2024 (11) TMI 1372 - AT - Income Tax

CIT(E) wrongly applied section 13(1)(b) criteria during registration instead of examining trust objects under sections 12AB and 80G(5)

ITAT Surat allowed the appeal for statistical purposes after CIT(E) rejected applications under sections 12AB and 80G(5), claiming trust objects were ... Rejection of applications u/s 12AB and 80G(5) - objects are charitable in nature and restricted to the members of the Trust and not for the benefit of public at large and as such does not fall under the category of charitable object as per the provision of section 2(15) - HELD THAT:- We find that Hon’ble Jurisdictional High Court in CIT Vs. Jamiatul Banaat Tankaria [2024 (10) TMI 712 - GUJARAT HIGH COURT] held that where CIT(E) rejected assessee’s trust application for registration under Section 12A on the ground that its objects were for benefit of a particular religious community or caste and accordingly assessee was not entitled for exemption in terms of Section 13(1)(b), since Section 13(1)(b) was not relevant at the stage of registration under Section 12A but rather comes into play at the time of assessment when determining exemption u/s 11, impugned rejection of application was unjustified. CIT(E) has not examined the objects and activities of the assessee trust which are the twin conditions for granting registration u/s 12A/12AB. We also find merit in the submission of assessee that the ld. CIT(E) while rejecting the application of assessee has referred Clause- H to O only and has not considered the other clauses. Entire memorandum of association has to be considered and not by selecting a particular clause of the memorandum of association. Considering the fact that the ld. CIT(E) has not given his finding on the objects and activities of the assessee, therefore, we deem it appropriate to restore the issue back to the file of ld. CIT(E) reconsider the registration of assessee u/s 12AB of the Act afresh Appeal of assessee is allowed for statistical purposes. Issues:1. Rejection of applications under Section 12AB and 80G(5) of the Income Tax Act, 1961 by the Ld. CIT(E).Comprehensive Analysis:The case involved two interconnected appeals by a single assessee against separate orders of the Ld. CIT(E) rejecting applications under Section 12AB and 80G(5) of the Income Tax Act, 1961. The appeals were clubbed and heard together. The main contention raised by the assessee was that the Ld. CIT(E) erred in passing ex-parte orders without providing a reasonable opportunity to be heard. The Ld. CIT(E) rejected the applications citing that the objects of the assessee were not charitable in nature for the benefit of the public at large, as required under section 2(15) of the Income-tax Act. The Ld. CIT(E) also canceled the provisional registration granted under section 12A(1)(ac)(iii) (paragraphs 1-3).During the hearing, the Authorized Representative (AR) of the assessee argued that the rejection was unjustified and mechanical, emphasizing that the objects of the assessee were charitable and in compliance with the law. The AR requested the matter to be restored to the file of the Ld. CIT(E) for a fresh consideration. The AR also cited relevant case laws to support the assessee's position (paragraph 4).On the other hand, the Commissioner of Income Tax-Departmental Representative (CIT-DR) supported the Ld. CIT(E)'s order, stating that the objects of the assessee were specific to a particular community and not for the public at large. The CIT-DR suggested that if relief was to be granted, the matter should be sent back to the Ld. CIT(E) for further examination (paragraph 5).After considering the submissions and case laws, the Tribunal found that the Ld. CIT(E) had not adequately examined the objects and activities of the assessee trust, which are crucial for registration under Section 12A/12AB of the Act. The Tribunal agreed with the AR that the entire memorandum of association should have been considered, not just specific clauses. As a result, the Tribunal decided to restore the issue back to the Ld. CIT(E) for a fresh assessment, directing the Ld. CIT(E) to consider all relevant aspects and decisions cited by the assessee (paragraph 6).The Tribunal also directed the Ld. CIT(E) to grant the assessee an opportunity of hearing and submission before deciding the application afresh. Additionally, the assessee was instructed to provide any necessary information as required. Both appeals by the assessee were allowed for statistical purposes (paragraph 7).Lastly, as one appeal was restored back to the Ld. CIT(E) for deciding the registration under Section 12AB, the other appeal under section 80G(5) was also sent back for a fresh decision after the primary issue was resolved. Both appeals were allowed for statistical purposes only (paragraphs 8-9).