samaj Trust (supra) dated 30.04.2024 is directly on the subject issue. After referring to various decisions including the decisions of Hon'ble Supreme Court in case of Palghat Shadi Mahal Trust (supra) and Dawoodi Bohara Jamat (supra), the Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 7– Tribunal held that where CIT(E) rejected application of assessee-trust, citing Section 13(1)(b) due to trust's objectives being limited to benefiting a specific religious community, since provisions of section 13 can be invoked only at time of assessment and not at time of grant of registration u/s 12A, therefore, matter would be restored to file of CIT(E), for de novo consideration. The facts of the above case are that assessee-trust filed application for registration of trust u/s 12AB of the Act in Form- 10AB. The CIT(E) rejected the application of the assessee on the ground that objects of the assessee-trust are restricted to the benefit of a particular religious community or caste i.e., Leuva Patel Community. He invoked the provision of 13(1)(b) of the Act and rejected the registration of application. After referring to the decisions of the Hon'ble Supreme Court cited supra and the decision of Hon'ble jurisdictional High Court in cases of Leuva Patel Seva Samaj Trust (supra), Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (supra) and CIT (Exemptions) v. Shree Tapeshwar Hanumaji Bajrang Charity Trust [2020] 122 taxmann.com 98/421 ITR 358 (Gujarat) and various decisions of Tribunal, the Tribunal held as under: "10. 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 199/243 Taxman 60 (Gujarat) wherein on the issue of denial of grant of registration u/s 12A of the Act b invoking Section 13(1)(b) of the Act, it not at the time of grant of registration. The relevant finding of the Hon'ble High Curt 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 carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Ac, which would be the task of the Assessing Office 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 ground as mentioned in its order for rejecting the application filed by the assessee trust." 5.2 Since the facts of the present case are similar to the facts of the above case, following the reasons given in the above order, the matter is restored back to the file of CIT(E) for de novo consideration after giving adequate opportunity of hearing to the assessee. The assessee is directed to file necessary documents and evidence as needed by the CIT(E). For statistical purposes, the ground of appeal raised by the assessee is treated as allowed.
Shree Naminath Shwetamar Murtipujak Tapagachh Jain Religious Trustvs. CIT(E) Asst.Year –N.A. - 8– 6. In the result, appeal filed by the assessee is allowed for statistical purposes.
Looking into the judicial precedents on the subject, in our considered view, provisions of Section 13(1)(b) of the Act can be invoked at the time of assessment, on the basis of material that may be brought on record. However, grant of registration under Section 12A of the Act cannot be denied to the assessee by invoking the provisions of Section 13(1)(b) of the Act at the time of grant of registration.
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.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 30/09/2024