Registration under Section 12AB cannot be rejected solely due to Trust's focus on a specific community as Section 13(1)(b) applies only at the assessment stage: ITAT

Citation- Dandhavya Chhasath Prajapati Samaj v. Commissioner of Income-tax (Exemption)

ITAT- Ahmedabad

ITA No: 505 (AHD) OF 2022

Assessment Year: 2022-23

Date of Order- October 16, 2024

Brief Facts:

• The assessee trust applied for registration under Section 12AB, to seek exemption under Section 11 and 12 of the Income Tax Act

• The trust’s objectives were primarily educational, social, and economic welfare activities

• The CIT (Exemption) rejected the application, citing that the trust’s activities were limited to the “Chhasath Prajapati Community,” thereby invoking section 13(1)(b), which restricts exemption for trusts benefiting a specific community

• The trust appealed this rejection, arguing that the charitable activities broadly served the public and not just a specific community

Observations of the Tribunal:

The Tribunal observed as follows-

1. The assessee submitted all required documents online as per the notices, and no specific deficiency was pointed out by the Commissioner (Exemption).

   
   

2. Upon examining the objectives, the Tribunal found that the trust engaged in general public-benefit activities, including scholarships, hostel facilities, and social reform programs, extending beyond a single community.

   
   

3. The Tribunal clarified that section 13(1)(b), which restricts benefits for trusts serving a particular community, is relevant at the assessment stage when deciding exemption under section 11, not at the registration stage under section 12AB.

Hence, the Tribunal held that the rejection of the registration application was erroneous, and the Commissioner (Exemption) was directed to grant the registration.

[Editorial note: Using of income for the benefit of any particular religious community is also a ground for cancelling registration under section 12AB – see section 12AB(4), Explanation (d)]