Tellicherry Minority Welfare Trust vs Commissioner of Income Tax

Dr. Manjula Chellur, C.J.—The appellant was the unsuccessful trust who failed in getting registration certificate u/s 12A of the income tax Act, 1961 (hereinafter referred to as "the Act"). An application came to be filed on July 21, 2008, for registration u/s 12A of the income tax Act which came to be rejected on January 15, 2009. According to the appellant, the said order was unsustainable; therefore, he preferred an appeal before the Appellate Tribunal. Aggrieved by the order of the Tribunal, the appellant is before us. The main contention of the appellant is, the authorities, while considering or processing the application for registration u/s 12A of the Act, are not entitled to examine the said application with reference to section 13(1)(b) of the income tax Act. Therefore, the reasoning for the orders of the Commissioner as well as the Tribunal is unsustainable. He also relies upon the following three decisions of various High Courts to substantiate his arguments. Fifth Generation Education Society Vs. Commissioner Income Tax, ; Commissioner of Income Tax Vs. Jodhpur Chartered Accountants Society, and an unreported judgment of the High Court of Punjab and Haryana at Chandigarh dated October 5, 2011, in I.T.A. Nos. 701 of 2010 and 189 of 2011 (since reported as Commissioner of Income Tax-II, Chandigarh Vs. M/s Surya Educational and Charitable Trust, ). Placing reliance on these decisions, the appellant-assessee contends, the Commissioner was not required to examine the application of income while processing the application for registration u/s 12A of the Act. Therefore, the order of the Commissioner as well as the Tribunal clearly indicates how they analysed the application of the assessee for registration u/s 12A which has led to the present erroneous order under challenge.

According to them, anticipating the expenditure with reference to a particular minority community, by referring to certain clauses in the trust, there was no justification to prejudge the issue. Even before computation of tax was undertaken by the authorities, the intention of the trust in question cannot be anticipated. It cannot be held that the intention is to help only one religious minority, therefore, hit u/s 13(1)(b) of the income tax Act.

As against this, the learned standing counsel submitting arguments for the Department, contends that the clauses and the words used in the entire document of the trust, especially, the name of the trust, restriction of beneficiaries at clause 9 of the trust deed clearly indicates that the intention of the trust is only to extend the benefits to a particular religious minority, therefore, there was justification in rejecting the application of the assessee.

He further contends, issuance of registration u/s 12A is mandatory, if anyone intends to seek exemption u/s 11 of the Act. Then section 13 refers to conditions which have to be looked into while granting exemption of tax u/s 11 of the Act. Therefore, unless the activities undertaken by the applicant indicate that the activities are meant for general public without reference to any particular religious group, no registration certificate could be issued. As the very rejection of application is with reference to clauses in the document, the appeal deserves to be dismissed.

We have gone through the order of Tribunal in detail. While referring to application of section 11 of the Act under what circumstances it extends to, they did refer to section 13(1)(b) in order to appreciate the justification of the applicant seeking registration u/s 12A. This is only with reference to whom the benefit was proposed to be extended. This is not with reference to computation of tax payable giving such exemption while computing the income. Therefore, there was no examination of income being undertaken by the authorities while analysing the facts. Therefore, the argument of the learned counsel for the appellant that except considering the application u/s 12A registration, the authorities were not required to examine the income never occurred in the present case, therefore, the said argument falls to ground.

Then coming to the next argument, whether there is any indication that the benefits arising out of charitable service rendered by the trust in question were intended only to a particular religious minority, both the authorities have gone through the clauses of trust in detail.

We have also gone through different clauses of trust and also nomenclature. In unmistakable words the heading of the document of the trust says Tellicherry Minority Welfare Trust. Though it is declared as a public charitable and minorities trust, clause 9 indicates, the beneficiaries are financially poor minorities and other backward classes in Tellicherry Municipality and its suburbs.

If the object of the trust was to help all backward classes as contended by appellant, we fail to understand why financially poor minority were included. If their intention were to extend the benefit to all poor minorities as indicated in the orders of the Tribunal, the minorities have to be with reference to minorities as declared by the Central Government. Though it refers to minorities, the trust does not further clarify whether it is religious minority, linguistic minority or cultural minority.

We are unable to understand what exactly is the object and aim of the trust in mentioning minorities and backward classes of the Tellicherry Municipality and its suburbs. In order to understand what exactly is the intention, the entire document on perusal does not indicate that it is with reference to any particular minority of religion, language or culture. Even now no material is brought on record which minority groups in the Tellicherry Municipality represent religion, language or culture. In the absence of such details by referring to minorities living in the Tellicherry Municipality and its suburbs, the real intention of using the word "minorities" in the trust deed, according to the authorities, with reference to a particular religious minority seems to be justified.

If the intention were to be otherwise, at least some of the clauses of the trust had to refer to such details. If it is a charitable and religious trust, especially in the case of charity, having regard to several restrictions u/s 13(1) of the Act (especially section 13(1)(b)) if the benefit is restricted to a particular religion or class, the exemption benefit will not be attracted. No doubt, once registration u/s 12A is secured, there is no automatic exemption of income and such exemption will be extended only with reference to the factual situation. In order to get exemption, they must comply with the conditions enumerated and the authorities must also verity whether the activities undertaken by the applicant is really meant for public at large or they are restricted to a particular group with reference to religion or caste. Unless this exercise is done, it would not be proper for the authorities to blindly grant registration u/s 12A to every other applicant. As long as section 12A registration is in existence, the assessee can claim the benefit. Without section 12A registration, even if the assessee were to spend money on charitable activities, they are not entitled for the benefit. Therefore, registration u/s 12A is like an entry document to secure exemption. Hence, registration is a relevant process which has to be carefully exercised by the authority concerned. It is always the Commissioner who process the applications for registration u/s 12A and it is not entrusted to any other officer below the rank of a Commissioner of income tax.

The observation of the authorities below with reference to the contents of the trust deed in question persuaded'' them to opine that the meaning and import of the word "apply", having regard to the denominational character of the trust on the holistic approach to conclude that the intention was not to extend the benefit to all minorities but to a particular religious minority. It is always open to the applicant-assessee to approach the authorities concerned after modifying the clauses in the trust clearly indicating that the charitable benefits are meant for all sections across the society and not a particular group. With these observations the appeal is disposed of.