ROYAL WELFARE SOCIETY,MUMBAI vs. DIT (E), MUMBAI

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ITA 7338/MUM/2010Status: DisposedITAT Mumbai16 March 20164 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the trust had amended its Memorandum of Association to remove the objectionable clauses, addressing the DIT(E)'s concerns. Therefore, the DIT(E)'s order was set aside, and the application was restored for fresh consideration.

What were the facts?

The assessee, a charitable trust, applied for registration under Section 12A of the Income Tax Act. The Director of Income Tax (Exemption) rejected the application, citing that the trust's objects benefited specific members of a community rather than the general public, violating Section 13(1)(b).

What were the issues?

Whether the trust's objects were for the benefit of the general public, and if amendments made to the Memorandum of Association rectified the defects pointed out by the DIT(E).

Which sections of the Income-tax Act were involved?

Section 12A,Section 12AA,Section 13(1)(b)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: S/SHRI B.R.BASKARAN & SHRI SANDEEP GOSAIN

For Appellant: Shri S M Makhija
For Respondent: Shri A K Srivastava
Hearing: 3.12.2015Pronounced: 16.3.2016

सुनवाई की तारीख / Date of Hearing : 3.12.2015 घोषणा की तारीख /Date of Pronouncement : 16.3.2016 O R D E R

PER SANDEEP GOSAIN, JM:

1.

The assessee has filed this appeal challenging the order dated 23.8.2010 passed u/s 12AA(1)(b)(ii) r.w.s 12A of the Income Tax Act, 1961 by Ld. Director of Income Tax (Exemption) refusing to grant registration to the assessee u/s 12A of the Income Tax Act, 1961.

2.

We heard the parties and perused the record. The assessee is a charitable trust having been constituted on 14.7.2002 by the Memorandum

2 of Association and registered with office of the Charity Commissioner under Bombay Public Trust Act, 1950. The assessee trust bearing registration no.F-24578 and under the Society Registration Act, 1860 bearing no.GBBSD 1135/2002 dated 19.8.2002.

3.

The assessee made an application for Registration u/s 12A to the Director of Income Tax (Exm) for grant of exemption. The ld. AR submitted that the Director of Income Tax (Exemption) (DIT(E)) has rejected the application filed by the assessee seeking registration u/s 12A of the Act on following grounds : (a) The objects mentioned in the Memorandum of Association of the assessee contain certain objects which are not made for general public and the benefit of the trust are restricted to the members of the community. (b) Violation of section 13(1) (b) of the Income Tax Act. (c) The character of the Institution/trust as envisaged by the legislature, should be for the benefit of general public at large and not for the benefit of specific members. The assessee trust restricted the benefit only to “members of the community”

Therefore, the ld. Director of Income Tax (E) was of the view that the benefit granted under section 11 cannot be extended to the assessee trust and hence, rejected the application for registration u/s 12AA of the Act for want of violation of provisions of section 12 too. While dealing with the issue of registration u/s 12AA of the Act, the ld.DIT(E) has lent support from the decision of the Hon’ble Madhya Pradesh High Court in the case of Dhakad Samaj Dharamshala Bhavan Trust V/s CIT (302 ITR 321) (MP).

4. With regard to the first objection of ld. DIT(E), the ld. AR submitted all activities mentioned in the Memorandum of Association is meant for less privileged class of people irrespective of their castes or religion. The beneficiaries hail from all the communities and not restricted to any one particular community. The local area where the trust is functioning belongs to different castes and creeds. The assessee trust is promoting sports activities amongst poor children games and organization of sports for very poor children. The ld.AR further submitted that the assessee trust passed resolution amending the objectionable word “community” appearing in clause (b) and ( c ) in the Memorandum of Association and submitted the amendment to the office of Charity Commissioner for its approval. The ld. Charity Commissioner vide order dated 21.11.2014 has allowed the application and passed the order as under : ORDER 1) Change Report is hereby accepted; 2) Schedule -1 be amended accordingly. Therefore, the ld.AR submitted that the objections raised by the DIT(E) for not granting registration u/s 12AA have been removed and prayed that the ld. DIT(E) be directed to grant registration u/s 12AA of the Act. He also placed on record the copy of the order issued by the Charity Commissioner, which is forming part of this record.

4.

On the contrary, the ld. DR relied on the decision of the DIT(E) and submitted that the assessee has failed to prove his case on merit.

5.

Having heard the rival submissions, we are of the view that the application filed by the assessee requires reconsideration at the end of ld. DIT(E). The object clause of Memorandum of Association of the assessee 4 since have been amended by the order of the Charity Commissioner. We are of the view that rests of the objections are consequential in nature.

6.

In view of the above, we are of view that the assessee should be provided one more opportunity to explain about all the defects pointed out by the Ld DIT. Accordingly, we set aside the order of ld. DIT(E) and restore all the matters to his file with a direction to consider the application of the assessee afresh, after providing adequate opportunity of being heard to the assessee. We also direct the assessee to furnish all the details and explanation that may be called for by ld. DIT(E) for speedy disposal of the application.

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