2014 (12) TMI 250 - AT - Income Tax

Refusal to grant registration u/s 12A Activities not commenced Whether the Trust or institution should have been established either for religious or charitable purpose and it cannot have mixed objects - Held that - As decided in assessee s own case for the earlier assessment year on the earlier occasion DIT(E) had rejected assessee s application solely for the reason that assessee has not commenced its activities - DIT(E) never raised any issue with regard to mixed objects of the appellant trust it was clearly mentioned that prima-facie objects of the appellant trust were of charitable nature - DIT(E) has found a new reason to deny registration to assessee by stating that as per section 11(1)(a) of the Act a Trust or institution should have been established either for religious or charitable purpose and it cannot have mixed objects DIT(E) accepts the fact that objects of the trust are charitable in nature - relying upon Commissioner of Income Tax Versus M/s. Dawoodi Bohara Jamat 2014 (3) TMI 652 - SUPREME COURT wherein it has been held that in certain cases activities of the trust may contain elements of both religious and charitable and thus both the purposes may be overlapping - when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community or also public at large. A trust/institution having charitable and religious objects will be eligible for exemption u/s 11 unless hit by restrictions imposed u/s 13(1)(a) or 13(1)(b) of the Act - DIT(E) has not brought any material on record to show that provisions of section 13(1)(a) or 13(1)(b) applies to the assessee denial of registration u/s 12AA for alleged violation of section 11(1)(a) is not justified - applicability of section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by DIT(E) while exercising power u/s 12AA of the Act thus the order of the DIT(E) is set aside and direct him to grant registration to the appellant trust u/s 12AA of the Act Decided in favour of assessee.

Summary

Issues Involved:
1. Rejection of registration under section 12A of the Income Tax Act.
2. Examination of the charitable and religious nature of the trust's objectives.
3. Applicability of section 11(1)(a) concerning mixed objects of charitable and religious nature.
4. Interpretation of section 13(1)(a) and 13(1)(b) regarding the eligibility for exemption under section 11.

Detailed Analysis:

1. Rejection of Registration under Section 12A:
The appellant, a charitable trust, applied for registration under section 12A of the Income Tax Act. The DIT(E) initially rejected the application on the grounds that the trust had not commenced its activities. The matter was remitted back to the DIT(E) by the ITAT with directions to examine the aims and objects of the trust for charitable purposes.

2. Examination of Charitable and Religious Nature of the Trust's Objectives:
Upon re-examination, the DIT(E) found that some objects of the trust were of a religious nature and concluded that the trust had mixed objects, both charitable and religious. The DIT(E) issued a show cause notice to the trust, which responded by clarifying that the religious objects were ancillary to the main charitable objectives and were for the benefit of all communities.

3. Applicability of Section 11(1)(a) Concerning Mixed Objects:
The DIT(E) held that under section 11(1)(a), a trust must be established either for charitable or religious purposes, not both. The ITAT disagreed, stating that the objects of the trust were for the benefit of the general public and not confined to any particular religion or community. The ITAT emphasized that the primary purpose of the trust was charitable, and any religious activities were incidental to the main charitable purpose.

4. Interpretation of Section 13(1)(a) and 13(1)(b) Regarding Eligibility for Exemption:
The ITAT referred to the Supreme Court's judgment in CIT Vs. Dawoodi Bohara Jamat, which held that a trust with mixed charitable and religious objects could claim exemption under section 11, provided it did not benefit any specific religious community. The ITAT concluded that the trust's objects were for the benefit of the general public and did not violate sections 13(1)(a) or 13(1)(b). The ITAT directed the DIT(E) to grant registration under section 12AA, as the denial based on mixed objects was not justified.

Conclusion:
The ITAT set aside the order of the DIT(E) and directed the grant of registration to the appellant trust under section 12AA, allowing the appeal of the assessee. The judgment emphasized that a trust with mixed charitable and religious objects could still be eligible for exemption under section 11, provided it did not exclusively benefit a particular religious community.