Top Stories ITAT Grants Registration u/s 12AB, Clarifying That S.13(1)(b) Applies Only at the Assessment Stage [Read Order] The tribunal found that the CIT (E) misapprehended this principle, as charitable trusts benefiting specific communities still qualified for registration By Sneha Sukumaran Mullakkal – On October 23, 2024 2:36 pm – 2 mins read

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)granted registration under section 12AB of the Income Tax Act,1961 clarifying that section 13(1)(b) of the Act applies only at the assessment stage for determining exemption under section 11, not during the registration process. Shree Dandhavya Chhasath,the appellant-assessee, had filed an application on 31.03.2022,for registration under section 12AB of the Act in Form No. 10AB. The application declared aims and objectives primarily focused on educational, social, and economic welfare activities. The Commissioner of Income Tax(Exemption)[CIT(E)] rejected the registration after multiple notices, stating that the Trust’s objects were limited to the “Chhasath Prajapati Community,” violating section 13(1)(b) of the Act, which disallows exemptions for trusts benefiting a specific community. The assessee also failed to provide requested details. Get a Copy of Handbook To Income Tax Rules, Click here The Authorised Representative (AR) of the assessee asserted that the Trust’s aims were charitable and not limited to the “Chhasath Prajapati Community.” The AR highlighted the Trust’s goals, including educational activities, scholarships, hostels, social initiatives like group marriages, and efforts for social reform and government benefits for its members.

The Departmental Representative (DR) argued that the CIT (E) correctly rejected the registration application due to incomplete details from the assessee, suggesting this reflected poorly on the Trust’s activities. The AR countered that all required documents were uploaded online and that the CIT did not specify any missing documents and cited the Supreme Court’s judgment in CIT vs. Dawoodi Bohara Jamat, which clarified that section 13(1)(b) applies at the exemption stage, not during registration, and referenced the Co-ordinate Bench’s decision in Jamiatul Banaat Tankaria vs. CIT (Exemption), which overturned a similar rejection. Get a Copy of Handbook To Income Tax Rules, Click here The tribunal carefully considered the submissions of both the DR and AR, along with the material on record, including the CIT(E)’s order.

The CIT(E)had rejected the registration application under section 12AB, citing that the Trust’s objects benefited a particular community and invoked section 13(1)(b) of the Act. However, the bench noted that the Supreme Court in CIT vs. Dawoodi Bohara Jamat held that section 13(1)(b) applies only during assessment for exemption under section 11, not at the registration stage under section 12AB. The tribunal found that the CIT (E) misapprehended this principle, as charitable trusts benefiting specific communities still qualified for registration. The Tribunal also noted that the AR claimed all required documents were uploaded, and the CIT(E)did not specify any deficiencies.

Get a Copy of Handbook To Income Tax Rules, Click here The two member bench comprising Suchitra Kamble(Judicial Member) and Makarand V.Mahadeokar(Accountant Member) upon reviewing the Trust’s objectives, determined that its activities, including scholarships and social reform, served the public at large and were not limited to a particular community. Consequently, the tribunal held that the CIT (E) erred in rejecting the application for registration under section 12AB and directed that the registration be granted. Thus, the appeal of the assessee was allowed