Case Law Details
Machhi Mahajan Sports and Cultural Association Vs CIT (Exemption) (ITAT Surat)
Conclusion: Tribunal ordered fresh consideration of an application for registration under Section 12AB as Commissioner of Income Tax(Exemption)[CIT(E)] rejected the application of registration on grounds of limited review of the trust’s objectives and had not given his finding on the objects and activities of assessee.
Held: Assessee, filed an application for registration under Section 12AB. CIT(E) issued notices seeking explanations and audited accounts for FY 2022–23. CIT(E) in the show-cause notice observed that the trust’s objectives were charitable but restricted to its members and not for the public at large. Based on this, CIT(E) held that the objectives did not meet the definition of “charitable purposes” under Section 2(15). CIT(E) also noted that no response was filed to the notice and, referring to a Punjab & Haryana High Court decision, denied the registration under Section 12AB and cancelled the provisional registration under Section 12A(1)(ac)(iii). Aggrieved by this order, assessee filed an appeal before Tribunal. It was held that CIT(E) had not examined the objects and activities of assessee trust which were the twin conditions for granting registration under Section 12A/12AB. CIT(E) while rejecting the application of assessee had referred Clause-H to O only and had not considered the other clauses. Entire memorandum of association had to be considered and not by selecting a particular clause of the memorandum of association. Considering the fact that CIT(E) had not given his finding on the objects and activities of assessee, therefore, in view of the above factual and legal position, it was deemed appropriate to restore the issue back to the file of CIT(E) reconsider the registration of assessee under Section 12AB afresh and pass order in accordance with law. CIT(E) should consider the aforesaid decisions, cited by assessee, at the time of fresh adjudication of the application of assessee under Section 12A/12AB.
FULL TEXT OF THE ORDER OF ITAT SURAT
These two appeal by single assessee are directed against the separate orders of Ld. Commissioner of Income-Tax (Exemption), Ahmedabad [for short, “Ld. CIT(E)”] dated 17/05/2024 in rejecting applications under Section 12AB and 80G(5) of Income Tax Act, 1961 (‘in short, the Act’). Both the appeals are interconnected, thus with the consent of parties, both the appeals were clubbed and heard together and are decided by common order for the sake of brevity. For appreciation of facts, the facts in ITA No. 763/Srt/2024 is treated as lead case. In this appeal, the assessee has raised following grounds of appeal:
“1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(E) has erred in passing ex-parte order without giving reasonable and sufficient opportunity of being heard.
2. Even otherwise on the facts and in circumstances of the case as well as law on the subject, the learned CIT(E) has erred in rejecting the application of assessee for registration u/s 12AB of the I.T. Act, 1961.
3. It is therefore prayed that order of CIT(E), passed u/s 12AB of the I.T Act, 1961 may please be cancelled and registration may be granted or matter may be set aside to the file of CIT(E) with appropriate direction.
4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
2. In ITA No.762/SRT/2024, the assessee has raised following grounds of appeal:-
“1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(Exemption) has erred in rejecting assessee’s application in Form No.10AB for registration u/s 80G(5)(iii) on the ground that assessee’s application for registration u/s 12AB was rejected. Assessee submits that the assessee has filed for appeal against the refusal of registration u/s 12AB by Ld.CIT (Exemption).
2. It is therefore prayed that order of CIT(Exemption), passed /s 80G(5) of the I.T. Act, 1961 may please be set aside to the file of CIT(Exemption) with appropriate direction.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
3. Brief facts of the case are that the assessee filed an application for registration under Section 12AB of the Act in Form 10AB as per Rule 17A of the Income Tax Rules, 1962, (in short, the Rules) on 30/11/2023. On receipt of such application, the ld. CIT(E) issued notice dated 19/03/2024 and subsequently on 13/05/2024 for requiring certain explanation. In the show cause notice dated 13.05.2025, the ld CIT(E) referred clause H to O of objects of the assessee-trust and noted that the objects are charitable in nature and restricted to the members of the Trust and not for the benefit of public at large and as such does not fall under the category of charitable object as per the provision of section 2(15) of the Income-tax Act. The assessee was also require to submits audited accounts of FY-2022-23. The ld CIT(E) noted that no reply in response to show cause notice dated 13.05.2024 was filed by the assessee. The ld CIT(A) held that from of Memorandum of Article of assessee it is evident that the assessee-trust is formed for and by members of Shree Manchi Mahajan Sports and Culture Association and confined to the welfare of its members only and not for the benefit of public at large. The ld CIT(E) by referring the decision of Hon’ble Punjab & Haryana High Court in CIT Vs Truck Operators Association 9 taxmann.com 267 held that objects of the assessee are not found to be for public at large and registration under section 12AB cannot be granted to the assessee. The ld CIT(E) also cancelled provisional registration granted under section 12A(1) (ac) (iii). Aggrieved by the order of ld. CIT(E), the assessee has filed this appeal before Tribunal.
4. We have heard the submissions of learned Authorized Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue. The ld. AR of the assessee submits that the assessee furnished complete details while filing/uploading required details at the time of filing of application. The ld. AR of the assessee submits that in the show cause notice dated 13.05.2024 very short time of two days was allowed to the assessee. the ld CIT(E ) passed impugned order on 17.05.2024. The ld. AR of the assessee submits that the application of assessee was rejected in a mechanical way without giving reasonable and sufficient time for seeking explanation from the assessee. The ld. AR of the assessee submits that the Hon’ble Jurisdictional High Court in CIT Vs. Jamiatul Banaat Tankaria (2024) 168 taxmann.com 35 (Guj) held that where CIT(E) rejected assessee’s trust application for registration under Section 12A on the ground that its objects were for benefit of a particular religious community or caste and accordingly assessee was not entitled for exemption in terms of Section 13(1)(b), since Section 13(1)(b) was not relevant at the stage of registration under Section 12A but rather comes into play at the time of assessment when determining exemption under Section 11, impugned rejection of application was unjustified. The ld. AR of the assessee submits that the objects of assessee are charitable and the assessee is undertaking its activities in accordance with its objects. The ld. CIT(E) while rejecting the application of assessee has referred Clause-H to O only and has not considered the other clauses. Entire memorandum of association has to be considered and not by selecting a particular clause of the memorandum of association. The object and activities of the assessee is not disputed by the ld. CIT(E). The ld. AR of the assessee submits that the assessee may be given at least one more opportunity to explain the facts that the assessee was set up for the purpose of benefits of public at large. the ld AR of the assessee submits that the matter may be restored to the file of ld CIT(E) to consider the matter afresh, she undertakes on behalf of assessee to be more vigilant in making compliance as early as possible. The ld. AR of the assessee submits that once application for registration under Section 12AB was rejected, the application for approval of fund under Section 80G(5) was also rejected, thus, the second appeal may also be restored to the file of ld. CIT(E). The ld. AR of the assessee also relied upon the following decisions:
> CIT(E) Vs Jamiatul Banaat Tankaria (2024) 168 taxmann.com 35 (Guj),
> Jito Bhavnagar Chapter Foundation Vs CIT(E), Ahmedabad (2024) 167 taxmann.com 646 (Ahd.Trib),
>Parul University Alumni Association Vs CIT(E) (2024) 162 taxmann.com 98 (Ahd.-Trib),
> Association of State Road Transport Undertaking Vs CIT (2015) 63 taxmann.com 272 (Delhi-Trib),
> Confederation of Pharma Dealers Association Vs CIT(E) (2022) 137 taxmann.com 117 (Raipur-Trib),
> ACIT Vs Surat City Gymkhana (2008) 170 Taxman 612 (SC)
> Bhamashah Sundarlal Daga Vs CIT(E) in ITA No. 278/Jodh/2023 dated 10/11/2023.
5. On the other hand, the ld. CIT-DR for the revenue supported the order of ld CIT(E). The ld CIT-DR for the revenue submits that the objects of the assessee are clearly for the benefits of particular community/Members of the trust as has been clearly identified by ld CIT(E). The assessee in its note of activities has admitted that they have no plan for religious activities in future. The object and activities of the assessee was not verified by the ld. CIT(E). On the contention of ld AR for the assessee that their activities are not doubted, the ld. CIT-DR submits that in case, if the Bench of view that the assessee deserve any relief, the matter may be restored back to the file of ld. CIT(E) to examine the object of assessee and genuinenity of the activities undertaken by the assessee trust and to examine any other requirement, if the assessee fulfills such condition.
6. We have considered the submissions of both the parties and have gone through the order of ld. CIT(E) carefully. We have also deliberated on various case laws relied by the ld. AR of the assessee. We have also perused various documentary evidences filed in the form of paper book. We find that the ld CIT(E) dismissed the application of the assessee by taking view that that objects of assessee are otherwise charitable in nature is / are for the benefits of any particular community/Members of the Trust. We find that Hon’ble Jurisdictional High Court in CIT Vs. Jamiatul Banaat Tankaria (Supra) held that where CIT(E) rejected assessee’s trust application for registration under Section 12A on the ground that its objects were for benefit of a particular religious community or caste and accordingly assessee was not entitled for exemption in terms of Section 13(1)(b), since Section 13(1)(b) was not relevant at the stage of registration under Section 12A but rather comes into play at the time of assessment when determining exemption under Section 11, impugned rejection of application was unjustified. We further find that the ld. CIT(E) has not examined the objects and activities of the assessee trust which are the twin conditions for granting registration under Section 12A/12AB of the Act. We also find merit in the submission of ld. AR of the assessee that the ld. CIT(E) while rejecting the application of assessee has referred Clause-H to O only and has not considered the other clauses. Entire memorandum of association has to be considered and not by selecting a particular clause of the memorandum of association. Considering the fact that the ld. CIT(E) has not given his finding on the objects and activities of the assessee, therefore, in view of the above factual and legal position, we deem it appropriate to restore the issue back to the file of ld. CIT(E) reconsider the registration of assessee under Section 12AB of the Act afresh and pass order in accordance with law. The ld. CIT(E) shall consider the aforesaid decisions, cited by assessee, at the time of fresh adjudication of the application of assessee under Section 12A/12AB of the Act.
7. Needless to direct that before deciding the application afresh, the ld. CIT(E) shall grant opportunity of hearing to the assessee and further to allow to make further submission to prove the object of assessee-trust and its activities. The assessee is also directed to file/furnish any other necessary information, if so desired. In the result, this appeal of assessee is allowed for statistical purposes.
ITA No. 762/Srt/2024 (under section 80G(5).
8. We find that once the appeal being ITA No. 763/Srt/2024 is restored back to the file of ld. CIT(E) for deciding the application for registration of assessee-trust under Section 12AB of the Act, therefore, this appeal in ITA 762/Srt/2024 is also restored back to the file of ld. CIT(E) for deciding the same afresh after deciding the registration under section 12AB of the Act. In the result, grounds of appeal raised by the assessee are allowed for statistical purposes only.
9. In the result, both these appeals of the assessee are allowed for statistical purposes.
Order pronounced on 27/11/2024 in open court.
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