CIT(E) Cannot Refuse Trust Registration by Speculating Potential Benefits to Specified Individuals | ITAT

Case Details: Jito Bhavnagar Chapter Foundation vs. CIT (Exemption), Ahmedabad - [2024] 167 taxmann.com 646 (Ahmedabad - Trib.)

Judiciary and Counsel Details

• Ms Suchitra Kamble, Judicial Member & Makarand V. Mahadeokar, Accountant Member
• M.S. Chhajed, AR for the Appellant.
• Prithviraj Meena, CIT-DR for the Respondent.

Facts of the Case

Assessee, a company registered under section 8 of the Companies Act 2013, was provisionally registered under section 12A. Later, while examining the application for registration, the CIT(E) noted that the assessee was operating as a welfare association for its members, collecting fees from members under various wings. He concluded that the assessee was not functioning as a public charity but as a service provider for its members.

Accordingly, the application for registration was rejected, and provisional registration was cancelled.

ITAT Held

The Ahmedabad Tribunal held that the CIT(E) order was flawed in its interpretation of the assessee’s objects and in the premature invocation of sections 13(1)(c) and 13(3). The provisions of section 13 should not be invoked at the registration stage.

The CIT(E) should confine his examination to the charitable objects and not speculate about potential benefits to members unless and until actual instances of such benefits arise, which can only be verified during the assessment.

Registration under section 12A is primarily concerned with whether the objects of the trust are charitable and whether it genuinely intends to carry out charitable activities. The issue of whether any benefits to specified persons occur is to be examined when the income is applied, not when the trust seeks registration. The applicability of section 13 should only be examined during assessment and not at the registration stage under section 12A.

List of Cases Reviewed

• Anjuman E Nusratul Muslimin Tankaria v. CIT(E) [2024] 162 taxmann.com 42 (Ahd- Trib)
• Bargahe Husaini Trust v. CIT(E) [2024] 165 taxmann.com 141 (Ahd-Trib),
• CIT(E) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199 (Guj), (Para 6.1) followed.

List of Cases Referred to

• CIT v. Truck Operators Association [2011] 9 taxmann.com 267/198 Taxman 196/[2010] 328 ITR 636 (Punjab & Haryana) (para 2.1),
• Anjuman E Nusratul Muslimin Tankaria v. CIT (Exemptions) [2024] 162 taxmann.com 42/206 ITD 781 (Ahmedabad – Trib.) (para 6.1),
• Bargahe Husaini Trust-Monpar v. CIT (Exemption) [2024] 165 taxmann.com 141/208 ITD 158 (Ahmedabad – Trib.) (para 6.1)
• CIT (Exemptions) v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199/243 Taxman 60 (Gujarat) (para 6.1).