Trust promoting Jain Community entitled to registration if it was also working for benefit of general public

Facts:

a) The assessee-trust applied for registration in terms of section 12A.

b) The Commissioner refused such registration on the ground that the objects and activities of the trust were not charitable and were mainly for the purposes of a Jain Community and, therefore, provisions of section 13(1)(b) were attracted.

c) On appeal, the Tribunal was of the view that the Commissioner could not mix the requirements of registration of a trust with that of granting exemption under section 13.

The High Court held as under:

1) It was seen that, the Commissioner focused his attention on particular clauses 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., the trust would engage itself in activities relating to education by maintaining and running education centers, run hostels, training centers for creating awareness in the common people and to make the education available to the public.

2) It would also engage in imparting training in computers. 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 the trust could engage in rural development schemes.

Society providing training in travel and tourism is entitled to sec. 11 exemption

Facts:

a) The assessee was a society registered under section 12A. It provided various courses, including certificate course in Travel & Tourism' which was being conducted in collaboration with Miranda House, University of Delhi.

b) The AO held that courses conducted by assessee did not have any recognition from Govt. and activities carried on by assessee would fall outside purview of 'charitable purpose' as given under section 2(15). Consequently, assessee was not entitled to exemption under sections 11 and 12.

c) The CIT(A) reversed order of the AO. Aggrieved-revenue filed the instant appeal. The Tribunal held in favour of assessee as under:

1) For certificate course of Travel & Tourism the course content was set by Miranda House, education and training was provided by the appellant, examination paper was set out by appellant, examination was conducted by appellant and the Diploma Certificate was awarded by both Miranda House and the appellant to the successful candidates/students.

No disallowance under sections 40(a)(ia) and 43B if assessee-trust was enjoying exemption under section 11

Issue

Whether disallowance under sections 40(a)(ia) and 43B could be made in a case of trust enjoying exemption under section 11 of the Income-tax Act (‘Act’)?

The tribunal held as under-

1)    Sections 11, 12 and13 deal with income from property held for charitable or religious purposes and the mode of computation of income subject to certain conditions. Accordingly, income of any charitable trust or society is exempt from tax, if such conditions are fulfilled.

2)    Sections 40(a)(ia) and 43B fall under Chapter IV-D of the Act. The said Chapter deals with computation of profits and gains from business or profession. The profits and gains from business or profession are computed under section 28. Section 29 provides the manner of computation of income under the head "profits and gains of business or profession", which states that the income referred to in section 28 shall be computed in accordance with the provisions of sections28 to 43D.

Institute providing coaching to students appearing for competitive exams is eligible for sec. 10(23C) relief

A coaching institute imparting coaching to students for various competitive examinations is eligible for exemption under section 10(23C)(iiiad)

Facts:

a)The assessee-society was registered under section 12A with the object of providing coaching and training to students appearing in competitive examinations.

b)It claimed exemption under Section 10(23C)(iiiad) which was rejected by the Assessing Officer ('AO').

c)The AO opined that assessee-society could not be classified as a charitable institution as it was not created for imparting a systematic education.

d)On appeal, the CIT (A) held that the activities of the assessee were covered under the realm of 'education' and it was eligible for exemption under section 10(23C)(iiiad). The aggrieved-revenue filed the instant appeal before Tribunal

The Tribunal held in thefavour of assessee as under:

1)On examination of the definition of 'charitable purpose' under section 2(15), it is clear that education is one of the activities coming within the meaning of charitable purpose. It is a fact that the Supreme Court in case of Sole Trustee, LokaShikshana Trust v. CIT (1975) 101 ITR 234 observed that 'education' as used in section 2(15) could not be interpreted in a manner to mean that the expression 'education' envisaged under section 2(15) had to be given a restricted meaning and would only mean the education as imparted in schools and colleges.

2)If education was considered to mean training and developing the skill, knowledge, mind and character of students, then the activity of the assessee could be termed to be coming within the expression 'education' as used in section 2(15).

3)The provision contained under section 10(23C)(iiiad) uses the words 'Any University or other Educational Institution' solely for educational purpose and not for the purpose of profit. Thus, if the activities of the assessee' society had to be considered, it would be considered as other educational institution existing solely for educational purpose and without profit motive.

4)Thus, the coaching institute providing coaching to students appearing for competitive exams would be eligible for exemption under section 10(23C)(iiiad). - ADIT V. HYDERABAD STUDY CIRCLE - (2015) 55 taxmann.com 379 (Hyderabad - Trib.)

CIT can’t consider violation of provisions of sec. 13 while granting registration to a trust

Provisions of section 13 couldn't be applied to deny registration to a trust or an Institution under section 12A - It shall be applied to decide deduction to be allowable to a trust or an Institution while completing assessment proceedings.

Facts:

a) In the instant case, one of the objects of the trust was limited to the benefit of Jain community;

b) The CIT contended that trust had violated provisions of section 13(1)(b) since benefits of sections 11 and 12 could not be extended to the charitable trust or institution which was established for the benefit of any specific religious community. Hence, he denied registration to trust under section 12A.

Issue:

• The issue that arose for consideration before the Tribunal was:

• "Whether the CIT has erred in denying the trust registration under Section 12A holding that the object clause of the Trust Deed is specifically for the benefit of the Jain Community which is a specific religious community and hence attracts the provisions of sec.13(1)(b)?"

The Tribunal Held in favour of assessee as under:

1)In order to avail of the deduction under sections 11 and 12 of the Act, the trust or institution has to make an application for registration under section 12AA of the Act;

2)The CIT after satisfying himself about the objects of the trust or Institution and about the genuineness of its activities, had to pass an order in writing granting or refusing the registration;

3)The Assessing Officer had to consider non-fulfillment of the conditions laid down in section 13(1)(b) during assessment procedure while allowing deduction under sections 11 and 12 to the trust or Institution;

4)Therefore, the CIT was not authorized to consider violation by the trust or Institution on account of provisions of section 13(1)(b) while granting it registration under section 12A-Kul Foundation v. CIT[2015] 54 taxmann.com 143 (Pune - Trib.)

Imparting of training in seminary was 'education'; assessee was entitled to registration as a trust

Where assessee was imparting training to students in 'Seminary', training programme undertaken by assessee was also education and, therefore, it was entitled to registration under section 12A.

Facts:

a)The assessee was imparting training to students in 'Seminary'. In the return of income, it claimed exemption under section 10(23C)(iiiad). The Assessing Officer disallowed the claim of exemption.
b)On appeal, the assessee contended that it was entitled to registration under section 12A, as the training imparted in the 'Seminary' amounted to education, therefore, it had to be treated as trust running educational institution.

c)The CIT(A) opined that the training programme undertaken by the assessee could not be treated as an educational programme in order to give it status of an educational institution. On second appeal, the Tribunal held that the assessee was an educational institution.

On appeal, the High Court held as under:

It was a settled position by virtue of a judgment of the Kerala High Court rendered in the case of CIT v. St. Mary's Malankara Seminary [2012] 206 Taxman 429 that imparting training to students in 'Seminary' was also education. In the light of settled position, one needed not to ponder much over the issue or the controversy regarding the registration under section 12A to be given to the assessee. - CIT V. ST. MARY'S MALANKARA SEMINARY [2014] 48 taxmann.com 387 (Kerala)

Editor’s Comments:

In case of St. Mary’s Malankara (Supra), the question that arose for consideration of the High Court was whether assessee engaged in 'Seminary' teaching for priesthood was an educational institution entitled to exemption from tax under section 10(23C )(iiiad)?.

The High Court held that the term 'education' should enjoy a wide connotation covering all kinds of coaching and training carried on in a systematic manner leading to personality development of an individual. In the case of seminary, students on completion of their studies were made priests who headed the churches as religious leaders. The religious teaching in the seminary was also an education and, therefore, an 'educational institution' entitled to exemption under section 10(23C )(iiiad).

Gymkhana Club providing sports and other facilities only to its members could not be treated as a charitable trust

Where assessee-club was involved in providing sports activities accompanied by facilities like liquor bar, playing cards, restaurant, marriage hall, catering services, etc. to a certain group of persons, i.e., members of club, activities of assessee-club would not fall in definition of charitable purpose.

Facts:

a)The assessee-trust, claiming to be a charitable trust, filed its return of income declaring total income at nil. The Assessing Officer (‘AO’) noticed that, though the assessee-trust had been granted registration under section 12A, yet, the activities of the assessee-trust were not charitable activities.

b)He, therefore, held that the assessee was not entitled to exemption under section 11. He, accordingly, taxed the assessee's receipts. On appeal, the CIT(A) observed that the assessee-trust had been conferred the benefit of exemption under section 11 up to assessment year 2008-09.

c)The sports and other activities carried out by the assessee-trust would partake the character of general public utility which term was included in the definition of charitable purpose as defined under section 2(15). He, therefore, held that the assessee-trust was eligible for exemption under section 11. The aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of revenue as under:

1)The assessee had been involved in providing sports and recreational facilities to its members only. The AO had given a categorical finding that, though the membership of the club was open to public yet it had been restricted in many ways. Even the membership was offered on payment of very high premium.

2)High class premium services, such as facility of liquor bar, playing cards, restaurant, marriage hall, catering services, etc., were provided to the members, which could not be said to constitute any charitable activity.

3)Members who constituted high class, influential and rich persons could obtain services, that too on payment of high premium. However, the assessee-trust was also offering the facility of sports to its members that by itself could not partake the character of charitable activity.

4)It was not the case of the assessee-trust that such sports activities had resulted into any benefit to the public at large or any section of the society. The sports activities accompanied by facilities like liquor bar, playing cards, restaurant, marriage hall, catering services, etc., were limited to a certain group of persons.

5)There was no element of charity involved in such activities rather the activities of the club were meant for leisure and pleasure of the members of the club and the membership had been restricted to certain individuals. Thus, there was no infirmity in the order of the AO in holding that the activities of the assessee-trust would not fall in the definition of charitable purpose as defined under section 2(15). – ADIT(E) V. NAVI MUMBAI MERCHANTS GYMKHANA [2014] 47 taxmann.com 53 (Mumbai - Trib.)

No registration to a trust if its financing activities weren’t carried out for furtherance of its objects

Principal activities of metropolitan development authority were to be ascertained before denying it registration under section 12A on account of financing and rental activities.

Facts:

a)The assessee, a city metropolitan development authority under section 12, was established under a State Act, viz., MMRD Act. The assessee was claiming exemption under section 11.

b)It earned interest on sums lent to various organizations and lease rental of its property. The DIT(E) cancelled/withdraws its registration under Sec. 12A on the ground that activities carried out by it were commercial in nature.

c)The aggrieved-assessee filed the instant appeal.

The Tribunal held as under:

1)There was no finding that interest and rent receipts were integral to the assessee's functioning or its principal objects, so as to be considered as arising on account of activities necessary for the furtherance of the objects of assessee.

2)There ought to have been some principal activities for financing and rental activities to be considered as necessary and incidental thereto. The physical and/or functional correlation between the two would decide this aspect of the matter.

3)Such a finding was necessary to satisfy conditions stipulated under section 12AA(3). Thus, as the issue of applicability of section 12AA(3) in the instant case being factually indeterminate, the case was to be restored to the DIT(E) for passing a speaking order in accordance with law. - MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY V. DIT(E) [2014] 45 taxmann.com 354 (Mumbai - Trib.)

No IT relief to trust if its business receipts exceeded threshold; yet its registration couldn't be revoked

Where gross receipts of a charitable institution from its business exceeds prescribed limit, it will not be entitled for exemption or other admissible tax benefits for relevant year only; however its registration as charitable institution will continue.

Facts:

a)  The assessee, a textile promotion council, was registered as a charitable trust. Its activities were falling under the category of 'advancement of any other objects of general public utility' as per definition of 'charitable purpose' given under section 2(15);

b)  The Director (Exemption) had cancelled the registration of assessee as he noticed that the assessee was carrying out activities in the nature of trade, commerce or business, etc., and its gross receipts therefrom were in excess of prescribed limit.

c)  The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)  Merely because income of a registered charitable trust from ancillary activities of business crosses prescribed limit, that by itself cannot be a ground for cancellation of its registration invoking section 12AA(3);

2)  If income arising out of the activities is not in accordance with the objects of the trust, the assessee may not get the exemption under section 11.

3)  Thus, for the previous year, during which the gross receipt of income of trust crossed the prescribed limit, it would not get exemption or benefit of its being charitable in nature despite its charitable activities;

4)  Therefore, the impugned order of the Director (Exemptions) was to be set aside and the registration granted to assessee under section 12A was to be restored.- Cotton Textiles Exports Promotion Council v. DIT (Exemption) [2014] 44 taxmann.com 168 (Mumbai - Trib.)

Trust can work for charity with life-long members; registration can't be revoked on ground of perpetual members

The High Court held as under:

1)  The object of Section 12AA is to examine the genuineness of the objects of the Trust and though while examining genuineness, the income as well as resources of the Trust may be taken into consideration but any suspicion as to these facts cannot be the sole criteria for rejecting an application under Section 12A;

2)  Merely because a trustee was a life-long member of a trust, same could not itself raise an inference that trust was not charitable. Therefore, Tribunal was justified in directing registration of assessee as charitable trust. – CIT v. Baba Kartar Singh Dukki Educational Trust [2014] 42 taxmann.com 17 (Punjab & Haryana)