Section 13(1)(b) applies only to trusts which are purely for charitable purposes

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Section 13(1)(b) applies only to trusts which are purely for charitable purposes

 

SHIYA DAWOODI BOHRA JAMAT vs. COMMISSIONER OF INCOME TAX

ITAT, ITAT, AHMEDABAD ‘C’ BENCH

G.D. Agarwal, Vice President & Mukul Kumar Shrawat, J.M.

ITA No. 2767/Ahd/2009

8th July, 2011

(2011) 30 CCH 0361 AhdTrib

(2011) 133 ITD 0271

Legislation Referred to

Section 12AA, 13(1)(a), 13(1)(b)

Case pertains to

Asst. Year -,

Decision in favour of:

Assessee

Trusts—Religious trust—Registration under s. 12AA—Assessee religious trust was denied registration for alleged violation of the s. 13(1)(a)/13(1)(b)—Sec. 13(1)(b) applies only to trusts which were purely for charitable purposes and the assessee-trust was charitable as well as religious in nature and the assessee was entitled to exemption under s. 11

Held:

It is evident that the s. 13(1)(b) is applicable for a trust which is established for charitable purpose. Therefore, s. 13(1)(b) is not applicable for religious trust.

(Para 7)

Even if a trust is for charitable as well as religious purpose, s. 13(1)(b) would not be applicable. Admittedly, the assessee trust is a religious trust, therefore s. 13(1)(b) would not be applicable. In view of the above, in the case of the assessee, neither s. 13(1)(a) would be applicable nor s. 13(1)(b). No other reasons is given for refusing the registration to the assessee-trust except application of s. 13(1)(a)/13(1)(b). Since it was already held that s. 13(1)(a) and s. 13(1)(b) both are not applicable in the assessee’s case, the CIT, Baroda is directed to grant registration to the assessee-trust.—CIT vs. Barkate Saifiyah Society (1995) 213 ITR 492 (Guj), Dawoodi Bohra Jamat vs. CIT (2010) 123 ITD 452 (Ind) and CIT vs. Dawoodi Bohara Jamat (2009) 226 CTR (MP) 291 : (2009) 26 DTR (MP) 289: (2009) 317 ITR 342 (MP) followed.

(Para 8)

Conclusion:

Assessee trust being a religious trust, s. 13(1)(a) as well as 13(1)(b) would not be applicable and denial of registration under s. 12AA for alleged violation of s. 13(1)(a)/13(1)(b) was not justified.

In favour of:

Assessee

Case referred to

Ahmedabad Rana Caste Association vs. CIT (1971) 82 ITR 704 (SC)

Dawoodi Bohra Masjid & Kabrastan (ITA No. 1915/Ahd/2006)

Counsel appeared:

M.K. Patel, for the Appellant : G.S. Suryavanshi, for the Respondent

ORDER

G.D. AGARWAL, VICE PRESIDENT :

ORDER

This is assessee’s appeal against the order of the learned CIT-III, Baroda dt. 24th Aug., 2009.

  1. The ground raised in this appeal by the assessee is against the refusal of the registration of the Trust by the CIT under s. 12AA of the IT Act, 1961.
  2. At the time of hearing before us, it is stated by the learned counsel that the CIT has rejected the registration of the trust only on the ground that the assessee trust is not for the benefit of general public within the meaning of s. 13(1)(a)/13(1)(b) of the Act. He has stated that the assessee is a religious trust for the benefit of a community known as Shiya Dawoodi Bohra. That the Hon’ble apex Court has considered the identical issue in the case of Ahmedabad Rana Caste Association vs. CIT (1971) 82 ITR 704 (SC) and has held that a trust for the benefit of Ahmedabad Rana Caste Community is a trust for a general public utility. He has stated that the ratio of the above decision would be squarely applicable to the case of the assessee. He also relied upon the decision of the Hon’ble jurisdictional High Court in the case of CIT vs. Barkate Saifiyah Society (1995) 213 ITR 492 (Guj) and stated that s. 13(l)(b) would not be applicable to the religious trust. He further stated that identical issue is considered by the Tribunal, Indore Bench in the case of Dawoodi Bohra Jamat vs. CIT (2010) 123 ITD 452 (Ind) and Tribunal Indore Bench granted registration under s. 12AA to the trust for Dawoodi Bohra Community. He has stated that the object of the assessee-trust and Dawoodi Bohra Jamat’s case (supra) are identical. The above decision of the Indore Bench is upheld by the Madhya Pradesh High Court in the case of CIT vs. Dawoodi Bohara Jamat (2009) 226 CTR (MP) 291 : (2009) 26 DTR (MP) 289: (2009) 317 ITR 342 (MP). He also stated that similar issue is also decided by the Tribunal, Ahmedabad ‘D’ Bench in the case of Dawoodi Bohra Masjid & Kabrastan (ITA No. 1915/Ahd/2006). He therefore submitted that the CIT should be directed to allow registration to the trust.
  3. The learned Departmental Representative, on the other hand, relied upon the order of the CIT-III, Baroda and stated that the assessee is not entitled to registration because it has violated provisions of s. 13(1)(a)/13(1)(b) of the Act.
  4. We have carefully considered arguments of both the sides and perused the material placed before. From the perusal of the orders of the authorities below, it is evident that the main reason for refusal of the registration is the alleged violation of the s. 13(1)(a)/13(1)(b) of the Act. That s. 13(1)(a) reads as under :
  5. Sec. 11 not to apply in certain cases.—(1) Nothing contained in s. 11 or s. 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;

From the above, it is evident that s. 13(1)(a) is applicable for a private religious trust which does not enure for the benefit of the public. We find that the Hon’ble apex Court has considered similar issue in the case of Ahmedabad Rana Caste Association (supra). In that case their Lordships held as under :

“that between the members of the Rana Caste or Community of Ahmedabad and those who had to get admitted to that community according to custom and usage there was a common quality which united them, namely, of being members of the Rana caste or community. The mere fact that a person of the Rana community who was not an original native of Ahmedabad had to prove his credentials according to the custom and usage of that community to get admitted into that community did not introduce a personal element which would detract from the impersonal nature of the common quality.

It is well-settled that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of the community sought to be benefited must be sufficiently definite and identifiable by some common quality of a public or impersonal nature.”

From the above, it is evident that though the above decision was with regard to examining whether for the purpose of exemption under s. 11(1)(a), the Ahmedabad Rana Association is a eligible because the benefits were available to a particular religious community i.e., Ahmedabad Rana Caste Association. Their Lordships accepted the assessee’s claim and held that if an object is for the benefit to a section of the public, it is an object of general public utility. The section of public is distinguished from a specified individual. In our opinion, the ratio of the above decision would be applicable while interpreting the words “private religious trust” which does not enure for the benefit of the public. In the case of the assessee-trust, the benefit of the trust is available to all persons of Dawoodi Bohra Community, therefore the benefit is available to a section of a public and not to some specified individuals. As the Hon’ble apex Court has held that benefit to a section of the society is sufficient to allow exemption under s. 11, therefore, in our opinion, when the benefit is available to entire community i.e., Shiya Dawoodi Bohra, it cannot be said that the trust is for private religious purpose. We find that similar view is taken by the Tribunal Indore Bench in the case of Dawoodi Bohra Jamat (supra) which is upheld by the Hon’ble Madhya Pradesh High Court in the case of Dawoodi Bohra Jamat (supra).

  1. That s. 13(1)(b) reads as under :
  2. Sec. 11 not to apply in certain cases.—(1) Nothing contained in s. 11 or s. 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof—

(a) …………. ……….

(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;

  1. From the above, it is evident that the s. 13(1)(b) is applicable for a trust which is established for charitable purpose. Therefore, s. 13(1)(b) is not applicable for religious trust. This issue is considered by the Hon’ble jurisdictional High Court in the case of Barkate Saifiyah Society (supra) wherein their Lordships held as under :

“that the Tribunal had rightly held that s. 13(1)(b) applies only to trusts which were purely for charitable purposes and the assessee-trust was charitable as well as religious in nature and the assessee was entitled to exemption under s. 11 of the Act.”

  1. Similar view is taken by Hon’ble Madhya Pradesh High Court in the case of Dawoodi Bohra Jamat (supra) wherein their Lordships held as under :

“That s. 13(l)(b) is attracted in the case of income of the trust for charitable purpose of a community or caste, which was not the case here. Thus, the Tribunal rightly decided the issue of applicability of s. 13(1)(b) holding that since the assessee was a religious trust, the provisions of s. 13(l)(b) were not applicable because they were applicable in the case of the trust established for charitable purposes.”

From the above, it is evident that Their Lordships of Hon’ble Gujarat High Court as well as Madhya Pradesh High Court have held that s. 13(1)(b) would be applicable only to the trusts which is purely for charitable purpose. Even if a trust is for charitable as well as religious purpose, s. 13(1)(b) would not be applicable. Admittedly, the assessee trust is a religious trust, therefore s. 13(1)(b) would not be applicable. In view of the above, we hold that in the case of the assessee, neither s. 13(1)(a) would be applicable nor s. 13(1)(b). No other reasons is given for refusing the registration to the assessee-trust except application of s. 13(1)(a)/13(1)(b) of the Act. Since we have already held that s. 13(1)(a) and s. 13(1)(b) both are not applicable in the assessee’s case, we direct the CIT, Baroda to grant registration to the assessee-trust.

  1. In result, the assessee’s appeal is allowed.

 

 

 

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