2014 (3) TMI 652 - SC - Income Tax

Claim of benefit of exemption u/s 11 and 12 r.w.s. 13 of the Act – Public religious trust – Whether the Courts were justified in coming to the conclusion that the respondent- trust is a public religious trust and is outside the purview of Section 13(1)(b) and eligible for exemption under Section 11 of the Act – Held that:- Determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact - It is but a question which requires examination of legal effects of the proven facts and documents, that is, the legal implication of the objects of the respondent-trust as contained in the trust deed - It is only the objects of a trust as declared in the trust deed which would govern its right of exemption u/s 11 or 12 – thus, the High Court has erred in refusing to interfere with the observations of the Tribunal in respect of the character of the trust.

The objects of the trust exhibit the dual tenor of religious and charitable purposes and activities - Section 11 of the Act shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of Section 13 - The activities of the trust under such objects would therefore are entitled to exemption accordingly.

Whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under Section 11 of the Act in view of provisions of Section 13(1)(b) of the Act – Held that:- The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious community or caste - it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large.

Relying upon Sole Trustee, Loka Shikshana Trust v. CIT [1975 (8) TMI 1 - SUPREME Court] - The objects of the respondent-trust are based on religious tenets under Quran according to religious faith of Islam - the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community - The objects do not channel the benefits to any community if not the Dawoodi Bohra Community and thus, would not fall under the provisions of Section 13(1)(b) of the Act – thus, the respondent-trust is a charitable and religious trust which does not benefit any specific religious community - it cannot be held that Section 13(1)(b) of the Act would be attracted to the respondent-trusts and it would be eligible to claim exemption under Section 11 of the Act – Decided against Revenue.