Trust with broad public utility objects granted tax registration despite religious community focus

Case Name:** COMMISSIONER OF INCOME TAX (EXEMPTION) VS BAYATH KUTCHHI DASHA OSWAL JAIN MAHAJAN TRUST **Key Takeaways:** 1. A trust with diverse public utility objects can be granted registration even if some activities benefit a specific religious community. 2. The Commissioner should focus on the overall objects of the trust during registration, not just specific clauses. 3. Exemption under Section 13 is separate from registration and should be assessed by the Assessing Officer during assessment. **Issue:** Was the Income Tax Appellate Tribunal correct in allowing registration to the assessee trust, despite the Revenue's claim that it primarily benefited a particular religious community (Jain Community) and was thus hit by Section 13(1)(b) of the Income Tax Act? **Facts:** 1. The Bayath Kutchhi Dasha Oswal Jain Mahajan Trust applied for registration under Section 12A of the Income Tax Act, 1961. 2. The Commissioner initially refused registration, claiming the trust's objects and activities were not charitable and were confined to the Jain community. 3. The trust appealed to the Income Tax Appellate Tribunal, which allowed the appeal and granted registration. 4. The Revenue department appealed against the Tribunal's decision in the High Court. **Arguments:** Revenue's Argument: - The trust's objects and activities were confined to benefiting a specific religious community (Jain Community). - This made the trust ineligible for registration under Section 13(1)(b) of the Act. Trust's Argument: - The Commissioner's conclusion about the trust's objects being confined to a religious community was incorrect. - The trust had numerous objects benefiting the general public, not just the Jain community. **Key Legal Precedents:** 1. Shantagauri Ramniklal Trust & Ors. V/s. Commissioner of Income-tax and Anr., reported in (1999) 239 ITR 528 2. Commissioner of Income-Tax V/s. Leuva Patel Seva Samaj Trust (Tax Appeal No.59 of 2012) The Tribunal relied on these decisions to differentiate between registration requirements and exemption granting under Section 13 of the Act. **Judgement:** The High Court dismissed the Revenue's appeal, agreeing with the Tribunal's decision. Key points: 1. The Commissioner incorrectly focused on one clause (social activities) while ignoring numerous other objects benefiting the general public. 2. The trust's objects included education, medical help, rural development, and cultural activities, which were not confined to any specific community. 3. The court held that examining activities under Section 13 is the task of the Assessing Officer during assessment, not at the registration stage. 4. The court found no error in the Tribunal's decision to grant registration. **FAQs:** 1. Q: Does this mean any trust with some religious community-specific activities can get registered? A: Not necessarily. The court emphasized the importance of looking at all objects of the trust. In this case, the trust had numerous objects benefiting the general public. 2. Q: What's the difference between registration and exemption for trusts? A: Registration under Section 12A is about recognizing the trust's charitable status. Exemption under Section 13 deals with specific tax benefits and is assessed separately during the assessment process. 3. Q: Can the Revenue still challenge the trust's activities later? A: Yes, the Assessing Officer can examine the trust's activities during the assessment process to determine if they qualify for exemption under Section 13. 4. Q: What were some of the trust's objects that the court found significant? A: The trust's objects included education, medical help, rural development, literary and cultural activities, and general public welfare activities like running cow shelters and helping during calamities. 5. Q: Does this judgment set a precedent for similar cases? A: While each case is unique, this judgment emphasizes the importance of considering all objects of a trust during registration, rather than focusing on a single clause or community-specific activities.

1. The Revenue is in appeal against the judgment of the Income- Tax Appellate Tribunal dated 8.3.2016 raising following question for our consideration :

“(a) Whether the appellate Tribunal is correct in allowing registration to the assessee, disregarding the fact that the assessee trust is hit by section 13(1)(b) of the Act, as the trust is not created for the benefit of general public but is created for the benefit of a particular religious community i.e. ‘Jain Community?’

2. The respondent – assessee – trust had applied for registration in terms of Section 12A of the Income-Tax Act,1961 (for short ‘the Act’). The Commissioner by an order dated 31.9.2015 refused such registration on the ground that the objects as well as the activities of the trust are not charitable. He was prompted to take such a decision on the basis that the objects and activities of the trust were confined to certain religious community, namely, Kutchhi Dasha Oswal Jain of village Bayath. In his opinion, the activities of the trust were also confined mainly for the purpose of Jain Community.

3. The assessee challenged the order of Commissioner before the Tribunal. The Tribunal by the impugned judgment followed the decisions of this Court in case of Shantagauri Ramniklal Trust & Ors. V/s. Commissioner of Income-tax and Anr., reported in (1999) 239 ITR 528 and in case of Commissioner of Income-Tax V/s. Leuva Patel Seva Samaj Trust rendered in Tax Appeal No.59 of 2012 and allowed the appeal. The Tribunal was of the view that the Commissioner cannot mix the requirement of registration of a trust with that of granting exemption under Section 13 of the Act.

4. Learned counsel, Mrs.Mauna Bhatt for the department submitted that the Commissioner had correctly come to the conclusion that the objects and activities of the trust were confined for the benefit of a section of a religious community. In terms of the provisions contained in Section 13 of the Act therefore, such issue could have been examined even at the stage of granting or refusing registration by the Commissioner.

5. On the other hand, learned counsel, Mr.R.K.Patel for the assessee opposed the appeal contending that the Commissioner should at the objects and activities of the trust were confined for the benefit of religious community was incorrect. He drew our attention to the constitution of a trust and the objects specified therein.

6. As noted, in the present case the Commissioner referred to the social activities clause contained in the constitution of the trust to come to the conclusion that the objects of the trust were confined for the benefit of a religious community. We, however, notice that there were large number of other objects which were for the benefit of general public. Relevant portion of the constitution of the trust reads as under :

“4. Objects of Trust: Object of this institution will be as under:

1. Educational :

1. To do all activities related to Education or which encourages education

2. To establish, maintain and run Educational centres, infant schools, Primary Schools, Secondary Schools, High Secondary Schools, Colleges, to establish, maintain and run Hostels, training Centres and to help in such activities for creating awareness in the common people and to make the publicity of education.

3. To impart knowledge of Computer and latest technology.

4. To help or arrange for such help to students through Scholarships, subsidy, loan prize, stipend, etc. Page 3 of 8

5. To provide guidance and education for Technical, Vocational and other crafts professions.

2. Social activity :

1.To arrange such collective function and to be helpful in such activities which increases relationship, brotherhood, familyness, unity, love amongst the members.

2. To establish, administer and maintain Guest Houses, Bhojanalaya, Service (vaiyavachh), centres and other buildings for the benefit of members of the society.

3. To construct or to arrange for the construction of residential complexes for the members of the Samaj and to provide loan/financial help subject to the provisions of the rules of the trust.

3. Medical :

1. To do all activities of medical help, to establish, administer and maintain Dispensary, Hospital, Laboratory and other medical treatment centres and arrange camps and seminars.

2. To help patients in medical treatment by providing medicines, financial assistance and all other helps.

3. To make publicity of medical education and given Scholarships.

4. Rural Development : 1. To provide employment to the villagers and to do all activities of poverty elimination.

2. To make tree plantation, tree protection and provide energy, forestry and electricity.

3. To create water scheme units for providing water for agriculture and drinking and make storage of water through ponds, small dams and farm ponds, well etc.,

4. To take the any Government Scheme to villagers which make development of their area.

5. Literature & Culture :

1. To make efforts for the development and protection of Indian Culture

2. To do or help in such activities, which is socially prosperous for common people in the area of literature, culture, physical education, and in sports.

3. To give every help for encouragement of people who are interested and liking in culture and literature.

6. Others:

1. For development of institutions’ objects, make research, publicity and developmental works or to help any institution, person, doing such activity or with their help to plan Training Centres, camps, Lectures, meetings, gatherings and seminars and to print books and other literatures, publish it or exhibit.

2. To run Cow homes and do the activities of growth of cow.

3. To provide food, cloths, residence, financial help and other help to financially weak and needy persons.

4. During natural or manmade calamities, provide help to needy persons and domestic helpful animals and birds.

5. To do all activity of Jivdaya.

6. To do activities of service to human and animals over the objects mentioned above.”

7. It can thus be seen that the Commissioner focused his attention to clause 4.2 of the objects of the trust to come to the conclusion that the same were for the benefit of a certain religious communities only, in the process ignoring various other objects, for e.g. as per clause 4.1, the trust would engage itself in activities relating to education by maintaining and running education centers, infant schools, primary secondary and high schools, colleges etc., to run hostels, training centers for creating awareness in the common people and to make the education available for the public. It would also engage in imparting training in computers. As per clause 4.3, the trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise in clause 4.4 the trust could engage in rural development schemes. As per clause 4.5, the trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Clause 4.6 which pertains to other included activities such as running cow shelters, to provide food, cloth and financial help for economically weaker persons, to help during natural or other calamities, to serve humans and animals etc.

8. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community, is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Act, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record.

9. In the result, no question of law arises. The Tax Appeal is dismissed.

(AKIL KURESHI, J.)

(A.J. SHASTRI, J.)