Levva Patel Gnati, Sultanpur, Sultanpur, Tal. Gondal, Dist. Rajkot V. The CIT(Examption), Ahmedabad, Ahmedabad

ITA 97/RJT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5987 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-06-2024
• Assessment Year: 2022-2023
• Appeal Filed On: 11-04-2023
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12; 11; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.97/RJT/2023 (Assessment Year: 2022-23) (Hybrid Hearing) Levva Patel Gnati, Village Sultanpur, Tal. Gondal, Rajkot-364470. Vs. The CIT(Exemption), Ahmedabad. थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAATL0953H (अपीलाथ /Appellant) ( यथ /Respondent) नधा रतीक ओरसे / Assessee by : Shri Bakul Ganatra, AR राज वक ओरसे/Revenue by : Shri Shramdeep Sinha, Sr. DR स ु नवाईक तार ख/ Date of Hearing : 11/06/2024 घोषणाक तार ख/Date of Pronouncement : 05/07/2024 आदेश/ORDER PER ARJUN LAL SAINI, AM: The captioned appeal filed by the assessee, is directed against the order passed by the Learned Commissioner of Income Tax (Exemption), vide order dated 12/03/2023, wherein the Ld.CIT(E), rejected application of the assessee, filed in form no. 10AB, for registration u/s 12AB of the Act, holding that the nature of activity of the trust is restricted to the benefit of particular religious community or caste (“Leva Patel”) and therefore provisions of section 13(1)(b) I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 2 of the Act, would be applicable and hence the assessee-trust would not be eligible for registration u/s 12AB of the Act. 2. The grounds of appeal raised by the assessee are as follows: 1.The learned CIT(E) has erred in facts as well as in law for the confusion regarding the applicability of section 13(1)(b). 2.The learned CIT(E) had erroneously erred in fact as well in law without appreciating that the statutory provisions allow to reject the renewal only in the cases of finding that activities are not genuine or had not complied with the provisions of other laws. 3.The appellant may please by allowed to add further grounds of the appeal and /or allowed to amend, alter, delete, change and/or raise further grounds during the pendency of these proceedings. 3. The facts of the case which can be stated quite shortly are as follows: The assessee before us is a trust and an application for registration of the trust u/s 12AB of the Income Tax Act, 1961, was filed electronically on 20/09/2022, by the assessee-trust, in Form No. 10AB, under Rule 17A of the I.T. Rules, 1962. Therefore, a notice was issued by the ld CIT(E ) to the assessee on 10/12/2022 with a request to furnish detailed note on the activities actually carried out by the trust as well as certain details and documents as mentioned in the notice. The above-mentioned inquiry about the actual activities of the trust was done by the Ld CIT(E ), in view of the mandatory provisions of the procedure for registration u/s 12AB of the Income Tax Act, 1961.However, in response to the said notice, the assessee has furnished part detail and documents. Therefore, ld CIT(E) provided, final opportunity of hearing, on 03.01.2023. In response to the said notice, the assessee has furnished its reply before ld CIT(E ). I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 3 4. From perusal of objects of the assessee-trust, it was observed by ld CIT(E) that following objects, which is otherwise charitable in nature, are for the benefit of any particular religious community or caste “LEVA PATEL”: “To arrange boarding for students of caste and to do useful work for caste” Therefore, ld CIT(E ) noticed that it would be essential to analysis, as to whether the provision of section 13(1)(b) of the Act, is applicable to the assessee-trust or not. The ld CIT(E), observed that section 13(1) (a) of the Act, stipulates that provisions of section 11 and 12 would not apply to an assessee, where any part of the income from the property held under a trust for private religious purposes, which does not ensure for the benefit of the public. Therefore, the provision of section 13(1)(a) of the Act, is applicable only when any part of income is from the property held under a trust for private religious purposes which does not ensure for the benefit of the public. Further section 13(1)(b) of the Act stipulates that provisions of section 11 and 12 would not apply in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof, if the trust or institution is created or established for the benefit of any particular religious community or caste. Therefore, the provision of section 13(1)(b) of the Act is applicable only in a case of charitable trust/institution created or established after commencement of this Act, if the trust/institution is created or established for the benefit of any particular religious community or caste. As per Form No. 10AB filed by the assessee, the Date of incorporation/Creation and Registration of the trust has been mentioned as 25.10.1963. Further, in the present Form No. 10AB filed by the assessee, the Nature of activities have been mentioned as "Charitable" I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 4 5. Therefore, ld CIT(E ) noted that the provisions of section 13(1)(b) of the Act is not applicable in the case of a religious trust. The provision of section 13(1)(b) of the Act is applicable to a charitable trust, as 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 section 13(1)(b) would be attracted and therefore the trust is not entitled for exemption u/s 11 of the Act. In case of composite trust/institution, i.e. charitable cum religious, the provision of section 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 section 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." 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 were charitable in nature and finally I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 5 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 section 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 as follows: "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.” 6. In the light of the above judgement of hon`ble Supreme Court, in the case of Dawoodi Bohara Jamat (supra), the ld. CIT(E ) noted that from the above objects of the assessee-trust, 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 “LEVA PATEL” and therefore, the provision of section 13(1)(b) of the Act, would be applicable and the assessee would not be eligible for exemption u/s 11 of the Act. Therefore, ld CIT(E ) rejected the assessee`s application, filed in Form No.10AB, for registration u/s 12AB of the Act. 7. Aggrieved by the order of the Ld.CIT(E), the assessee is in appeal before us. 8. Learned Counsel for the assessee, argued that assessee-trust was in existence since 1946, that is, prior to the Income-Tax Act 1961. The property was purchased by the trust in 1946. Therefore, the trust was in existence before the commencement of the Income-tax Act 1961, hence, even if the trust was created only for a particular community, (“LEVVA PATEL” caste under I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 6 consideration) the Ld. CIT(E), could not have denied the registration of the trust, because at the time of registration, the section 13(1)(b) of the Act Income Tax Act 1961, was not in force. Moreover, ld Counsel stated that section 13(1)(b) of the Act, relates to assessment of trust and not for registration, therefore, the provision relied on by Ld. CIT(E), under section 13(1)(b) of the Act, is out of context and does not relate to assessee under consideration, therefore, the Ld. CIT exemption should not have denied the registration of the trust under section 12 AB of the Act. The Ld. Counsel also stated that “Leva Patel” is not a particular caste/community. For that the Ld. Counsel for the assessee relied on followings judgements: i. Hon’ble Gujarat High Court in the case of CIT. vs. Kutchi Dasa Oswal Moto Parivar Ambama Trust [2013] 2013 taxmann.com 212(Guj.) ii. Co-ordinate Bench of ITAT, Chandigardh in ITA No.74/Chd/2009 in the case of Himachal Pradesh Environment protection & pollution control board Vs. CIT[2010] 42 SOT 343 (Chd.) iii. Hon’ble Punjab & Haryana High Court in the case of CIT. vs. Ved Niketan Dham, Public Charitable Trust [2013] 219 taxmann.com 115(Punjab & Haryana) iv. Hon’ble Patna High Court in the case of St. Michaels Educational Association St. Michaels High School vs. CIT [2019] 111 taxmann.com 242(Patna) v. Co-ordinate Bench of ITAT, Jaipur case of Bhagwan Mahavir Purusharth Prerna Nidhi Nyas vs. CIT [2012]23 taxmann.com 311(JP) vi. Hon’ble ITAT Pune & Hon’le Gujarat High Court in the case of Kul Foundation vs. CIT as well as DIT(Exe) vs. Panna Lalbhai Foundation [2015] 68 SOT 310(Pune) 8. Therefore, ld. Counsel for the assessee, prayed the Bench that learned CIT- (exemption) may be directed to grant the registration under section 12AB of the Income Tax Act 1961. I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 7 9. On the other hand, the Ld. DR for the Revenue, submitted that the assessee-trust is created for particular caste and community, that is, for “LEVVA PATEL”, therefore, the provisions of section 13(1) (b) of the Act, would be applicable to the assessee-trust, under consideration. Moreover, the assessee has not proved the genuineness of the its activities. The Ld. DR also pointed out that claim of ld Counsel that his assessee`s trust was in existence since 1946, but no activities have been done by the assessee-trust, since then, even for particular caste, “LEVVA PATEL”. Therefore, the genuineness of the activities of the trust, did not establish, in the assessee’s case under consideration, hence, the assessee’s appeal may be dismissed. 10. We have heard the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, we reproduce, section 13(1) (b) of the Act, as follows: “13. (1)Nothing contained in section 11 [or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;” We note that assessee -trust, under consideration was in existence prior to commencement of the Income Tax Act, 1961. The provisions of section 13(1)(b) of the Income Tax Act 1961, is applicable to the trusts created or established after the commencement of Income Tax Act, 1961. However, as per the plain language of section 13(1)(b) of the Income Tax Act 1961, as noted above, states I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 8 that “in the case of a trust for charitable purpose or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste” therefore, it is vivid that trust created prior to commencement of the Income Tax Act, 1961, the provisions of section 13(1) (b) of the Income Tax Act, 1961, would not be applicable to such trust, even if, such trust was established or created for the benefit of any particular religious community or caste. We find that assessee-trust, under consideration, was in existence since 1946, that is, prior to the Income-Tax Act, 1961, came into being. That is, the trust under consideration was created in 1946, however, the Indian Income Tax Act 1961, was come into force in the year 1961. Therefore, the assessee- trust was in existence prior to the Indian Income Tax Act 1961, hence the provisions of section 13(1) (b) of the Income Tax Act, 1961, would not be applicable to the assessee-trust under consideration. The ld. Counsel for the assessee, explained before us that the property was purchased by the trust in 1946. As per the PTR records, the assessee- trust became an owner of land by registered purchase deed, dated 26.12.1946 and 30.06.1959. Therefore, the assessee- trust, was in existence before the commencement of the Income-Tax Act 1961, hence, even if, the trust was created only for a particular community, ( “LEVVA PATEL”), the Ld. CIT(E), should not have denied the registration of the trust, provided, the assessee- trust fulfilled the conditions mentioned in section 12AB of the Income Tax Act, 1961 and Rule 17 A of the Income Tax Rules, 1962. Therefore, we find that judgments referred by Ld. CIT(E) in the case of Palghat Shadi Mahal Trust (supra) and the case of Dawoodi Bohara Jamat (supra), are not applicable to the assessee trust under consideration. I.T.A No.97/Rjt/2023 A.Y. 2022-23 Leva Patel Gnati vs. CIT 9 11. Therefore, considering, the above facts and circumstances, we state that the registration of the trust, should not be denied on account of provisions of section 13(1) (b) of the Income Tax Act, 1961, as these provisions are not applicable to the assessee-trust, under consideration, as explained above. Therefore, we direct the ld CIT(E ) to grant the registration to the assessee- trust provided, the assessee-trust fulfilled other conditions, as mentioned in section 12AB of the Income Tax Act, 1961 and Rule 17A of the Income Tax Rules, 1962. For statistical purposes, the appeal of the assessee is treated to be allowed. 12. In the result, the assessee’s appeal is allowed for statistical purposes, in above terms. Order pronounced in the open court on 05-07-2024 Sd/- Sd/- (DINESH MOHAN SINHA) (A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Dated: 05/07/2024 TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Rajkot 6. Guard file. By order/आदेश से, Assistant Registrar/Sr. P.S./P.S. ITAT, Rajkot