2023 (4) TMI 92 - AT - Income Tax

Trust Denied Tax Exemption for Specific Community; Appeal Dismissed for Lack of Public Benefit Evidence

Amreli Modh Vanik Community Property Versus The CIT- (Exemption), Ahmedabad

The Tribunal upheld the Commissioner of Income Tax (Exemption)'s decision to deny registration under Section 12AA to a Trust created for the benefit of a ... Exemption u/s 11 - denying Registration u/s 12AA - charitable activity u/s 2(15) - trust is created for the benefit of a particular community namely “Amreli Modh Vanik” - CIT(E) that is not satisfied with the genuineness of the activities of the trust - HELD THAT:- The assessee has not produced before us copies of the activities carried out by the assessee Trust, there is nothing on record before us that the activities carried out by the trust is open to “Amreli Modh Vanik” other than common public. In the absence of any details by the assessee before the Lower Authorities as well as before us to prove that the objects of the Trust is for General Public, and hit by section 13(1)(b) of the Act. No hesitation in confirming the order passed by Ld. CIT(E) denying registration under section 12AA - CIT(E) denied the benefit of registration u/s 12AA of the Act, which is legally justifiable and does not require any interference by the Tribunal. In the result, the grounds raised by the assessee are found devoid of merits and the same is hereby rejected. Appeal filed by the Assessee is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether registration under section 12AA can be granted where the objects of the trust, as per the Public Trust Register/Trust Deed, indicate benefit to a particular community ('Amreli Modh Vanik') and the assessee fails to produce documentary evidence showing availability of facilities/activities to the general public. 2. Whether the denial of registration under section 12AA is justified where the Commissioner is not satisfied about the genuineness of the activities and their consonance with the objects of the trust in the absence of adequate documentary proof from the applicant. 3. Whether section 13(1)(b) applies to a trust whose objects indicate benefit to a particular religious/community group and whether such application precludes grant of registration under section 12AA. 4. Whether the procedural fairness/content of opportunity afforded by the Commissioner (assessment of adequacy of opportunity and evidence) was adequate for a decision to refuse registration under section 12AA. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of section 12AA where objects indicate benefit to a particular community Legal framework: Section 12AA requires the Commissioner to be satisfied about the objects of the trust/institution and genuineness of its activities before granting registration. Section 2(15) defines 'charitable purpose' and section 13(1)(b) excludes from exemption income of a trust created for the benefit of any particular religious community or caste. Precedent Treatment: Reliance placed by the revenue on the authoritative statement of the law that the Commissioner must satisfy himself of charitable/religious nature and genuineness of activities before granting registration; reference made to a Supreme Court pronouncement articulating this procedure. Interpretation and reasoning: The Tribunal examined the Public Trust Register (PTR)/trust objects which expressly mention 'Sole Caste Dinner' and benefit to 'Amreli Modh Vanik'. The assessee failed to produce documentary evidence to show that the common purpose hall and activities were available to the general public or that the objects had been amended before the Charity Commissioner. In absence of evidence that objects or activities endure for the benefit of the public generally, the stated objects indicate restriction to a particular community. Ratio vs. Obiter: Ratio - where trust objects and PTR show benefit restricted to a particular community and the applicant fails to rebut by documentary evidence showing public benefit or change of objects, registration under section 12AA cannot be granted. Obiter - references to assorted tribunal decisions cited by the assessee which favour grant of registration in different factual matrices. Conclusions: The Tribunal concluded that the trust's objects, as recorded, indicate benefit to a particular community and, absent evidence to the contrary, do not satisfy the requirement of public benefit necessary for registration under section 12AA. Issue 2 - Satisfaction of the Commissioner regarding genuineness of activities and consonance with objects Legal framework: Section 12AA procedure empowers the Commissioner to call for documents, conduct enquiry and refuse registration if not satisfied about genuineness and authenticity of activities being consonant with objects. Precedent Treatment: The Tribunal accepted that the statutory procedure requires enquiry and satisfaction by the Commissioner; the Supreme Court authority cited affirms refusal where Commissioner is not satisfied after enquiry. Interpretation and reasoning: The Commissioner issued notices and reminders, received partial replies and documents filed late via portal and e-mail. The assessee's submissions did not include evidence demonstrating public access to facilities or a formal amendment of objects with the Charity Commissioner. Given incomplete documentary support, the Commissioner's conclusion of dissatisfaction as to genuineness and consonance was deemed reasonable and lawful. Ratio vs. Obiter: Ratio - Commissioner's refusal under section 12AA is justified where, after giving opportunity and calling for documents, the applicant fails to produce sufficient documentary evidence to establish genuineness and consonance of activities with charitable objects. Obiter - commentary by the assessee that similar tribunal decisions direct registration in other circumstances is not controlling where facts differ. Conclusions: The Tribunal upheld the Commissioner's exercise of discretion to refuse registration due to lack of satisfaction on genuineness and consonance, as the assessee did not substantiate its claims with documentary proof. Issue 3 - Application of section 13(1)(b) and its effect on grant of registration under section 12AA Legal framework: Section 13(1)(b) provides that income of a trust created for the benefit of any particular religious community or caste is excluded from exemption; section 12AA registration requires objects to be charitable/religious and not restricted so as to attract section 13(1)(b). Precedent Treatment: The Tribunal applied the statutory text of section 13(1)(b) to the facts; the Supreme Court formulation of the Commissioner's duty under section 12AA was applied to support this legal relationship. Interpretation and reasoning: Because the PTR/trust objects explicitly describe activities for a particular caste/community (e.g., 'Sole Caste Dinner' and benefit to 'Amreli Modh Vanik'), the trust falls within the mischief of section 13(1)(b) unless proven otherwise. The assessee's failure to demonstrate a change in objects or that activities were available to the public means that the statutory exclusion applies. Ratio vs. Obiter: Ratio - where trust is created for benefit of a particular community/caste as per objects and no evidence of public benefit is furnished, section 13(1)(b) renders the trust ineligible for registration/exemption. Obiter - none beyond factual commentary on the absence of amendment or public access evidence. Conclusions: Section 13(1)(b) is attracted on the facts; this precludes registration under section 12AA absent cogent evidence to the contrary. Issue 4 - Adequacy of opportunity and procedural fairness in refusal of registration Legal framework: Administrative action under section 12AA must follow the procedure of calling for documents and affording opportunity to explain; refusal should be based on the record. Precedent Treatment: The assessee contended that insufficient inquiry was made and relied on multiple tribunal/high court decisions where registrations were directed when the record supported charitable character; the Tribunal examined the procedural steps taken by the Commissioner. Interpretation and reasoning: The record shows issuance of notices, reminders, and receipt of partial replies and documents through the portal and e-mail with specified dates. The Commissioner considered replies but found them insufficient. The Tribunal noted that the assessee did not appear at hearing but filed written submissions; given the documentary deficiency, the Commissioner's factual conclusion was permissible. Ratio vs. Obiter: Ratio - refusal after giving notices/reminders and considering the material on record is procedurally valid where the applicant fails to provide adequate documentary evidence. Obiter - the assessee's reliance on decisions ordering registration where facts and evidence were materially different. Conclusions: The opportunity afforded and procedural steps taken were adequate; there was no procedural infirmity warranting interference with the refusal to register. Overall Conclusion The Tribunal affirmed the Commissioner's denial of registration under section 12AA: (i) the trust's objects as recorded confined benefit to a particular community and attracted section 13(1)(b); (ii) the assessee failed to produce documentary evidence showing public benefit or amendment of objects; (iii) the Commissioner lawfully exercised the power under section 12AA after calling for information and being unsatisfied as to genuineness and consonance of activities; and (iv) procedural opportunity afforded was adequate. The grounds of appeal were dismissed as devoid of merit.