Case Law:

Dhatri Foundation vs. CIT

Appeal No.:

ITA No. 252/VIZ/2020

Date of Order:

24-03-2021

Order pronounced by:

ITAT Vishakhapatnam

In Favour of:

Assessee

Ground-1:

While filing Form 10A online, the assessee has applied for registration u/s 12A of the Income Tax Act as a “charitable” trust whereas the objects of the trust included religious objects also. Registration u/s 12A is granted only to any trust/ society only if it is created wholly for a charitable purpose or wholly for religious purpose, but not for both. On this basis, registration u/s 12A was denied to the assessee.

Ground-2:

Further, the assessee society was formed in the year 2015 but the activities carried out by it are either meager or nil. Hence, the CIT(Exemption) was of the opinion that it is premature to grant registration u/s 12A to the assessee.

Ground-1:

The Tribunal referred to the decision of ITAT Hyderabad in the case of Rehoboth Mission vs. DIT (Exemption) [(2010) 29 CCH 443- Hyd.-Trib.: 2010] wherein it was held as under:

We have gone through the provisions of section 13(1)(b) of the Act. There is nothing in the language of this provision to suggest that an institution of mixed objects is precluded from getting registration u/s 12AA of the Act.

Ruling:

The observations & conclusions of CIT(Exemption) are having no strength of law. There is no bar for grant of registration to the Trust/ Institution which is having mixed activities i.e. charitable and religious in nature.

The Tribunal also placed reliance on the judgment of ACIT vs. Barkate Saifiyah Society (1995) 213 ITR 492 (Guj): 1995 TaxPub (DT) 0203 (Guj-HC) and CIT vs. Chandra Charitable Trust (2007) 294 AITR 86 (Guj): 2007 TaxPub (DT) 0451 (Guj-HC):

It was held that a trust can either be for religious purposes or for charitable purposes or it can be for both. Only a trust which is for religious purposes is excluded and debarred from registration u/s 12AA of the Act. A trust whose object is charitable as well as religious is not debarred from registration.

Also Referred the decision of Hon’ble jurisdictional High court in the case of CIT v. Social Service Centre [(2001) 250 ITR 39 (AP): 2001 TaxPub (DT) 1111 (AP-HC)] while considering the issue qua mixed activities held as under: -

“Once an exemption is granted for charitable activities, the religious activities are also included. The Supreme Court has held that, if the primary or dominant purpose of an institution was charitable, any other object which by itself might not be charitable but was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. This principle had been laid down by the Supreme Court in CIT vs. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC) reiterated in CIT vs. Bar Council of Maharashtra (1981) 22 CTR (SC) 106. Considering these judgments, we are of the view that the Tribunal was right. Therefore, this appeal is dismissed.”

Ground-2:

The Ld. Commissioner held that the charitable activities carried out by the assessee are either meager or nil, therefore the question arises as to whether carrying out the activities before applying and grant of registration u/s 12 of the Act is a mandatory and/ or essential requirement.

Ruling:

• On the basis of these observations, there is no bar as held and observed by the Ld. CIT(Exemptions) that the charitable activities carried out by the assessee are either meager or nil, hence, it is premature to grant registration under section 12A to the assessee.
• In our considered view, 2^nd ground of rejection is also contrary to law as the law has not specified any earmark as such observed by the Ld. CIT(Exemption) for grant of registration u/s 12A of the Act.
• Registration can be sought at the nascent stage and/ or after carrying out any activities. Hence, we are unable to sustain the 2^nd ground of rejection as well.

The Tribunal observed that in the case of Ananda Social and Educational Trust vs. CIT & Anr. (Civil Appeal No. (S). 5437-5438/2012 decided on 19-2-2020), it was held as under:

• Section 12 of the Act provides for the registration of a trust. Such registration can be applied for by a trust which has been in existence for some time and also by a newly registered trust.
• There is no stipulation that the trust should have already been in existence and should have undertaken any activities before making the application for registration.
• Section 12AA pertains to the registration of the Trust and not to assess what a trust has actually done, we are of the view that the term activities in the provision include proposed activities.