Section 13's applicability is restricted to assessment stages, not registration, leading to the trust's re-evaluation.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned Senior Standing Counsel Ms. Maithili Mehta for the appellant.

2. This Appeal is filed under Section 260A of the Income Tax, 1961 (for short ‘the Act’)proposing the following substantial questions of law arising out of order dated 30.4.2024 passed by the Income Tax Appellate Tribunal, “C” Bench, Ahmedabad (For short ‘The Tribunal’) in ITA No.667/Ahd/2023:

“(i) Whether on the facts and in the circumstances of the case and law, Hon'ble Tribunal has erred while interpreting the decision of Hon'ble Supreme Court in the case of Dawoodi BoharaJamat 43 Taxmann.com 243 in holding that section 13(1)(b) could not be applied for denying the grant of registration under section 12AB of Income Tax Act, 1961 despite the fact that the assessee trust is not created for the benefit of general public and many of its object clauses are for the benefit of a particular religious community?

(ii)Whether on the fact and in the circumstances of the case and law, Hon'ble tribunal has erred in ignoring the recent amendments in Act wherein a new procedure for registration under section 12AB of Income Tax Act, 1961 has been inserted & whereby as per clause (d) of explanation to sub section (4) of section 12AB of Income Tax Act, application of income for the benefit of any particular religious community has been listed as a specific violation for cancellation of registration of trust.”

3. The brief facts of the case are as under:

3.1 The respondent assessee filed an application for grant of registration of the Trust under Section 12AB of the Act on 21.12.2022 in Form No. 10AB.

3.2 The CIT (Exemption), Ahmedabad rejected the application filed by the respondent assessee by order dated 28.6.2023 on the ground that the objects of the Trust are restricted to the benefit of a particular religious community or caste i.e. “Leuva Patel Community”.

3.3 Being aggrieved, the respondent assessee preferred an appeal before the Tribunal and contended that it is a settled law that as per Section 13 (1)(b) of the Act, though benefit of provisions of Sections 11 and 12 of the Act are not available to the income of the Trust, if such Trust or institution is created or established for the benefit of any particular religious, community or caste, however, the provision of Section 13 would be applicable at the assessment stage and the CIT (Exemption) could not have rejected the application for registration of the Trust.

4. In support of the submission, reliance was placed on the decision of this Court in case of CIT, Rajkot-II v. Leuva Patel Seva Samaj Trust, reported in 42 taxmann.com 181 (Gujarat), wherein it is held that the question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant only when income of the trust is assessed in terms of Section 11, however, at the time of disposing of application of a trust seeking registration, Commissioner has to merely decide whether said trust has fulfilled necessary requirements of registration as provided under Section 12A of the Act or not. This Court further observed that “Leuva Patel Community” consists mainly of agriculturists and, therefore, such community cannot be dubbed as a “religious community”.

4.1 The Tribunal, following the decision of this Court in the aforesaid case as well as decision of Hon’ble Apex Court in case of CIT v. Dawoodi Bohara Jamat , reported in 43 taxmann.com 243 (SC), remanded the matter back to CIT (Exemption) 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 the order rejecting the application filed by the assessee Trust.

5. This Court in case of CIT, Rajko