Gulabchandmulchand Shree Parshwanath Trust Vs CIT (Exemption) (ITAT Surat)
The assessee appealed against the order dated 29.01.2024 passed by the Commissioner of Income Tax (Exemption), Ahmedabad, rejecting its application for registration under Section 12AB of the Income-tax Act, 1961, and cancelling its provisional registration. The assessee challenged the rejection of registration, cancellation of provisional registration, invocation of Section 13(1)(b) despite claiming to be a religious-cum-charitable trust, and the finding that it had committed specified violations under the Explanation to Section 12AB(4).
The assessee had filed an application in Form 10AB under Section 12A(1)(ac)(iii) on 09.07.2023, and additional details were submitted on 25.10.2023. On examining the trust deed, the Commissioner observed that one of the trust’s objects, contained in Clause (F), namely, “To set up or to be helpful to educational institutions for that sort of upliftment of the group of people following Jainism”, was charitable in nature but restricted to the benefit of the Jain community. The Commissioner treated the assessee as a composite trust and, relying on the Supreme Court decisions in CIT vs. Palghat Shadi Mahal Trust and CIT vs. Dawoodi Bohara Jamat, held that Section 13(1)(b) was applicable. On that basis, the Commissioner concluded that the assessee was not eligible for exemption under Section 11, rejected the application for registration under Section 12A, and cancelled the provisional registration.
Before the Tribunal, the assessee submitted a paper book containing its submissions before the Commissioner, the English translation of the trust deed, Form 10AB, and judicial precedents. The assessee contended that the Commissioner had rejected the application solely on the basis of the trust’s objects and not its activities. It relied upon the decisions of the Gujarat High Court in CIT vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust and CIT vs. Leuva Patel Seva Samaj Trust, as well as the Ahmedabad Tribunal decisions in Jamiatul Banaat Tankaria and Bhojalram Leuva Patel Seva Samaj Trust. The Departmental Representative supported the Commissioner’s order and relied upon the Supreme Court decisions in Palghat Shadi Mahal Trust and Dawoodi Bohara Jamat.
The Tribunal examined the objects of the trust and noted that, apart from Clause (F) relating to educational institutions for persons following Jainism, the trust deed also contained objects such as construction and renovation of Jain temples, establishment of religious pathshalas, welfare activities for the upliftment of the general public, educational, occupational and medical assistance, medical help to needy patients, and activities beneficial through religious and cultural movements. The Tribunal observed that the Commissioner had considered only Clause (F) while overlooking the other objects, including welfare activities for the general public, educational and medical assistance, and medical help to needy patients. It therefore held that rejection of registration on the basis of only one clause was not proper.
The Tribunal further noted that the Ahmedabad Bench, in Bhojalram Leuva Patel Seva Samaj Trust, after considering the Supreme Court decisions in Palghat Shadi Mahal Trust and Dawoodi Bohara Jamat, the Gujarat High Court decisions in Leuva Patel Seva Samaj Trust, CIT(E) vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust, CIT vs. Shree Tapeshwar Hanumaji Bajrang Charity Trust, and various Tribunal decisions, had held that Section 13 can be invoked only at the stage of assessment and not while considering an application for registration under Section 12A. The Tribunal reproduced the relevant observations from that decision, including the Gujarat High Court’s finding that examining the applicability of Section 13 at the registration stage would amount to undertaking an exercise meant for assessment proceedings.
Finding that the facts of the present case were similar to those considered in Bhojalram Leuva Patel Seva Samaj Trust, the Tribunal followed the same reasoning and restored the matter to the file of the Commissioner of Income Tax (Exemptions) for de novo consideration, after directing that the assessee be given an adequate opportunity of hearing and to furnish necessary documents and evidence. The Tribunal also directed that the assessee should not be denied registration solely on the ground relied upon in the impugned order. The appeal was allowed for statistical purposes.
Cases Discussed
- Bhojalram Leuva Patel Seva Samaj Trust vs. CIT (Ahmedabad – Trib.), (2024) 162 taxmann.com 270
- Jamiatul Banaat Tankaria vs. CIT (Ahmedabad – Trib.), (2024) 160 taxmann.com 358
- CIT vs. Shree Tapeshwar Hanumaji Bajrang Charity Trust (Gujarat High Court), (2020) 122 taxmann.com 98
- CIT vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (Gujarat High Court), (2016) 74 taxmann.com 199 (Guj)
- CIT vs. Leuva Patel Seva Samaj Trust (Gujarat High Court), (2014) 42 taxmann.com 181 (Guj)
- CIT vs. Dawoodi Bohara Jamat (SC), 43 taxmann.com 243
- CIT vs. Palghat Shadi Mahal Trust (SC), 120 Taxman. 889
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal filed by the appellant emanates from the order dated 29.01.2024 passed by the Commissioner of Income Tax (Exemption), Ahmedabad (in short, “the CIT(E)”) who rejected assessee’s application for registration under section 12AB of the Income Tax Act, 1961 (for short, ‘the Act’). The grounds raised by the appellant are as under: –
“1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in rejecting application for registration u/s 12AB of Act to the assesse trust.
2. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in cancelling the provisional registration of the assessee-trust.
3. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in invoking the provisions of Section 13(1)(b) of the Act without considering that assessee-trust is religious-cum-charitable trust and section 13(1)(b) of the Act is applicable only to the charitable trust.
4. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Exemption) has erred in holding that assesse-trust has conducted ‘specified violations’ as per the explanation to section 12AB(4) of the Act without considering that objects of assessee trust are not limited to benefit of people follow Jainishm for a private group but is extended to all the people following Jainism.
5. Appellant craves leave to add, alter or, delete any ground(s) either before or in the course of hearing of the appeal.”
2. The fact of the present case in brief are that the application for registration / approval in Form 10AB u/s 12A(1)(ac)(iii) was filed on 09.07.2023. In addition to this, some details were filed on 25.10.2023. On perusal of the objects of the trust, the CIT(E) observed that the object in the trust deed / instrument of creation of trust seems to be charitable in nature and appears to be restricted to the benefit of a particular religious community or caste or private religious community i.e, Jain community. The CIT(E) issued show-cause notice to the assessee which was replied to by assessee. The notice and reply are at para-6.3 and 6.4 of the order of CIT(E). The object as per sub-clause(F) is as follows:
“F. To set up or to be helpful to educational institutions for that sort of upliftment of the group of people following Jainism…”
In view of the above referred discussion and objects, the CIT(E) observed that the assessee-trust is a composite trust. However, clause-(F) of the objects, i.e., “to set up or to be helpful to educational institutions for that sort of upliftment of the group of people following Jainism” is charitable in nature which is restricted to the benefit of a particular religious community or caste being “Jain community” and, therefore, as per law laid down by the Hon’ble Apex Court in the cases of CIT vs. Palghat Shadi Mahal Trust 120 Taxman. 889 (SC) and CIT vs. Dawoodi Bohara Jamat 43 taxmann.com 243 (SC), the provisions of Sec.13(1)(b) would be applicable and accordingly, the applicant/assessee would not be eligible for exemption u/s 11 of the Act. He, therefore, held that assessee cannot be granted registration u/s 12A of the Act. He rejected the application filed in Form-10AB u/s 12A(i)(ac)(iii) of the Act and also cancelled the provisional registration. Aggrieved by the order of Ld.CIT(E), the appellant has filed present appeal before the Tribunal.
3. The Ld.AR for the assessee has filed paper book containing 42 pages including (i) submission before CIT(E); (ii) trust deed translated in English; (iii) From-10AB and (iv) copies of decisions in favour of assessee. He submitted that CIT(E) had rejected the objects of the trust but not its activities. He submitted that his case is covered by the following decisions of Hon’ble jurisdictional High Court and ITAT Ahmedabad: (i) CIT vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (2016) 74 taxmann.com 199 (Guj)
i. CIT vs. Leuva Patel Seva Samaj Trust (2014) 42 com 181 (Guj)
ii. Jamiatul Banaat Tankaria vs. CIT (2024) 160 com 358 (Ahmedabad – Trib.) and (iv) Bhojalram Leuva Patel Seva Samaj Trust vs. CIT (2024) 162 taxmann.com 270 (Ahmedabad – Trib.).
4. On the other hand, Ld.CIT-DR for the Revenue relied on the order of the CIT(E). He submitted that the CIT(E) has duly considered relevant provisions of Act and relied on the decisions of Hon’ble Supreme Court in case of CIT vs. Palghat Shadi Mahal Trust 120 Taxman. 889 (SC) and CIT vs. Dawoodi Bohara Jamat 43 com 243 (SC) and therefore the appeal filed by the assessee should be dismissed.
5. We have heard the rival submissions and perused the materials available on record. We have also deliberated on the decisions relied upon by both parties. Before deciding the issue, it would be proper to reproduce the objects of the assessee-trust, which is the basis for the CIT(E) to reject the application for registration and cancellation of the provisional registration. The objects of the assessee-trust is at page-15 of the paper book, which are as under:
“4) OBJECDTIVES OF THE TRUST:
A. To construct new Jain temples, Jain monasteries, caravan saris or to administer them so that the Jain saints, holy men and women and man and woman practicing penance may stay there comfortably and worship the God. Moreover to renovate old Jain temples.
B. To set up religious paths alas for moral and spiritual upliftment.
C. To express kindness towards animals and birds, set up asylums for weak and crippled birds and animals, cow asylums and homes for pigeons or to help them.
D. To do all welfare activities for upliftment of the general public. To do whatever is required for their physical, mental, financial and spiritual advancement. To help the needier and such organizations.
E. To provide educational, occupational and medical help especially to be useful for the people’s financial development and making them financially independent.
F. To set up or to be helpful to educational institutions for that sort of upliftment of the group of people following Jainism.
G. Provide medical help to the needy patients and to set up medical facilities.
H. To do activities which may prove beneficial through religious and cultural movements.”
5.1 It is clear from the objects of the assessee-trust that it was not for benefit of only Jain community. The CIT(E) has considered only clause-(F) and not the other clauses for proper appreciation of the issue. The objects also include medical help to the needy patients (clause-G), educational, occupational and medical help (clause-E), welfare activities for upliftment of general public (clause-D) etc. Hence, rejection of registration based on only one clause is not proper. We also find that the decisions relied upon by the Ld.AR of the assessee supports the case of the assessee-trust. The recent decision of the ITAT Ahmedabad in case of Bhojalram Leuva Patel Seva Samaj Trust (supra) dated 30.04.2024 is directly on the subject issue. After referring to various decisions including the decisions of Hon’ble Supreme Court in case of Palghat Shadi Mahal Trust (supra) and Dawoodi Bohara Jamat (supra), the Tribunal held that where CIT(E) rejected application of assessee-trust, citing Section 13(1)(b) due to trust’s objectives being limited to benefiting a specific religious community, since provisions of section 13 can be invoked only at time of assessment and not at time of grant of registration u/s 12A, therefore, matter would be restored to file of CIT(E), for de novo consideration. The facts of the above case are that assessee-trust filed application for registration of trust u/s 12AB of the Act in Form-10AB. The CIT(E) rejected the application of the assessee on the ground that objects of the assessee-trust are restricted to the benefit of a particular religious community or caste i.e., Leuva Patel Community. He invoked the provision of 13(1)(b) of the Act and rejected the registration of application. After referring to the decisions of the Hon’ble Supreme Court cited supra and the decision of Hon’ble jurisdictional High Court in cases of Leuva Patel Seva Samaj Trust (supra), CIT(E) vs. Bayath Kutchhi Dasha Oswal Jaian Mahajan Trust (2016) 74 taxmann.com 199 (Guj) and CIT vs. Shree Tapeshwar Hanumaji Bajrang Charity Trust (2020) 122 taxmann.com 98 (Guj) and various decisions of Tribunal, the Tribunal held as under:
“10. In view of the above judicial precedents, looking into the facts of the instant case, we are of the considered view that the provisions of Section 13 of the Act can be invoked only at the time of assessment 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 (Exemptions) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199/243 Taxman 60 (Gujarat)/[2017] 8 ITR-OL 494 (Guj.) wherein on the issue of denial of grant of registration u/s 12A of the Act b invoking Section 13(1)(b) of the Act, it not at the time of grant of registration. The relevant finding of the Hon’ble High Curt 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 Ac, which would be the task of the Assessing Office to be undertaken at the time of assessment on the basis of material that may be brought on record.”
11. In the result, in view of the above observations, the matter is restored to the file of CIT(Exemptions), for de novo consideration, after giving due opportunity of being heard and with the direction not to disentitle the assessee for grant of registration only on the ground as mentioned in its order for rejecting the application filed by the assessee trust.”
5.2 Since the facts of the present case are similar to the facts of the above case, following the reasons given in the above order, the matter is restored back to the file of CIT(E) for de novo consideration after giving adequate opportunity of hearing to the assessee. The assessee is directed to file necessary documents and evidence as needed by the CIT(E). For statistical purposes, the ground of appeal raised by the assessee is treated as allowed.
6. In the result, appeal filed by the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 26/07/2024 after closing of hearing.
