Case Law Details
Dandhavya Chhasath Prajapati Samaj Vs CIT (ITAT Ahmedabad)
In the case of Dandhavya Chhasath Prajapati Samaj vs. CIT (ITAT Ahmedabad), the Income Tax Appellate Tribunal (ITAT) ruled in favor of granting registration under section 12AB of the Income Tax Act, 1961, overturning the earlier rejection by the Commissioner of Income Tax (Exemption). The CIT had denied the registration on the grounds that the trust’s objectives primarily benefited the “Chhasath Prajapati Community,” thereby invoking section 13(1)(b), which disallows exemptions for trusts serving specific communities. However, the ITAT clarified that section 13(1)(b) is relevant only at the assessment stage, not during the registration process. The assessee contended that their objectives encompass broader charitable activities, including educational initiatives, scholarships, and social reforms, not limited to their specific community. The Tribunal noted that the CIT did not specify any deficiencies in documentation submitted by the trust, concluding that the rejection was based on a misunderstanding of the trust’s activities. Citing precedents, including the Supreme Court’s judgment in CIT vs. Dawoodi Bohara Jamat, the ITAT emphasized that charitable trusts serving specific communities can still qualify for registration. Ultimately, the ITAT set aside the CIT’s order and directed the grant of registration, allowing the trust to continue its philanthropic efforts. The decision reflects an important clarification regarding the application of income tax provisions concerning the registration of charitable trusts.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Exemption), Ahmedabad, [hereinafter referred to as the “CIT(Exemption)”] dated 28.09.2022, rejecting the application filed by the assessee in Form No. 10AB for registration under section 12AB of the Income Tax Act, 1961 [hereinafter referred to as “the Act”].
Facts of the Case:
2. The assessee, filed an application for registration under section 12AB of the Act in Form No. 10AB on 31.03.2022, declaring its aims and objectives primarily related to educational, social, and economic welfare activities. The CIT (Exemption), after issuing multiple notices, rejected the registration application, citing that the objects of the Trust were confined to the “Chhasath Prajapati Community”, thus attracting the provisions of section 13(1)(b) of the Act, which disallows exemption for trusts benefiting a particular community. Additionally, it was noted that the assessee failed to provide certain details as called for by the CIT (Exemption).
3. The assessee is in appeal before us with following grounds of appeal:
1. The Commissioner of Income Tax(Exemption) Ahmedabad has eared in Law and on facts, in rejecting the application in form 10AB U/S 12AB of the Income Tax Act, 1961, on non satisfaction of genuineness of the activities of the trust.
2. The CIT (Exemption) has eared in law, in over looking and in summarily rejecting and not considered, the tangible material submitted during the proceeding u/s 12AB of Income Tax Act. 1961.
3. Your appellant crave, leave to add, alter, & or to emend modify substitute all or any ground of appeal before final hearing if necessity so arise.
4. The learned Authorised Representative (AR) of the assessee stated that the aims and objectives of the Trust are charitable in nature, and the activities are not limited to the benefit of the “Chhasath Prajapati Community” alone. The AR stated that the assessee’s aims, as outlined in its constitution, include conducting educational activities, providing scholarships, and setting up hostels and advisory centres for students, social initiatives, such as group marriages, youth gatherings, and efforts towards social reform and economic activities, including managing funds for the Trust’s development and efforts to avail government benefits for its members.
5. The learned Departmental Representative (DR) argued that the CIT (Exemption) rightly rejected the registration application on the grounds that the assessee failed to provide the complete details and documents requested during the registration proceedings. The DR emphasized that the noncompliance with notices calling for additional documents reflected poorly on the genuineness of the activities of the Trust. The learned Authorized Representative (AR) for the assessee countered the DR’s arguments, stating that the assessee had indeed uploaded all the required documents online through the Income Tax Department’s portal as per the notices issued. The AR further contended that the CIT (Exemption) did not specify any particular document or detail that was not provided, and the rejection was primarily based on a misunderstanding of the nature of the Trust’s activities. The AR also placed reliance on the judgement of the Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat [43 com 243], which clarified that section 13(1)(b) of the Act applies at the stage of exemption under section 11 of the Act, not at the stage of granting registration under section(s) 12A/12AB of the Act. The AR also cited the Co-ordinate Bench’s decision in Jamiatul Banaat Tankaria vs. CIT(Exemption), Ahmedabad [ITA No. 58/Ahd/2023], which had set aside a similar rejection under section 12AB of the Act based on section 13(1)(b) of the Act.
6. We have carefully considered the submissions of the learned DR and AR, and perused the material on record, including the order of the CIT (Exemption). The CIT (Exemption) rejected the application for registration under section 12AB of the Act on the grounds that the Trust’s objects benefit a particular community, thereby invoking section 13(1)(b) of the Act. However, the Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat has categorically held that section 13(1)(b) of the Act is applicable at the stage of assessment for determining exemption under section 11 of the Act, and not at the stage of granting registration under section 12AB of the Act. This principle was reiterated by the Co-ordinate Bench in the case of Jamiatul Banaat Tankaria vs. CIT(Exemption), Ahmedabad. We reproduce hereunder the relevant portion of the said decision for the sake of clarity: –
“5. 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 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.”
6.1. This paragraph establishes that section 13(1)(b) of the Act is not relevant at the stage of registration under section 12AB of the Act, but rather comes into play at the time of assessment when determining exemption under section 11 of the Act.
6.2. The learned DR’s submission regarding the failure to provide required details has been carefully considered. The assessee’s AR has categorically stated that all documents were uploaded online through the official portal as per the notices issued. The CIT (Exemption) has not pointed to any specific document that remained unfiled. In the absence of any specific deficiency in documentation being highlighted, we do not find merit in the Department’s argument that the assessee failed to comply with the document submission requirement.
6.3. Upon examination of the Trust’s objectives, we find that the Trust is engaged in various educational, social, and economic activities that serve the public at large, not limited to the Chhasath Prajapati Community. These include scholarships, hostel facilities for students, social reform programs, and efforts to uplift the community economically. Therefore, the Trust’s activities cannot be said to benefit only a particular religious or caste-based community.
6.4. The registration under section 12AB of the Act is merely a recognition of the charitable status of the Trust. The application of section 13(1)(b) of the Act would only arise at the stage of assessment when determining exemption under section 11, depending on the actual income and activities of the Trust. In view of the above findings and judicial precedents, we hold that the CIT (Exemption) erred in rejecting the application for registration under section 12AB of the Act. Accordingly, the order of the CIT (Exemption) is set aside, and the CIT (Exemption) is directed to grant registration to the assessee Trust as applied for.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 16th October, 2024 at Ahmedabad.
Author Bio
