CIT(E) Rejected 12AB Registration by Relying on S.13(1)(b): ITAT Restores 12AB Registration Application for fresh adjudication [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) restored the matter to the Commissioner of Income Tax (Exemption) [CIT(E)] for fresh adjudication after ruling that the rejection of 12AB registration by invoking Section 13(1)(b) only at the time of assessment and not at time of grant of registration. 

Shree Nishkalank Mahadev Koliyak (assessee), a trust engaged in religious and charitable activities, had filed an application seeking registration under Section 12AB of the Income Tax Act, 1961.

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The CIT(E) rejected the application on three primary grounds which were (i) the trust's objectives allegedly benefited the Mahant and his family, (ii) incomplete documentation submitted by the assessee, and (iii) expenditures related to the Gaushala were deemed inconsistent with the stated objects of the trust.

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Aggrieved by the order of CIT(E), the assessee filed an appeal before the Tribunal. The counsel for the assessee argued that the Mahant and his family were temple employees, and any related expenditure aligned with the trust's objectives.

The Counsel contended that Section 13(1)(b), which deals with exclusion of income from charitable purposes when it benefits a specific religious community or caste, could only be invoked during assessment proceedings but not at the registration stage.

The two-member bench comprising Dr. B.R.R. Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) observed that the provisions of section 13(1)(b) can be invoked only at time of assessment but not at the time of registration.

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The tribunal relied on several precedents including Bargahe Husaini Trust, Jamiatul Banaat Tankaria, and the Gujarat High Court’s ruling in Bayath Kutchhi Dasha Oswal Jain Mahajan Trust. The tribunal observed that in all these cases the courts had reiterated that Section 13(1)(b) is applicable only during assessment, not at the time of granting registration under Section 12A/12AB.

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The tribunal set aside the order and remanded the matter to the file of CIT(E) for de-novo consideration. The CIT(E) was directed to adjudicate on the merits of the trust’s activities and not deny registration solely on the grounds cited in the original rejection.

The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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