BHUJ BHIL GNATI TRUST ,BHILVAS, LAL TEKRI, BHUJ-KUTCH. V. THE CIT (EXEMPTION), AHMEDABAD, AHMEDABAD

ITA 324/RJT/2023

AI Insights

The case involves the Bhuj Bhil Gnati Trust, which applied for registration under section 12A(1)(ac)(iii) of the Income Tax Act, 1961, but was denied by the Commissioner of Income Tax (Exemption), Ahmedabad. The Commissioner argued that the Trust's activities, being restricted to a particular religious community, violated section 13(1)(b) of the Act. The Trust contested this decision, highlighting its broader charitable activities beyond religious ones. The Tribunal, referencing several precedents, concluded that the Commissioner incorrectly applied section 13(1)(b) at the registration stage rather than at the assessment stage, leading to the decision to allow the Trust's appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 28855 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-07-2024
• Assessment Year: 2023-2024
• Appeal Filed On: 20-09-2023
• Other Referred Cases: CIT vs Dawoodi Bohara Jamat, Jamiatul Banaat Tankaria vs CIT, Malik Hasmullah Islamic Educational and Welfare Society vs CIT, CIT vs Bayath Kutchhi Oswal Jain Mahajan Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAMDEEP SINHA
• Assessee Lawyers: DARSHAK THAKKAR
• Keywords: Set aside; Question of law; Charitable institution
• Section: 43; 12A; 13; 12

Judgement Text

" आयकर अपीलȣय अͬधकरण,राजकोट Ûयायपीठ, राजकोट। IN THE INCOMETAXAPPELLATE TRIBUNAL, RAJKOT BENCH: RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER And SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No. 324/RJT/2023 (Ǔनधा[रण वष[/Assessment Year: N.A. Bhuj Bhil Gnati Trust, Bhil Vas Lal Tekri, Bhuj Kutch-370001, Gujarat Vs. Commissioner of Income Tax (Exemption), Ahmedabad èथायी लेखा सं./जीआइआरसं./PAN/GIR No.: AABTB4083H (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) Ǔनधा[ǐरती कȧ ओर से/Appellant by : Shri Darshak Thakkar, A.R. राजèव कȧ ओर से/Respondent by : Shri Shramdeep Sinha, CIT-D.R. सुनवाई कȧ तारȣख/ Date of Hearing : 23/07/2024 घोषणा कȧ तारȣख/Date of Pronouncement : 15/10/2024 आदेश / O R D E R PER SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER: Captioned appeal filed by the assessee, is directed against the order passed by the Learned Commissioner of Income Tax (Exemption), Ahmedabad, [in short ‘Ld.CIT(E)’], dated 29.08.2023, wherein the Ld.CIT(E) rejected the assessee’s application in Form No.10AB, u/s 12A(1)(ac)(iii) of Income Tax Act, 1961 (in short ‘the Act’), holding that objects of the trust which are in the nature of charitable, and are restricted to the benefit of a particular religious community or caste, that is, ‘Bhuj Bhil Gnati Bhuj Kutch’, therefore provisions of section 13(1)(b) of the Act, would be applicable to the assessee-trust and hence assessee-trust would not be eligible to grant registration u/s 12A (1)(ac)(iii) of Income Tax Act, 1961. Page | 2 ITA No.324/RJT/2023 A Y:2023-24 2. Brief facts qua the issue are that assessee-trust filed an application in Form No.10AB, u/s 12A(1)(ac)(iii) of the Act, before the Ld. CIT(E). Therefore, the Ld. CIT(E) issued notice to the assessee-trust, to file the details and documents, to prove the genuineness of the activities of the trust. In response to the notice of the Ld. CIT(E), the assessee submitted its reply before the Ld. CIT(E). In this connection it is to state that Trust is maintaining small temple within the premises of Bhuj Bhil Gnati trust for the members of Bhil Samaj. Expenses incurred for maintaining this temple as well as performing Utsavs for Members of Bhil Samaj are mentioned as religious expenses in Financial Statements as well as in Audit Reports. Thus expense mentioned in the above show cause notice is only to maintain small temple within premises of Bhuj Bhil Gnati Trust as well as performing utsavs for Members of Bhil Samaj. However, the Ld. CIT(E), after going through the objects of the assessee-trust, noted that assessee is a religious trust and as well as it is charitable trust. However, the nature of charitable activities, are restricted to the benefit of a particular community or caste and i.e. ‘Bhuj Bhil Gnati Bhuj Kutch and therefore as per law laid down by the Hon’ble Supreme Court in the case of CIT vs Dawoodi Bohara Jamat, 43 taxmann.com 243, the provision of Section 13(1)(b) of the Act, would be applicable to the assessee-trust and hence the assessee’s application in Form No.10AB for registration u/s 12A(1)(ac)(iii) of the Act was rejected by the Ld. CIT(E). 3. Aggrieved by the order of Ld. CIT(E), the assessee-trust, is in appeal before us. 4. Shri Darshak Thakkar, Learned Counsel for the assessee submitted a paper book page and stated that objects of the assessee- trust are not only religious but charitable also. There are only few objects which are religious, however all the objects of the assessee-trust are charitable in Page | 3 ITA No.324/RJT/2023 A Y:2023-24 nature, which is evident from the objects of the trust-deed, which are reproduced below: Objects :- Main objects of this institute shall be as under without discrimination of caste, creed, religion for all Bhil community. 1. Social Field :- 1. To establish and create brotherhood, intimacy, affection and family unity by celebrating collectively and to help such activities. 2 To establish, maintain and manage Guest house, Dinning room, Samajwadi, Old aged shelter and other necessary complex for use of society members. 2. Educational Field :- 1. To carry out encouraging activity related to education and all other such activities and help in such activities. 2. To commence, manage and maintain educational center to propagate education awareness in Bhil community, as well as to establish library and to manage and run other educational centers. 3. To provide training by computer and latest technology. 4. To provide scholarship, grant, financial help, prize, stipend etc. to the students. 3. Medical Field: 1. To carry out all medical relief activities, to open, manage and maintain dispensary, hospitals and other treatment centers. 2. To provide financial help for medicine and treatment to patients and other relief. Other :- 1. To carry out activities in the filed of youth, women, child welfare, sports, cultural and entertainment field an to help such activities. 2. To provide financial help to economically weaker and needy person by food, cloth, shelter, medical relief, financial relief and by other relief activity. 3. To carry out all type of activity for self reliance, self development, social, moral and financial development. 4. To manage community tradition and rites practical and competent. 5. To give proper training to eradicate anti customs and superstition in the society. Page | 4 ITA No.324/RJT/2023 A Y:2023-24 6. To provide all type of relief and help to needy and human useful birds and animals during natural and man made calamities. 7. To carry out all type of rural development work. 8. To carry out all living being activity. 5. Accordingly, to carryout all above objective activities, to help them and encourage in other activity or to help them.” 5. Therefore, Ld. Counsel for the assessee, contended that objects of the trust are not restricted to a particular community i.e. ‘Bhuj Bhil Gnati Bhuj Kutch’. However, the above objects of the assessee-trust are for the benefit of general public, therefore registration u/s 12A(1)(ac)(iii) should not be denied. The Learned Counsel also stated that Section 13(1)(b) of the Act, is applicable at the time of assessment and not at the time of granting registration to the trust, therefore, in assessee’s case under consideration, section 13(1)(b) of the Act is not applicable, hence, registration under section 12A(1)(ac)(iii) of the Act, should not have been denied by the learned CIT (Exemption). 6. On the other hand, Learned Departmental Representative (Ld. CIT- DR) for the Revenue relied on the order of Ld. CIT(E) and submitted that assessee-trust is created for the benefit of a particular religious community or caste i.e. ‘Bhuj Bhil Gnati Bhuj Kutch, therefore there is a violation of the provision of section 13(1)(b) of the Act, hence registration has been rightly denied to the assessee-trust, by the ld CIT (E). 7. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(E) and other materials brought on record. We find that Ld. CIT(E) heavily relied on the judgment of Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat Page | 5 ITA No.324/RJT/2023 A Y:2023-24 (supra) wherein it was held that if a trust is a composite one, that is, it is for both, religious and charitable purposes, then it would not covered by the provisions of section 13(1)(b) of the Act. Therefore, the ratio laid down by the Hon’ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat (supra), does not cover the assessee-trust, under the provisions of section 13(1)(b) of the Act, as the assessee-trust is a composite one, that is, religious and charitable purposes ( mix objects), however, most of the objects of the assessee -trust are for charitable purposes, as noted by us from the objects of the assessee- trust. 8. We find that assessee-trust under consideration was created on 5th October, 2018 and applied for registration u/s 12A(1)(ac)(iii) of the Act and we find that Ld. CIT(E) has denied the registration u/s 12A (1)(ac)(iii) of the Act, solely on the reason that the assessee-trust was created for a particular caste and community i.e. ‘Bhuj Bhil Gnati Bhuj Kutch and therefore relying on the provision of section 13(1)(b) of the Act, the Ld. CIT(E) denied the registration u/s 12A (1)(ac)(iii)of the Act. We observe that in the case of Jamiatul Banaat Tankaria (2024) 160 taxmann.com 358 (Ahd – Trib), the ITAT held that where objects of assessee-trust were primarily charitable rather than favouring any specific religious community, CIT(E) was not justified in denying registration under Section 12A, by invoking Section 13(1)(b) of the Act, as said provisions would be attracted only at time of assessment and not at time of grant of registration. In the case of Malik Hasmullah Islamic Educational and Welfare Society (2012) 24 taxmann.com 93/138 ITD 519 (Lucknow), the Coordinate Bench of ITAT held that since provisions of Sections 11, 12 and 13 are intended for exercise of jurisdiction by an assessing officer (AO) in an assessment proceedings, the Commissioner (Exemption) is not competent to invoke such provisions for purpose of declining registration u/s 12A(1)(ac)(iii) of the Act. Therefore, we note that Section Page | 6 ITA No.324/RJT/2023 A Y:2023-24 13(1)(b) of the Act can be invoked only at the time of assessment and not at the time of registration u/s 12A(1)(ac)(iii) of the Act. We also note that when the assessee-trust under consideration, has large number of other objects, which are for benefit of general public, (apart from a few objects in the nature of religious), therefore registration should not be denied to the assessee-trust u/s 12A (1)(ac)(iii)of the Act, for that reliance is placed on the judgment of the Hon’ble jurisdictional High Court of Gujarat in the case of CIT vs. Bayath Kutchhi Oswal Jain Mahajan Trust, (2016) 74 taxmann.com 199 (Guj) wherein it was held as follows: “3. The assessee challenged the order of Commissioner before the Tribunal. The Tribunal by the impugned judgment followed the decisions of this Court in case of Shantagauri Ramniklal Trust &Ors. V/s. Commissioner of Income-tax and Anr., reported in (1999) 239 ITR 528 and in case of Commissioner of Income-Tax V/s. Leuva Patel Seva Samaj Trust rendered in Tax Appeal No.59 of 2012 and allowed the appeal. The Tribunal was of the view that the Commissioner cannot mix the requirement of registration of a trust with that of granting exemption under Section 13 of the Act. 4. Learned counsel, Mrs. Mauna Bhatt for the department submitted that the Commissioner had correctly come to the conclusion that the objects and activities of the trust were confined for the benefit of a section of a religious community. In terms of the provisions contained in Section 13 of the Act therefore, such issue could have been examined even at the stage of granting or refusing registration by the Commissioner. 5. On the other hand, learned counsel, Mr. R. K. Patel for the assessee opposed the appeal contending that the Commissioner should at the objects and activities of the trust HC-NIC Page 2 of 8 Created On Tue Aug 30 20:07:48 IST 2016 O/TAXAP/568/2016 ORDER were confined for the benefit of religious community was incorrect. He drew our attention to the constitution of a trust and the objects specified therein. 6. As noted, in the present case the Commissioner referred to the social activities clause contained in the constitution of the trust to come to the conclusion that the objects of the trust were confined for the benefit of a religious community. We, however, notice that there were large number of other objects which were for the benefit of general public. Relevant portion of the constitution of the trust reads as under: \"4. Objects of Trust: Object of this institution will be as under: 1. Educational: 1. To do all activities related to Education or which encourages education Page | 7 ITA No.324/RJT/2023 A Y:2023-24 2. To establish, maintain and run Educational centres, infant schools, Primary Schools, Secondary Schools, High Secondary Schools, Colleges, to establish, maintain and run Hostels, training Centres and to help in such activities for creating awareness in the common people and to make the publicity of education. 3. To impart knowledge of Computer and latest technology. 4. To help or arrange for such help to students through Scholarships, subsidy, loan prize, stipend, etc. HC-NIC Page 3 of 8 Created On Tue Aug 30 20:07:48 IST 2016 O/TAXAP/568/2016 ORDER 5. To provide guidance and education for Technical, Vocational and other crafts professions. 2. Social activity: 1. To arrange such collective function and to be helpful in such activities which increases relationship, brotherhood, familyness, unity, love amongst the members. 2. To establish, administer and maintain Guest Houses, Bhojanalaya, Service (vaiyavachh), centres and other buildings for the benefit of members of the society. 3. To construct or to arrange for the construction of residential complexes for the members of the Samaj and to provide loan/financial help subject to the provisions of the rules of the trust. 3. Medical: 1. To do all activities of medical help, to establish, administer and maintain Dispensary, Hospital, Laboratory and other medical treatment centres and arrange camps and seminars. 2. To help patients in medical treatment by providing medicines, financial assistance and all other helps. 3. To make publicity of medical education and given Scholarships. 4. Rural Development: 1. To provide employment to the villagers and to do all activities of poverty elimination. 2. To make tree plantation, tree protection and provide energy, forestry and electricity. 3. To create water scheme units for providing water for agriculture and drinking and make storage of water through ponds, small dams and farm ponds, well etc., 4. To take the any Government Scheme to villagers which make development of their area. 5. Literature &Culture: 1. To make efforts for the development and protection of Indian Culture Page | 8 ITA No.324/RJT/2023 A Y:2023-24 2. To do or help in such activities, which is socially prosperous for common people in the area of literature, culture, physical education, and in sports. 3. To give every help for encouragement of people who are interested and liking in culture and literature. 6. Others: 1. for development of institutions objects, make research, publicity and developmental works or to help any institution, person, doing such activity or with their help to plan Training Centres, camps, Lectures, meetings, gatherings and seminars and to print books and other literatures, publish it or exhibit. 2. To run Cow homes and do the activities of growth of cow. 3. To provide food, cloths, residence, financial help and other help to financially weak and needy persons. 4. During natural or manmade calamities, provide help to needy persons and domestic helpful animals and birds. 5. To do all activity of Jivdaya. 6. To do activities of service to human and animals over the objects mentioned above.\" 7. It can thus be seen that the Commissioner focused his attention to clause 4.2 of the objects of the trust to come to the conclusion that the same were for the benefit of a certain religious communities only, in the process ignoring various other objects, for e.g. as per clause 4.1, the trust would engage itself in activities relating to education by maintaining and running education centers, infant schools, primary secondary and high schools, colleges etc., to run hostels, training centers for creating awareness in the common people and to make the education available for the public. It would also engage in imparting training in computers. As per clause 4.3, the trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise in clause 4.4 the trust could engage in rural development schemes. As per clause 4.5, the trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Clause 4.6 which pertains to other included activities such as running cow shelters, to provide food, cloth and financial help for economically weaker persons, to help during natural or other calamities, to serve humans and animals etc. 8. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community, is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Act, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record. 9. In the result, no question of law arises. The Tax Appeal is dismissed.” Page | 9 ITA No.324/RJT/2023 A Y:2023-24 9. Considering the above facts and circumstances, we noted that in case of Malik Hasmullah Islamic Educational and Welfare Society (2012) 24 taxmann.com 93/138 ITD, 519 (Lucknow), held that since provisions of sections 11, 12 and 13 are intended for exercise of jurisdiction by the AO in an assessment proceedings, the Commissioner(Exemption) is not competent to invoke such provision for purpose of declining registration u/s. 12A(1)(ac)(iii) of the Act, therefore, we set aside the order of Ld. CIT(E) and remit the matter back to the file of Ld. CIT(E), with the direction to grant the registration to the assessee-trust in accordance with law. For statistical purposes, the appeal of the assessee is allowed. 10. In the result, appeal of the assessee, is allowed for statistical purposes. Order is pronounced on 15/10/2024 in the Open Court. Sd/- Sd/- (DR. ARJUN LAL SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot TRUE COPY Ǒदनांक/ Date: 15/10/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6.Guard File. By Order, Assistant Registrar/Sr. PS/PS ITAT, Rajkot "