Trust Created for Benefit of Particular Community or Religious Group is not ‘Charitable Trust’: ITAT Denies Tax Exemption [Read Order]

Tax Exemption

The Hyderabad bench of ITAT has denied the tax exemption of said concern and said that Trust created for benefit of a particular community or a religious group is not ‘Charitable Trust’.

In the consequential proceedings, the DIT (E) considered the issue and did not grant registration mainly on the reason that the trust is mainly for the prosperity of its members and for charitable and religious purposes. Since the object of running the said trust is meant for both purpose, the provision not permitted to grant the registration.

S. Rama Rao and P. Soma Sekhar Reddy appeared at the behest of Assessee and revenue respectively.

The bench including Judicial Member P. Madhavi Devi and Technical Member B. Ramakotaiah heard the contention Assessee that the Trust is having both charitable and religious projects and is for the general public and it is eligible for registration.

The bench before the said parties calls for the relevance of Section 11(1)(b) makes an exception for the mixed trust which is for partly religious and partly for other purposes, if they were created before the commencement of the Income Tax Act, 1961. There is no question regarding the commencement of the concern since the deed shows its running in the year of 1968.

Tribunal perused all the documents submitted by the trust and cited various case laws and the tribunal observed that “In the present case, the families of ‘SAMAJ’ cannot be considered as the section of general public and they are limited to the particular group and not for general public. The principles laid down in the above-said case for a particular group of police irrespective of their caste, creed or religious beliefs and are in general public employment are considered as public for the purpose of granting registration, whereas in the present case, the Members of the ‘SAMAJ’ has a single personal relationship either to the deity or to the ‘SAMAJ’ as can be seen from the clauses in the Trust Deed”.

The tribunal pressed the importance of law laid in the case of CIT Vs. Palghat Shadi Mahal Trust wherein Supreme Court held that there was no limitation in the Trust Deed in regard to which Muslims could avail the benefit of the Trust. The benefit was available to Muslims all over the world, none of whom except in Kerala were of backward classes. The Trust was not covered by Section 13(1)(b) and therefore held not entitled to exemption from tax.

Likewise, bench found no merits in the question raised by Assessee and dismissed their appeal.

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