Case Law Details
Parul University Alumni Association Vs CIT (ITAT Ahmedabad)
The case of Parul University Alumni Association vs. CIT (ITAT Ahmedabad) revolves around the rejection of the appellant’s application for registration under Section 12A(1)(ac)(iii) of the Income Tax Act by the Ld. Commissioner of Income Tax (Exemptions) (CIT(E)).
The appellant, a charitable trust registered under the Bombay Public Trust Act, applied for registration under Section 12AB of the Income Tax Act. Although it received provisional registration, its application for regular registration was rejected by the CIT (Exemptions) on two grounds. Firstly, there was a discrepancy in the name between the registration certificate issued by the Assistant Charity Commissioner Vadodara and the PAN database. Secondly, the CIT (Exemptions) argued that the trust’s objectives primarily served the interests of the members of Parul University, rather than the public at large.
The appellant appealed against this decision, citing the consistency of its legal entity despite the name difference and arguing that its objectives did indeed serve the public interest. The Tribunal found merit in both arguments and directed the CIT (Exemptions) to re-examine the case.
Regarding the name mismatch, the Tribunal accepted the appellant’s explanation that the discrepancy arose from translating the organization’s name from Gujarati to English, affirming that there was no change in the legal entity. Consequently, the Tribunal deemed it inappropriate to reject the application solely on this ground.
On the second ground, the Tribunal agreed with the appellant’s contention that its objectives aimed at the advancement of general public utility. It cited legal precedents highlighting that charitable purposes need not benefit all individuals in society but rather a sizable section of the public. The Tribunal emphasized that the determination of whether the trust serves a particular community should occur at the time of assessing tax exemption under Section 11, not during the registration process under Section 12AA.
In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the CIT (Exemptions) to re-evaluate the case considering the explanations provided by the appellant regarding the name mismatch and the charitable nature of its objectives.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemptions) (in short “Ld. CIT(E)”), Ahmedabad vide order dated 28.11.2023.
2. The assessee has taken the following grounds of appeal:-
“1. The learned Hon. CIT Exemption is not correct in rejecting registration u/s 12A(1)(ac)(iii) of the Income Tax Act.
2. The learned Hon. CIT Exemption has erred in stating that the objects are for the benefit / welfare / interest of the members of the association of Parul University and not for the benefit of public at large.
3. The trust is requesting you to allow the appeal of Appellant for non granting registration by Hon. CIT Exemption.
4. Alternatively appeal is allowed by set aside the order and matter referred back to the desk of Hon. CIT Exemption for reconsideration.
5. Appellant Craves leave to add, alter or amend any of the grounds of Appeal mentioned above, either at or before the time of hearing.”
3. The brief facts of the case are that the assessee is a charitable trust registered under the Bombay Public Trust Act, 1950 on 27.08.2021. The assessee / applicant filed application for registration of trust under Section 12AB of the Act. The assessee/ applicant Trust started its activities in F.Y. 2021-2022. It has got provisional registration under sub-clause (vi) of clause (ac) of sub-Section (1) of Section 12A from A. Y. 2022-23 to A.Y. 2024-25 w.e.f. from 23.03.2022. The assessee / applicant Trust applied for regular registration by filling application in Form 10AB on 30.05.2023 electronically. Along with the application, appellant filed copy of Trust Deed, copy of Provisional Registration Certificate in Form 10AC, copy of Trust Registration Certificate under Bombay Public Trust Act, 1950 and Audited accounts for F.Y. 2021-2022. The application of the appellant for registration was however rejected by Ld. CIT(Exemptions) vide order dated 28.11.2023 firstly, on account of alleged name mismatch between the certificate of registration issued by the Charity Commissioner, Vadodara and the PAN database. Ld. CIT(E) observed that the name of the applicant in the certificate of registration issued by the Assistant Charity Commissioner Vadodara and Memorandum of Association is mentioned as “Parul University Bhutpurva Vidhyarthi Mandal”. However, the name of the applicant trust as per PAN database is “Parul University Alumni Association”. Secondly, CIT (Exemptions) observed that the objects/objectives of the applicant/Association are for the benefit/welfare of the members (former and present students) of Parul University – Vadodara only and not for public at large. In view of the above, the CIT (Exemptions) rejected the application filed by the applicant trust, with the following observations:
“7.1 The above reply of the applicant is considered, however same is not found acceptable for the reason that it is necessary to maintain consistency in name of legal entity and it has to be remained same before all Government authorities. Further, the applicant has not submitted any language translation certificates and official recognition documents from authorized translation agencies, confirming the accuracy of the translation as claimed in its reply. The plea of the applicant that it happened due to translation of name from Gujarat to English cannot be accepted for the reason discussed above.
7.3 The object/objective enumerated in number 1,2,5,7 & 12 as stipulated in Memorandum of association are for the benefit/welfare/interest of the members of the association i.e. alumni/students of Parul Univeristy and not for the benefit of public at large.
5. The objects of the applicant need to be analyzed as to whether they are charitable in nature. The litmus test of a charitable institution is that it should primarily carry on charitable activities. Charity is the noble cause meant for the benefit and upliftment of the down trodden, poor and the needy. Charity is not a technical concept safeguarded by legal jargons. Charity is not an edifice built on logical deliberations. Charity is a divine reflection of human civilization which finds ways and means to help the needy, to protect the helpless, to support the poor and to work for the betterment of the society and mankind. So what is necessary is actual work of charity, howsoever humble it might be.
From perusal of above referred objects of the applicant/assessee, it is evident that it is formed as association to protect the business interest and welfare of its members and that hardly can be considered as charitable in nature, particularly when the essence of altruism is absent from the same. The applicant/assessee is established and functioning as welfare association or union and also collecting fee in the guise of donation from ranging Rs. 01 to 3,11,000/- from 01.04.2021 to 31.03.2023 from its members. Moreover, the welfare activities adopted for its members are in nature of services being rendered to members as are common in other welfare organizations, which could not be termed for general public utility and charitable purpose. Further, the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Truck Operators Association reported in 9 taxmann.com 267 decided the matter in favour of revenue and held as under.
“9. On examination of the objects and the purpose of the Association in the present caso, it emerges that the respondent-Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or non-member to undertake any business activity within the precincts of Hansi Town/village. The Association charges fees from its members before the transportation on the basis of the distance involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing. The association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. The welfare activities adopted for the truck drivers, cleaners and mechanics of the truck owners are in the nature of staff welfare activities, as are common in other business organizations which cannot be termed for general public utility.”
9. Therefore, as the aforesaid objects are for the benefit/welfare/interest of the members of the association i.e. alumni/students of Parul Univeristy and not for the benefit of public at large, I am of the considered opinion that the applicant/assessee is not eligible for registration u/s 12A 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.
10. 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 is also cancelled.”
4. The applicant/assessee is in appeal before us against the aforesaid order passed by CIT (Exemptions) dismissing the application filed by the applicant trust. Before us, the Counsel for the assessee submitted as under.
Grounds No. 1: Name Mismatch
5. Before us, the Counsel for the assessee submitted that the applicant/assessee had explained in detail before CIT (Exemptions) about the difference in name in the application form and name as per legal documents like Trust registration certificate and Memorandum of Association. The Counsel for the assessee/applicant submitted that the variation in nomenclature arises due to the English translation of the organization’s name. The term “Parul University Bhutpurva Vidhyarthi Mandal” in the Memorandum of Association and the certificate of registration issued by the Assistant Charity Commissioner Vadodara is the official name of the organization in Gujarati. On the other hand, “Parul University Alumni Association” is the English translation of “Parul University Bhutpurva Vidhyarthi Mandal,” used in the PAN database and Form 10B for giving equal importance to both languages and to help with better understanding and recognition. Accordingly, there is no change in the organization’s legal status or structure. To support this clarification, the applicant trust also submitted relevant language translation certificates and official recognition documents from authorized translation agencies, confirming the accuracy of the translation. It was submitted before us that Name of the assessee/applicant trust has not changed but in translation from Gujarati to English, words in Gujarati “Bhutpurva Vidhyarthi Mandal” is translated in English as “Alumni Association”. Instead of “Bhutpurva Vidhyarthi” the word “Alumni” is translated in English and for the word “Mandal”, it is translated as “Association”. Otherwise, the entity is the same as it is registered under the Bombay Public Trust Act, which is proved from the Trust Registration Number mentioned in Registration Certificate in Gujarati and translated in English. The Counsel for the assessee submitted that the applicant trust has got provisional registration in the name “Parul University Alumni Association” on the basis of legal documents like Trust Registration Certificate and Memorandum of Association. Same documents were also filed with the application form applied in the same name for registration in Form 10AB. Hence, it was submitted that name of the assessee/applicant trust is consistent with it’s legal entity and it has remained the same before all Government Authorities.
6. In response, Ld. DR placed reliance on the observations made by CIT (Exemptions) in the order rejecting the application filed by the assessee/applicant trust.
7. We have heard the rival contentions and perused the material on record.
8. In our considered view, the assessee/applicant trust has been able to reasonably explain the mismatch between the name as appearing in the legal documents submitted by the assessee/applicant trust before CIT (Exemptions) and the name as appearing in the PAN database. In view of the detailed explanation in support of the alleged mismatch given by the assessee/applicant trust, we are of the considered view that it is not a fit case where the application filed by the assessee/applicant trust can be summarily rejected only the ground of name mismatch alone.
9. Accordingly, CIT (exemptions) is directed to examine this issue afresh after taking on record the detailed submissions filed by the assessee/applicant trust in support of this contention/issue.
10. In the result, Ground No. 1 of the assessee’s appeal is allowed for statistical purposes.
Grounds No. 2: the objects of the assessee/applicant trust are not for public at large
11. Before us, the Counsel for the assessee submitted that Objects mentioned in the constitution of the appellant trust falls in the fifth and residuary limb contained in the definition of “Charitable purposes” under Section 2(15) i.e. “Advancement of any other general public utility”. It was submitted that advancement of any other general public utility comprises an array of combination of three significant words, namely, ‘general’ meaning pertaining to a whole class, ‘public’ meaning the body of people at large irrespective of their class and ‘utility’ meaning usefulness. Therefore, the advancement of any object beneficial to the public or a Section of public as distinguished from an individual or group of individuals would be a charitable purpose as held in CIT vs. Ahmedabad Rana Caste Association [1973] 88 ITR 354(Guj.). It was further submitted before us that the expression ‘public’ includes cross section of public. It is well settled that for satisfying the requirements of Section 2(15), it is not necessary that the benefit should reach each and every poor person in the state or country. The court in the case of Girijan Co-operative Corporation Ltd vs. CIT [1989] 178 ITR 359(AP) held that it is sufficient if it reaches a sizable number of members of public. Further it was submitted by the Ld. Counsel for the assessee that in the case of CIT vs. Indian Sugar Mills Association [1974] 97 ITR 486 (SC) it was held that “the expression object of general public utility’ is not restricted to objects beneficial to the whole of mankind or even all people living in particular country or province. It is sufficient if the intention is to benefit a section of the public as distinguished from specified individuals. The Section of the public sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature; where there is no common quality uniting the potential beneficiaries into a class, it may not be regarded as valid.” It was submitted that trust is inviting all students irrespective of any university to take the benefit of activities and not restricted to few individuals, hence benefit of objects of the trust relying on the above cited pronouncement cannot be said that it is for particular community and not for general public. The Ld. Counsel for the assessee placed reliance on the case of CIT vs. Surji Devi Kunji Lal Jaipuria Charitable Trust [1990] 186 ITR 728 (All.), wherein the High Court observed that giving financial help for the marriage of girls of a particular community would be considered as charitable purpose even if the beneficiaries were not necessarily poor. It was held that spending money in the marriages of girls of the Vaisya community was a charitable purpose and that it was not necessary that it should be beneficial to the poor only. What was required was benefit to a Section of the public as distinguished from specified individuals. The Ld. Counsel for the assessee further submitted that question whether the trust is created or established for the benefit of any particular religious community or caste would be relevant when the income of the trust is being assessed to tax and the question arises whether such income should be excluded from the total income of the trust in terms of Section 11 of the Act and not so far as grant of registration under Section 12AA of the Act is concerned. For purposes of registration under Section 12AA of the Act, Ld. CIT(E) should follow the requirements of grant of registration and not requirement of claiming tax benefit as envisaged under Section 11 of the Act. However, in the instant case the Ld. CIT(E) rejected the application by invoking Section 13 at the time of grant of registration itself, which is not correct. Section 13 gets triggered only at the time of examining the claim of exemption under Section 11 and not at the time of grant of registration to the Trust. Reliance was pleased on following judgements:
a. [2014] 42 com 181 (Gujarat) High Court of Gujarat in case of Commissioner of Income-tax, Rajkot-II v. Leuva Patel Samaj Trust.
b. Shantagauri Ramniklal Trust V. CIT [1999] 239 ITR 528
c. Jamiatul Bannat Tankaria [TS – 166-ITAT-2024 (AHD)]
12. Accordingly, it was submitted before us by the Counsel for the assessee that the objects of the trust for overall development of students as a whole in the field of education, medicine and to do activities for development of society and culture are for the benefit of cross Section of the society which covers general public utility and not for the benefit of particular caste. Therefore, the trust is existing for charitable objects and satisfied all conditions is eligible to get registration under Section 12A(1) of the Income Tax act, 1961.
13. In response, Ld. DR placed reliance on the observations made by CIT (Exemptions) in the order rejecting the application filed by the assessee/applicant trust.
14. We have heard the rival contentions and perused the material on record.
15. In our considered view, looking into the objects of the trust, it cannot be held that the assessee/applicant trust has been formed only for the benefit of a particular community only. Further, we also agree with the Counsel for the assessee that this aspect should be considered at the time of grant of exemption under Section 11 of the Act and the provisions of Section 13 should not be invoked at time of grant of registration under Section 12AA of the Act. In the result, the matter is being restored to the file of CIT (Exemptions) to examine the activities carried out the trust (since we observe that the trust has been recently formed/registered) and to carry out the requisite analysis whether the trust is engaged in carrying out genuine activities, so as to be eligible for grant of registration under Section 12AA of the Act.
16. In the result, Ground No. 2 of the assessee’s appeal is allowed for statistical purposes.
17. In the result, the assessee’s appeal is allowed for statistical purposes.
This Order pronounced in Open Court on 24/04/2024
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