CIT(E)'s Order Set Aside: ITAT Remands Matter to AO for Re-examination in Light of Landmark Judgments [Read Order]

In a significant development, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has set aside the decision of the Commissioner of Income Tax (Exemption) (CIT(E)) rejecting the registration application of the Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Trust under section 12A of the Income Tax Act, 1961.

The ITAT has directed the CIT(E) to reconsider the matter in light of several landmark judgments related to the interpretation of Section 13(1)(b) of the Act.

The case concerns the Trust’s application for registration under Section 12A, which was rejected by the CIT(E) on the grounds that the Trust’s activities, while charitable, were primarily for the benefit of a particular religious community (Hindu). According to the CIT(E), this violated Section 13(1)(b), which denies tax exemptions to charitable organizations created for the benefit of a particular religious community or caste.

Law and Procedure for Filing of Appeals

The Trust had sought registration in August 2023, but the CIT(E) concluded that the Trust's objects were restrictive, focused solely on benefiting Hindus.

The Trust had defended its application by asserting that it was a public charitable trust, serving the public at large without any sectarian intent. However, the CIT(E) found the Trust's objects to be aligned with religious and community-based welfare rather than benefiting the broader public, citing the statutory provision that disqualifies such organizations from receiving exemptions.

The legal representatives for the Trust, during the appeal before the ITAT, pointed out that the CIT(E) had failed to consider critical Supreme Court rulings that clarify the interpretation of Section 13(1)(b), particularly the judgments in Shastri Yagnapurush Dasji v. Muldas Bhudardas Vaishya and CIT (Exemption) v. Jamiatul Banaat Tankaria , which could potentially alter the application of this provision in the present case.

The ITAT Bench of Dr.BRR Kumar(Judicial Member) and Suchitra Kamble(Accountant Member), after examining the facts and the arguments presented, found that the CIT(E) had overlooked these crucial rulings. The bench directed the CIT(E) to pass a fresh order, taking into account these judgments that clarify the scope of religious and charitable activities under the Act. The case was remanded for a re-examination of the Trust’s objectives, considering whether the Trust’s activities truly serve the public at large, rather than just a specific religious group.

In conclusion, the ITAT’s decision marks a crucial step in interpreting the tax laws for charitable and religious trusts, ensuring that the registration process under Section 12A aligns with established legal precedents.

The Trust's appeal was allowed for statistical purposes, with the matter to be revisited by the CIT(E) in accordance with the directions issued by the ITAT.

To Read the full text of the Order CLICK HERE

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