2015 (9) TMI 109 - HC - Income Tax

Commissioner cannot deny s.12AA registration solely due to trust benefiting a particular community; s.11-13 issues for assessment

HC held that the Commissioner erred in refusing registration under s.12AA merely because the trust's objects benefited a particular community; the ... Eligibility for registration under section 12AA - Commissioner after examining the objects of the trust, came to the conclusion that the trust was for the benefit of Leuva Patel Community and therefore, would be covered under section 13(1)(b) and rejected registration application - ITAT allowed claim - Held that:- The 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 and the question whether such income should be excluded from the total income of the trust in terms of section 11 of the Act. Insofar as section 12AA of the Act is concerned, the Commissioner had to take a decision if the trust fulfilled necessary requirements of registration as provided under section 12A of the Act. As decided in Shantagauri Ramniklal Trust v. CIT [1998 (11) TMI 87 - GUJARAT High Court] while considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fulfilled, the exemption must follow whether registration is accorded or not. - Decided in favour of assessee. Issues:1. Appeal against the judgment of the Income-tax Appellate Tribunal.2. Consideration of granting registration under section 12AA of the Income-tax Act 1961.3. Interpretation of section 13(1)(b) of the Act regarding trust for a particular religious community or caste.4. Tribunal's decision in reversing the Commissioner's rejection of registration.5. Application of the decision in the case of Leuva Patel Nutan Kelwani Mandal.6. Clarification on the distinction between registration and claiming tax benefits.7. Relevance of registration under section 12A for tax benefits under sections 11 and 12.Analysis:The High Court heard an appeal against the Income-tax Appellate Tribunal's judgment regarding the registration of a Public Charitable Trust under section 12AA of the Income-tax Act 1961. The Commissioner had rejected the trust's application citing section 13(1)(b) of the Act, which excludes trusts benefiting a particular religious community or caste from tax benefits. However, the Tribunal reversed this decision after considering various legal precedents, including the case of Leuva Patel Nutan Kelwani Mandal, where it was established that the trust's objects did not fall under the restrictive provisions of section 13(1)(b).The Court emphasized the distinction between registration under section 12A and claiming tax benefits under sections 11 and 12 in light of the Shantagauri Ramniklal Trust case. It clarified that registration is not a prerequisite for claiming tax benefits and that the Assessing Officer has the jurisdiction to investigate the eligibility for tax exemptions even without registration. The Court upheld the Tribunal's decision, stating that once the conditions for tax benefits under sections 11 and 12 are met, the exemption should be granted irrespective of registration status. Consequently, the Court dismissed the Tax Appeal, aligning with the Division Bench's previous ruling on the matter.