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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & MS. SUCHITRA R. KAMBLE
O R D E R
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the assessee against the order of learned Commissioner of Income-tax (Exemption), Ahmedabad [hereinafter referred to as “ld.CIT(Exemption)” for short] dated 29.12.2022, rejecting the application filed by the assessee in Form No.10AB for registration u/s 12AB of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short].
The assessee has raised the following grounds: “1 (a) The Order of CIT (Exemption) dated 29-12-2022 rejecting approval of Registration u/s.12AB is bad in Law and Void since it has not been passed within 15 days of Last Hearing dated 30-11-2022. (b) Your Appellant submits that in view of binding Circular of Central Board of Direct Taxes bearing No.279/Misc 53/2003-ITJ dated 19-6-2015 and Instruction bearing No. 20/2003 dated 23/12 / 2003 the CIT (Exemption) was Jamiatul Banaat Tankaria Vs. CIT(E) AY : 2022-23 2 duty bound to pass order within 15 days which he has failed and therefore the same be cancelled and approval u/s.12AB as per Form No.10B be granted.
(a) Without prejudice to above your Appellant submits that CIT(E) has wrongly interpreted various clauses of the Appellant Trust and his reliance to clause c' to give scholiast to Muslim Students for their studies and to make provisions so as they can get religious education is totally mis-construed and wrongly interpreted and the clause is of relief to all without cast of credit.
(b) Your Appellant further submits that the clause referred in the Trust Deed has to be interpreted in general and your Appellant refers and relies on the judgement of Lucknow ITAT in the case of Malik Hasmullam Islamic Education & Welfare Society vs. CIT, 24 taxmann.com 93 (Lucknow) and submits that the interpretation of learned CIT(E) was erroneous.
(c) Without prejudice it is submitted Exportation if any is incurred it is less than 5% of Total Expenditure of the Trust and hence the provision cannot be put in service and claim of Exemption of Appellant Trust cannot be refuse.
(a) Your Appellant submits that the Appellant is old Trust to with registration u/s.12A and u / s * 0.8G were already granted and the Appellant has not made any change in activities or alternation in objects of the Trust and the same activities which were held genuine in past years have been continued and that there is no reason to take a separate view on presumption and assumption.
(b) Your Appellant also relies on the judgement of CIT (Exemption) vs. Swami Omkaramdas Charitable Trust (2023) 150 taxmann.com 428 (Allahabad) and also of Supreme Court in the case of CIT vs. Excel Industries Ltd. 358 ITR P. 295 and submits that in view of Principle of "consistency" which is fully applicable to the Appellants case the order of Commissioner rejecting u/s80G(5) be cancelled and the Appellant be granted Renewal Registration u/s 80G(5) as per Law.
4. In view of above facts and circumstances, your Appellant submits that the order of CIT(E) under Appeal rejecting Registration u/s. 12AB be cancelled and he be directed to grant Exemption u/s.80G as per Law, keeping in mind facts of the case and provisions of Law.”
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 06.06.2022, alongwith Jamiatul Banaat Tankaria Vs. CIT(E) AY : 2022-23 3 necessary documents stipulated under the Act. The ld. CIT(Exemption), however, issued notices dated 17.10.2022 and 30.11.2022, requiring the assessee to furnish detailed note on the activities carried out by the assessee- trust. The ld. CIT (Exemption), after verifying the required documents, found that objects of the assessee-trust were for the benefit of particular religious community or caste i.e. Muslims. 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. His finding in this regard is recorded at paragraph No. 9 of his order as under:
“9. From the above referred objects of the applicant/assessee it is evident that it is not a religious trust, but it is religious cum charitable trust and above referred objects, which are in the nature of charitable is restricted to benefit of a particular religious community or caste “MUSLIMS” 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, the applicant/assessee cannot be granted registration u/s 12A of the Act.”
We have gone through the order of the ld. CIT(Exemption) and noted that the application filed by the assessee in Form No.10AB for registration u/s. 12AB of the Act was rejected by him finding that the objects of the assessee were for the benefit of a particular religious community or caste i.e. “Muslims”. While taking this view, he derives support from the decision of the Hon’ble Apex Court in the case of CIT Vs. Dawoodi Bohara Jamat, 43 taxmann.com 243.
We have gone through the decision of Hon’ble Apex Court in the case of Dawoodi Bohara Jamat (supra) and we find that the ld. CIT(Exemption) has totally mis-appreciated the decision rendered by the Hon’ble Apex Court Jamiatul Banaat Tankaria Vs. CIT(E) AY : 2022-23 4 in the said case. The Hon’ble Apex Court, we find, in the said case had categorically held that Trust with charitable objects, which existed for the benefit of a particular religious community qualified as charitable entity serving the public at large and this was sufficient for grant of registration under section 12A of the Act, and the provisions of section 13(1)(b) of the Act would be attracted only at the time of granting exemption to the assessee, wherein if it was found that the trust existed for the benefit of a particular religious community only, the exemption under section 11 was to be denied to the assessee. The Hon’ble Apex Court, therefore, categorically found that as per the provisions of law, section 13(1)(b) could not be applied for denying the grant of registration, but was to be applied only while granting/denying exemption to the assessee.
It is pertinent to note that the Hon’ble Apex Court has categorically held in the said decision that section 13(1)(b) comes into picture and is to be applied only when the eligibility of exemption of income in terms of provisions of section 11 is to be determined and not at the time of grant of registration. The Hon’ble Apex Court has categorically stated that the assessee has to first cross the hurdle of being eligible to exemption under section 11 by obtaining a certificate of registration under section 12A in this regard. Having crossed this hurdle, only then the provisions of section 13(1)(b) would come into picture, and a trust which is for the benefit of particular community, but it objects are otherwise charitable, is a valid trust for the purpose of grant of registration.
The ld.CIT(Exemption), in the present case, we find, has only picked a portion of the order of the Hon’ble Apex Court, wherein it has been held that the provisions of section 13(1)(b) of the Act would be applicable to a trust Jamiatul Banaat Tankaria Vs. CIT(E) AY : 2022-23 5 with mixed objects i.e. both charitable and religious. But he has failed to take note of the finding of the Hon’ble Apex Court that section 13(1)(b) would apply only at the time of grant of exemption under section 11, 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 Vs. Bayath Kutchhi Dasa Oswal Jain Mahajan Trust, (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 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.
9. Even otherwise, we have gone through the objects of the trust, which were placed before us in the “statement of facts” which are as under:
“1. Propagation and campaign of any sort of Religious and worldly cultivated activities, training and education, to maintain and administer Urdu English & Arabic Language cultivation and training, Cultivation of craft and industrial training.
2. To do welfare activities for upbringing and development of each section of the society.
3. To establish Children Nurseries, Primary schools, High schools, Colleges, Madressa, Masjid boarding houses, Hospitals, Dispensaries etc. And for that accommodating fixed assets and to manage the same thereby. And to do every kind of charitable activities. Jamiatul Banaat Tankaria Vs. CIT(E) AY : 2022-23 6
4. To make necessary arrangements for accommodation of poor people.
5. To help the Blind, Weak, Feverish people and those poor people who cannot run their lives.
6. To give Scholarships to Muslims Students for their studies and do make provisions so as they can get the religious education.
7. To give medical assistance in the events of requirement irrespective of caste and creed and to organise medical camps.
8. To help the poor, unhappy, orphan and economical poor classes and to help in burial and funerals
Cottage Industries, Rural Industries, Women Industries and to run each such activities to remove unemployment with the help of the government.”
The Ld.CIT(Exemption) has referred to object at S.no 6 which is providing scholarship to Muslim students for their studies and to make provision so as they can get religious education for arriving at his finding that the objects are for the benefit of a particular religious community- so as to invoke section 13(1)(b) of the Act. Further we find that the Ld.CIT(Exemption) notes that otherwise the objects are charitable in nature except for the aforestated object. As per section 13(1)(b) exemption u/s 11 is denied if the trust is created or established for the benefit of a particular religious community. With majority of the objects found to be not catering to a particular community and no finding of the assessee actually catering for the benefit of a particular community, there is no case for invoking section 13(1) (b) of the Act in the present case. Therefore, we hold that even on merits the Ld.CIT(Exemption) was wrong in holding that section 13(1)(b) was applicable in the facts of the present case. Jamiatul Banaat Tankaria Vs. CIT(E) AY : 2022-23 7
In view of the above, we hold that the objects of the trust are not wholly for the benefit of a particular religious community, but are largely charitable in character for general public at large, and for the purpose of granting registration under section 12A, the provision of section 13(1)(b) cannot be referred to, which is to be applied only when granting the exemption to the trust.
The order of the ld.CIT(Exemption) denying grant of registration is accordingly set aside, and the Ld. CIT (Exemption) is directed to grant the assessee-trust registration under Section 12A of the Act.
In the result, the appeal of the assessee is allowed.