ANJUMAN E NUSRATUL MUSLIMIN TANKARIA, BHARUCH V. CIT(EXEMPTION), AHMEDABAD

ITA 59/AHD/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2858 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-04-2024
• Assessment Year: 2022-2023
• Appeal Filed On: 26-01-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard
• Section: 11; 12A; 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER I .T .A . No .5 9/ A h d / 2 02 3 ( A s se ss m e nt Y e a r : 20 22- 2 3 ) A nj u m a n E N us ra tu l M u s lim i n Ta n ka r i a, A t & P . O. T an k a r i a , B h a r u c h , G uj a r a t - 3 92 24 0 V s .C o mm i s si o n er O f i nc o m e T a x ( Ex e m pt io n) , Ah me da bad [ P A N N o . AA FT A 4 8 0 4P ] (Appellant) .. (Respondent) Appellant by : Ms. Kinjal V. Shah, A.R. Respondent by: Shri Sudhendu Das, CIT-DR D a t e of H ea r i ng 15.04.2024 D a t e of P r o no u n ce me nt 24.04.2024 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (in short “Ld. CIT(E)”), Ahmedabad vide order 29.12.2022 passed for Assessment Year 2022-23. 2. The Assessee has taken the following additional grounds of appeal:- “1. (a) The Order of CIT (Exemption) dated 29-12-2022 rejecting approval of Registration u/s.12AB is bad in Law and Void since it has not been passed within 15 days of Last Hearing dated 12-11-2022. (b) Your Appellant submits that in view of binding Circular of Central Board of Direct Taxes bearing No.279/Misc 53/2003-ITJ dated 19-6-2015 and Instruction bearing No. 20/2003 dated 23/12/2003, the CIT (Exemption) was duty bound to pass order within 15 days which he has failed and therefore the same be cancelled and approval u/s.12AB as per Form No.10B be granted. 2. (a) Without prejudice to above your Appellant submits that CIT(E ) has wrongly interpreted various clauses of the Appellant Trust and inviting attention to Medical Relief his interpretation of the Trust is for the benefit religious community or cast i.e. Muslims is totally mis-construed and wrongly interpreted and the clause is of relief to all without cast or credit. ITA No. 59/Ahd/2023 Anjuman E Nusratul Muslimin Tankaria vs. CIT(E) Asst.Year –2022-23 - 2– (b) Your Appellant further submits that the clause referred in the Trust Deed has to be interpreted in general and your Appellant refers and relies on the judgement of Lucknow IT AT in the case of Malik Hasmullam Islamic Education & Welfare Society vs. CIT, 24 taxmann.com 93 (Lucknow) and submits that the interpretation of learned CIT(E) was erroneous. 3. (a) Your Appellant submits that the Appellant is old Trust to with registration u/s.12A and u/s.80G were already granted and the Appellant has not made any change in activities or alternation in objects of the Trust and the same activities which were held genuine in past years have been continued and that there is no reason to take a separate view on presumption and assumption. (b) Your Appellant also relies on the judgement of CIT (Exemption) vs. Swami Omkaramdas Charitable Trust (2023) 150 taxmann.com 428 (Allahabad) and also of Supreme Court in the case of CIT vs. Excel Industries Ltd. 358ITR P. 295 and submits that in view of Principle of "consistency" which is fully applicable to the Appellants case the order of Commissioner rejecting u/s.80G(5) be cancelled and the Appellant be granted Renewal Registration u/s.80G (5) as per Law. 4. In view of above facts and circumstances, your Appellant submits that the order of CIT(E) under Appeal rejecting Registration U/S.12AB be cancelled and he be directed to grant Exemption u/s.80G as per Law, keeping in mind facts of the case and provisions of Law.” 3. The brief facts of the case are that the assessee trust filed application for registration of trust under Section 12AB of the Act on 15.06.2022 in Form No. 10AB under Rule 17A of the I.T. Rules, 1962. The CIT (Exemptions) observed that in the application filed in Form No. 10AB, the applicants/assessee has stated the nature of activities as “charitable” and objects of the applicant has been stated therein as “medical relief”. However, from perusal of the objects of the applicant/assessee, the CIT (Exemptions) observed that that various objects which are otherwise charitable in nature, are for the benefit of a particular religious community i.e. Muslims only. It was observed by CIT (Exemptions) that the main clause of the objects states that the trusts will work for the Muslim Dini and Dundavi welfare, and for the same various works would be carried out like arranging library for circulation and expansion of Islamic teachings in the village, arranging medical help, arranging scholarship for persons studying in Madarsa etc. The CIT (Exemptions) observed that Section 13(1)(b) of the Act stipulates that the provisions of Section 11 and 12 would ITA No. 59/Ahd/2023 Anjuman E Nusratul Muslimin Tankaria vs. CIT(E) Asst.Year –2022-23 - 3– not apply in the case of a trust institution created or established for the benefit of any particular religious community or caste. In the instant case, the CIT (Exemptions) was of the view that since the assessee/applicant trust has been formed primarily for the purpose of benefit to a particular religious community only i.e. Muslim community, the assessee/applicant trust cannot be granted registration under Section 12A of the Act. While rejecting the application filed by the assessee, CIT (Exemptions) made the following observations: “Various courts have held that the provisions of sec 13(1)(b) of the Act is not applicable in the case of a religious trust. The provision of sec 13(1)(b) of the Act is applicable to a charitable trust, has been settled by the Hon'ble Supreme Court in the case of CIT vs. Palghat Shadi Mahal Trust, reported in 120 Taxman 889, wherein in the case of a public charitable trust, the Hon'ble Apex court held that where the benefit is available to Muslims from all over the world, none of whom except in Kerala are backward classes, the provision of sec 13(1)(b) would be attracted and therefore the trust is not entitled for exemption u/s 11 of the Act. Even some courts had held that in lease of composite trust/institution, i.e. charitable cum religious, the provision of sec 13(1)(b) of the Act is not applicable. However, the said controversy was resolved by the Hon'ble Supreme Court in the case of CIT vs. Dawoodi Bohara Jamat, reported in 43 taxmann.com 243, wherein the Hon'ble Apex Court held that the provision of sec 13(1)(b) of the Act is applicable even to a composite trust/institution and held as under: "45. From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste." 8. Further, the Hon'ble Supreme Court in the said case of CIT vs. Dawoodi Bohara Jamat (supra), which was composite in nature, after analyzing the various objects of the trust, held that two of its objects provide for the activities completely religious in nature and restricted to the specific community of the assessee trust are objects with religious purpose only. However, the Hon'ble Apex Court held that other four objects of the assessee trust was charitable in nature and finally held that the trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that sec 13(1)(b) of the Act would be attracted and hence the trust would be eligible to claim exemption u/s 11 of the Act. In concluding para the Hon'ble Apex Court held has under. ITA No. 59/Ahd/2023 Anjuman E Nusratul Muslimin Tankaria vs. CIT(E) Asst.Year –2022-23 - 4– "50. In that view of the matter, we are of the considered opinion that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that Section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under Section 11 of the Act." 9. From the above referred discussion and objects of the applicant/assessee it is evident that it is not a religious trust, but it is charitable trust and above referred objects, which are in the nature of charitable is restricted to benefit of a particular religious community or caste "Muslims" and therefore as per law laid down by the Hon'ble Apex court in the above referred cases, the provision of sec 13(1)(b) would be applicable and therefore the applicant/assessee would not be eligible for exemption u/s 11 of the Act. Therefore, in the facts and circumstances of the case, the applicant/assessee cannot be granted registration u/s 12A of the Act. 10. In view of the above, the present application filed in Form No. 10AB for the registration u/s 12Ab of the IT Act, 1961 is rejected.” 4. The assessee is in appeal before us against the aforesaid order passed by CIT (Exemptions) rejecting the application filed by the assessee/applicant trust. Before us, the Counsel for the assessee placed reliance in the case of Jamiatul Banaat Tankaria 160 taxmann.com 358 (Ahmedabad - Trib.), wherein 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) as the said provisions would be attracted only at time of assessment and not at time of grant of registration. . Further, the Counsel for the assessee submitted that in the instant facts, firstly, from the object it is evident that the applicant trust is not formed with the object of only benefiting one particular community i.e. the Muslim community and further, it was submitted that in view of the aforesaid decision cited above, rendered by the jurisdictional Ahmedabad Tribunal, provisions of Section 13(1)(b) of the Act cannot be invoked for the purpose of denial of registration under Section 12AB of the Act and said provisions can be invoked only at the time of grant of exemption ITA No. 59/Ahd/2023 Anjuman E Nusratul Muslimin Tankaria vs. CIT(E) Asst.Year –2022-23 - 5– under Section 11 and 12 of the Act, at the time of assessment of such applicant/assessee trust. 5. In response, the Ld. DR placed reliance on the observations made by CIT (Exemptions) in the order rejecting the grant of application filed by the assessee/applicant trust. 6. We have heard the rival contentions and perused the material on record. We observe that in the case of Jamiatul Banaat Tankaria 160 taxmann.com 358 (Ahmedabad - 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) 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 24 taxmann.com 93 (Luck.), the ITAT held that since provisions of Sections 11, 12 and 13 are intended for exercise of jurisdiction by an Assessing Officer in an assessment proceedings, Commissioner is not competent to invoke such provisions for purpose of declining registration under Section 12AA. In the case of St. Joseph Academy 50 taxmann.com 216 (Hyderabad - Trib.), the ITAT held that provisions of Section 13 can be invoked by Assessing Officer while framing assessment and not by Commissioner while considering application for registration under Section 12AA. In the case of Dawoodi Bohara Jamat 43 taxmann.com 243 (SC), the Hon'ble Supreme Court made the following observations: “40. Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15) of the Act. The institutions established to spread religious awareness by means of education though established to promote and further ITA No. 59/Ahd/2023 Anjuman E Nusratul Muslimin Tankaria vs. CIT(E) Asst.Year –2022-23 - 6– religious thought could not be restricted to religious purposes. The House of Lords in Barralet v. IR 54 TC 446, has observed that "the study and dissemination of ethical principles and the cultivation of rational religious sentiment" would fall in the category of educational purposes. The Madarsa as a Mohommedan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the object (d) would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character. 41. Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 of the Act shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of Section 13. The activities of the trust under such objects would therefore be entitled to exemption accordingly. 42. We would now proceed to examine the objects under the provisions of Section 13(1)(b) of the Act. It becomes amply clear from the language employed in the provisions that Section 13 is in the nature of an exemption from applicability of Sections 11 or 12 and the examination of its applicability would only arise at the stage of claim under Sections 11 or 12. Thus, where the income of a trust is eligible for exemption under Section 11, the eligibility for claiming exemption ought to be tested on the touchstone of the provisions of Section 13. In the instant case, it being established that the respondent-trust is a public charitable and religious trust eligible for claiming exemption under Section 11, it becomes relevant to test it on the anvil of Section 13. 7. In view of the above judicial precedents, looking into the facts of the instant case, we are of the considered view that the provisions of Section 13 of the Act can be invoked only at the time of assessment and not at the time of grant of registration under Section 12A of the Act. Our view is further supported by the decision of the Hon'ble jurisdictional High Court in the case of CIT (Exemptions) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199/243 Taxman 60 (Guj.)/[2017] 8 ITR-OL 494 (Guj.) wherein on the issue of denial of grant of registration u/s 12A of the Act by invoking Section 13(1)(b) of the Act, it was categorically held that the provisions of Section 13 would be attracted only at the time of assessment and not at the time of grant of registration. The relevant finding of the Hon'ble High Court at para 8 of his order is as under: "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 ITA No. 59/Ahd/2023 Anjuman E Nusratul Muslimin Tankaria vs. CIT(E) Asst.Year –2022-23 - 7– 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." 8. In the result, in view of the above observations, the matter is restored to the file of CIT (exemptions), for de novo consideration, after giving due opportunity of being heard and with the direction not to disentitle the assessee for grant of registration only on the grounds as mentioned in its previous order for rejecting the application filed by the assessee trust. 9. In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 24/04/2024 Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 24/04/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 22.04.2024(Dictation given by Hon’ble Member on his dragon software) 2. Date on which the typed draft is placed before the Dictating Member 22.04.2024 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 22.04.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement .04.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 24.04.2024 7. Date on which the file goes to the Bench Clerk 24.04.2024 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................