Provisions of Section 13(1)(b) cannot be invoked to deny registration at the stage of Section 12AB.

The appellant is a religious trust registered with the Charity Commissioner on 04.05.2023

It was granted provisional registration under Section 12A(1)(ac)(iv) of the Income Tax Act, 1961, on 10.01.2024

Subsequently, the trust applied for final registration under Section 12AB on 13.01.2024

The Commissioner of Income Tax (Exemption) [CIT(E)] issued a show-cause notice seeking to cancel the provisional registration, citing Section 13(1)(b) of the Act, which denies exemptions to trusts created for the benefit of a particular religious community

The CIT(E) rejected the registration application, a decision upheld by the Income Tax Appellate Tribunal (ITAT) on 03.01.2025

1. Whether the Tribunal was right in holding that a religious trust is not entitled to registration due to specified violations under Section 12AB(4) read with Section 13(1)(b) of the Act.

2. Whether the appellant is entitled to registration once it is accepted that the objects are related to religious activities.

3. Whether the Tribunal erred in law by relying on Section 12AB(4) instead of considering the registration provisions under Section 12AB(1)(b).

The Court applied Section 12AB of the Income Tax Act, which outlines the procedure for registration, focusing on the satisfaction of the Commissioner regarding the genuineness of activities and compliance with other laws

It relied on the principle that the restrictive provisions of Section 13(1)(b)—which deny exemption to trusts benefiting specific communities—are relevant only at the stage of assessment of income and not at the stage of granting registration

The Court followed the precedents set in CIT (Exemption) v. Jamiatul Banaat Tankaria (2024) [p. 2, 8] and CIT v. Dawoodi Bohra Jamat (2014) [p. 8, 16], which establish that a trust with charitable objects for a particular community qualifies for registration under Section 12A/12AB.

The Court reasoned that under Section 12AB(1)(b), the Commissioner's inquiry is limited to the genuineness of the trust's activities and the objects of the trust

Investigating the application of funds or the specific beneficiaries under Section 13(1)(b) at the registration stage is premature

The Court found that the CIT(E) and the Tribunal erroneously invoked Section 12AB(4), which pertains to the cancellation of existing registrations for "specified violations," whereas the appellant’s case was a fresh application for final registration following a provisional one under Section 12AB(1)(b)

The Court noted that even if a trust is religious in nature or benefits a specific community, it cannot be denied registration if its activities are genuine; the question of whether its income is exempt will be determined by the Assessing Officer during the assessment year

It held that the provisions of Section 13(1)(b) cannot be used to deny registration under Section 12AB, as they are only applicable during the assessment stage

The impugned orders of the CIT(E) and the Tribunal were set aside, and the Court directed the grant of registration to the appellant trust. The appeal was allowed