2015 (2) TMI 323 - AT - Income Tax

Tribunal directs CIT to grant registration under Income Tax Act without assessing section 13(1)(b)

Kul Foundation Versus Commissioner of Income-tax -I, Pune

The Tribunal allowed the appeal, directing the CIT to grant registration under section 12A of the Income Tax Act, 1961, and issue the necessary ... Denial of registration under section 12A - clause No.23 of the object clause of the Trust Deed was specifically for the benefit of Jain community and the Trust had not commenced its activities as yet - Held that:- Ratio laid down by Hon'ble Allahabad High Court in Hardayal Charitable & Educational Trust v. CIT-II (2013 (3) TMI 377 - ALLAHABAD HIGH COURT) wherein it was held that at the time of registration under section 12A of the Act, it is not necessary to look into the activities vis-à-vis claim of exemption under sections 11 and 12 of the Act. The Hon'ble Supreme Court in CIT v. Dawoodi Bohara Jamat (2014 (3) TMI 652 - SUPREME COURT) had also laid down similar proposition. Accordingly, the view favourable to the assessee is adopted for deciding the issue. In the totality of the above said facts and circumstances and the legal propositions, we find no merit in the order of CIT in this regard and accordingly, we direct the CIT to grant registration to the assessee Trust under section 12A of the Act and pass the order under section 12AA of the Act registering the said Trust. The assessee in the present facts and circumstances of the case, had in its objects recognized the field of education as the activity to be carried on. Merely because that the said activity has not started, does not dis-entitle the assessee from the claim of registration under section 12A of the Act. No merit in the order of CIT in refusing to grant registration under section 12A of the Act, as the assessee had not started its activities. Following the above said ratio laid down by Hon'ble High Court of Gujarat in Director of Income Tax (Exemption) v. Panna Lalbhai Foundation [2013 (8) TMI 110 - GUJARAT HIGH COURT] , we direct the CIT to grant registration under section 12A of the Act and issue the necessary Certificate under section 12AA of the Act. - Decided in favour of assessee. Issues Involved1. Violation of natural justice due to lack of opportunity for hearing.2. Denial of registration under section 12A of the Income Tax Act, 1961 based on specific clauses in the Trust Deed.3. Non-commencement of activities by the Trust.Issue-wise Detailed Analysis1. Violation of Natural JusticeThe first ground of appeal raised by the assessee was not pressed. Consequently, this issue was dismissed as not pressed.2. Denial of Registration under Section 12AThe primary issue was the denial of registration under section 12A of the Income Tax Act, 1961. The CIT denied registration based on two reasons:- Clause No.23 of the object clauses of the Trust Deed was specifically for the benefit of the Jain community, which is a specific religious community, thus attracting the provisions of section 13(1)(b).- The Trust had not commenced its activities.Analysis of Clause No.23The CIT noted that although the other objects in the Trust Deed were general in nature, Clause No.23 was specifically for the benefit of the Jain community. This was seen as a violation of section 13(1)(b), which states that benefits under sections 11 and 12 cannot be extended to a charitable trust established for the benefit of any specific religious community. The CIT argued that granting registration under section 12A would serve no purpose since it is an in-principle recognition of entitlement to such benefits.Counterarguments by the AssesseeThe assessee argued that the object at serial No.23 was not violative of section 13(1)(b) as it aimed at promoting educational and social standards of the Jain community, not propagating a particular religion. The assessee cited various judicial precedents, including the Hon'ble Supreme Court's ruling in CIT v. Dawoodi Bohara Jamat, which held that the applicability of section 13(1)(b) should be considered by the Assessing Officer during assessment and not at the time of granting registration under section 12A.Tribunal's DecisionThe Tribunal agreed with the assessee, stating that the CIT's role under section 12AA is limited to examining the objects of the Trust and the genuineness of its activities. The Tribunal found no merit in the CIT's observation that the benefit to the Jain community would attract section 13(1)(b) and thus deny registration under section 12A. The Tribunal cited multiple cases, including the Pune Bench's decision in Ashoka Education Foundation v. CIT and the Hon'ble High Court of Gujarat's ruling in Director of Income Tax (Exemption) v. Panna Lalbhai Foundation, to support its decision. The Tribunal directed the CIT to grant registration under section 12A.3. Non-commencement of ActivitiesThe CIT also denied registration on the grounds that the Trust had not commenced its activities. The Tribunal found this reasoning flawed, citing the Hon'ble High Court of Gujarat's decision in Director of Income Tax (Exemption) v. Panna Lalbhai Foundation, which held that non-commencement of activities should not be a ground for denying registration under section 12A. The Tribunal emphasized that the CIT should focus on the objects of the Trust and the genuineness of its activities, not whether the activities had commenced.ConclusionThe Tribunal allowed the appeal, directing the CIT to grant registration under section 12A of the Income Tax Act, 1961, and issue the necessary certificate under section 12AA. The Tribunal's decision was based on the interpretation that the CIT's role is to examine the objects and genuineness of activities, not to assess the applicability of section 13(1)(b) or the commencement of activities at the stage of granting registration.