TaxTMI 
TaxTMI 
2024 (8) TMI 808
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee. 3. It is a settled law that at the stage of grant of registration, CIT(A) is not required to enquire whether the condition of section 11 to 13 is fulfilled or not. Condition of section 13(1)(b) do not apply to registration u/s 12AA and therefore the registration u/s 12AA refused by CIT is bad in law. 4. Assessee craves to leave to add, amend, alter or withdraw any or more grounds of appeal or before the hearing of the appeal." 3. Succinct facts qua the issue are that an application for registration of the trust u/s 12AA of the Income Tax Act, 1961, was filed by the assessee-trust on 27.03.2019, in form No. 10A under Rule 17A of the I.T. Rules, 1962. Therefore, the ld. CIT(E) issued a show cause notice to the assessee, on 5th August 2019, and asked the assessee-trust to furnish detailed note on the activity actually carried out by the trust as well as certain details and documents as mentioned in the notice.However, in response to the said notice, neither the assessee attended the office of the ld CIT(E) nor furnished any details/documents nor sought adjournment. Therefore, ld. CIT(E) issued another show cause notice to the assessee on 31st August 2019. In response ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee trust has created for a particular community, that is, "Soni Nyat", and also, the assessee has failed to file documentary evidences to satisfy about the genuineness of its activities and to verify these activities that the same are in consonance with its objects. Hence, the application filed in Form No. 10A for the approval u/s. 12AA of the I.T. Act, 1961, was rejected by ld CIT(E). 6. Aggrieved by the order of the Ld. CIT(E) the assessee is in appeal before us. 7. Learned Counsel for the assessee, argued that provisions of Section 13(1)(b) of the Act, is not applicable in case of assessee-trust, under consideration, as the assessee- trust is not created and working for benefit of any particular caste or community. This trust is open for the benefit of public, and to prove this, the learned counsel for the assessee, submitted before the bench, the objects of the trust. The ld. counsel, also argued that provisions of section 13(1)(b) of the Act, attracts only at the time of granting exemption and not at the time of granting registration. The ld. counsel, also pointed out that provisions of section 13(l)(b) of the Act, applies, only to the trusts or institutions established a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the organization. 4) Providing medical to needy members of the organization. 5) This organization provides school books, notebooks, scholarships, loans and incentives to children in the field of education. 6) The organization may perform other activities within the limits of the constitution as determined by the members from time to time." 10. We find that as per copy of the Public Trust Register (PTR), submitted before us, we note that assessee-trust was registered with Charity Commissioner in 1937, that is, before commencement of the Income Tax Act, 1961. Therefore, we find merit in the submissions that provisions of Section 13(1)(b) of the Act, does not apply to the assessee-trust, under consideration, for that reliance can be placed on the judgment of SMC Bench in the case of Rajkot Visha Shrimali Jain Samaj vs. ITO 111 ITD 238 (Rajkot), wherein it was held as follows: "6. With regard to non-application of provisions of section 13(1)(b), I found that the assessee-trust was incorporated on 1-9-1960 prior to the coming into force of Income-tax Act, 1961. The provisions of section 13(1)(b) are therefore not applicable to the assessee-trust. Documentary evidence with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s common ground that the trustees had been administering the fund established by the deceased under his will dated October 20,1918. In course of time, the existing choultry building needed repairs and development. Accordingly, the trustees co-opted some more persons and obtained further contributions from the members of the deceased's family for improving the trust (building). It appears, the trustees have added also more objects to the existing trust created by late K. China Venkata Subbaiah and these objects were to provide building for functions, arrangement of philosophical lectures, to provide facilities for travellers, to establish a library, to encourage cow protection and to give free food and education to Vysya students. Pursuant to the above objects, the trustees are maintaining a hostel for poor Vysya students. The trust was registered under the Societies Registration Act on December 5, 1967. It is called as Arya Vysya Kalyana Nilaya Sangam. The Revenue did not doubt the charitable character of the trust up to and including the assessment year 1975-76. It is admitted that the income of the assessee-trust had never been taxed prior to the assessment year under cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner and dismissed the appeal. It may be mentioned that before the Tribunal, a further argument was raised that the assessee-trust was deriving income by letting the building involving the earning of income and, as such, the assessee is carrying on an activity for profit within the meaning of section 2(15) of the Income-tax Act and, consequently, the income derived by the trust would not qualify for exemption. The Tribunal negatived this contention also on the ground that letting out of the properties belonging to the trust did not amount to an activity for profit as envisaged by section 2(15) of the Act. Aggrieved by the decision of the Tribunal, the Commissioner carried the matter on reference to this court and the three questions mentioned above have been referred. Learned standing counsel for the Revenue, Sri. M.S.N. Murthy, contended that on the facts and circumstances of this case, the assessee-trust must be held to have come into existence only on December 5, 1967, when it was registered under the Societies Registration Act, If the trust should be held to have come into existence on December 5, 1967, then the provisions of section 13(1)(b) of the Act would automatically co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as created under the will dated October 20, 1918, or the objects subsequently added by the trustees were charitable in character. The only dispute is that although the objects were charitable in nature, the society having come into existence on December 5, 1967, could be governed by the provisions of section 13(1)(b) of the Act. As already pointed out, there is already in existence an instrument evidencing the creation of a trust as far back as October 20, 1918, and what had happened on December 5, 1967, was merely registering the same document under the Societies Registration Act. We do not think that the Revenue is right in contending that a new trust came into existence and the provisions of section 13(1)(b) of the Act hit the new trust. If the trust has come into existence prior to April 1, 1962, its income would qualify for exemption under section 11 of the Act even if it enured for a particular community. This proposition is not disputed before us by the learned standing counsel for the Revenue. The other question that requires consideration is whether letting out of the property belonging to the trust amounted to an activity for profit. In the first place, there is no mat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld that the purpose of the trust was two-fold, i.e., to look after the property of the temple and to act for the uplift of the Maheshwari Samaj. First was purely a religious purpose but so far as the second purpose was concerned, the learned AAC held that the trust which had been created after the commencement of the Act and one of its objects was to provide benefit to a particular religious community, section 13(1)(b) of the Act was partly applicable. Accordingly, he directed the ITO to treat the trust as one created for charitable and religious purposes and to give exemption under section 11 of the Act for the income which had been utilised for religious purposes. The department did not challenge this order. The assessee, however, appealed before the Appellate Tribunal. The question which was raised before the Tribunal was whether the assessee-trust had been created or established before the commencement of the Act of 1961 or after and, if so, whether section 13(1)(b) was applicable to deprive the assessee-trust of the benefit available to it under section 11 of the Act. The Appellate Tribunal examined two public documents, one, a certificate issued by the High Court of Bh....