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TMI Blog2008 (3) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of expenditure. Therefore, the decision in the case of I. T. A. No. 615/Ind/07 was requested to be followed in the remaining appeals. 3. We have heard the learned representatives of the parties and have gone through the material available on record. 4. Considering the submissions of the parties and the common issues involved in all the appeals and that the parties mainly argued in I. T. A. No. 615/Ind/07 we propose to decide this appeal as under. 5. The facts of the case are that the assessee-trust filed an application for registration under Section 12A/12AA of the Act before the learned Commissioner of Income-tax, Ujjain. The objects of the trust (English translation by the assessee) as per the trust deed are as under: (a) To arrange for Nyaz and Majlis (lunch and dinner) on religious occasion of birth anniversary and Urs Mubarak of Awliya e Quiram (SA) and Saints of Dawoodji Bohra community. (b) To arrange for lunch and dinner on religious occasions and auspicious days of Dawoodi Bohra community. (c) For the betterment of Dawoodi Bohra community to give and take Qardati Hasana according to Farma of Qurane Majid. (d) To arrange for religious education and to establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust and on dissolution of the trust, what will happen to the properties of the trust. 8. The assessee-trust vide letters dated August 13, 2007 and August 27, 2007 filed written submissions before the Commissioner of Income-tax which were summarised by the learned Commissioner of Income-tax as under: (i) All the objects of the trust are religious in nature. (ii) As per the decision of the hon'ble High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj) the provisions of Section 13(1)(b) is not applicable if the trust is both religious and charitable. The provisions of Section 13(1)(b) are only applicable in cases where the trust is purely charitable in nature. (iii) Reliance has been placed on the decision in the case of Dawoodi Bohra Jamat, Kawant by the hon'ble Income-tax Appellate Tribunal, Ahmedabad in I. T. A. No. 2610/Ahd/2005. It has been submitted that in this case the hon'ble Income-tax Appellate Tribunal has held that the registration is allowable to this trust. (iv) Reliance has been placed on the decision in the case of CIT v. Chandra Charitable Trust [2007] 294 ITR 86 (Guj) : [2006] 206 CTR 418. It had been submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elements charity as well as religious" (e) Therefore, the reliance placed on the judgment in the case of Advocate-General of Bombay v. Yusuf Ali Ebrahim AIR 1921 Bom 338 is not correct. (f) In the case of Kalika Mata Seva Mandal Trust while rejecting the application under Section 80G(5), it has been held that the expenses for celebrating navaratri and dance performance given for celebrating it is religious in nature. (vi) The najwa paid to representative of his Holiness Dai-al-Mut-laq, donation to Shia Dawoodi Bohra Jamat, Jobat and travelling expenses are as per the objects of the trust-deed which are religious in nature. The najwa (offerings) given to representative of his holiness Dai-al-Mutlaq is in accordance with the directions of Quran. This is according to the age old traditional religious practice and custom and, therefore, cannot be covered under the provisions of Section 13(1)(c) of the Income-tax Act. The donation made to Shia Dawoodi Bohra Jamat, Jobat is a donation to another wakf which has similar objects as of the applicant-trust. Request application for change in the name is enclosed. Travelling expenditure of Dai-al-multaq on different occasion on various r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that a trust having the object of establishing institutions for educational, social, economic advancement of Muslims and for religious and charitable objects recognised by Muslims attracts the provisions of Section 13(1)(b) of the Income-tax Act. Since trust is created for a particular religious community hence Section 13(1)(b) is applicable. The learned Commissioner of Income-tax also observed that even if the trust is created whose objects are both charitable and religious in nature for a particular religious community, the provisions of Section 13(1)(b) of the Act are applicable and also if it is established for a particular religious community, it cannot be said that the trust has been created for public at large. The contention of the assessee was rejected that even if the objects of the trust are both religious and charitable, the provisions of Section 13(1)(b) are not applicable. The contention of the assessee that the trust is created for public at large was also rejected. 13. The learned Commissioner of Income-tax also noted that the assessee trust has given gifts and incurred various types of expenditure for Amil on various occasions who is the manager of the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to page 11 onwards and submitted that all the objects of the assessee trust are taken from Holy Quran and as such the same are religious in nature. He submitted that the words used in the objects are clearly religious. Learned Counsel for the assessee also demonstrated that to arrange for Nyaz and Majlis (lunch and dinner) on the religious occasion of birth anniversary and Urs Mubarak of Awliya-e-Qiram (SA) and Saints of Dawoodi Bohra community are referred in pages of Holy Quran written by A. Yusuf Ali and M. M. Pickthall and referred to the pages of Holy Quran in support of his contention. Similarly, for other objects of the assessee-society, learned Counsel for the assessee referred to pages of Quran written by the aforesaid author and submitted that all the objects of the assessee are taken from Holy Quran and as such the same are solely religious in nature with regard to Dawoodi Bohra community. Therefore, the findings of the Commissioner of Income-tax that the objects are charitable in nature and are for a particular community is incorrect. Learned Counsel for the assessee submitted that all the objects of the trust specifically refer to the religion or Quran and as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itual well being. Learned Counsel for the assessee submitted that public religious trusts are created for particular religion only and as such the learned Commissioner of Income-tax was not justified in rejecting the registration application of the trust on that reason. Learned Counsel for the assessee submitted that since all the objects of the assessee-trust referred to religion or coming from the Holy Quran therefore, the assessee is a public religious trust and as such the findings of the learned Commissioner of Income-tax are incorrect treating it to be charitable in nature for a particular community. 16. On the other hand, the learned Departmental representative relied upon the order of the Commissioner of Income-tax and submitted that the objects of the assessee-trust are charitable in nature and as such created for the direct or indirect benefit of a particular religious community, i.e., Dawoodi Bohra community. Therefore, the Commissioner of Income-tax was justified in rejecting the application of the assessee. 17. Considering the submissions of the parties, we do find force in the submissions of learned Counsel for the assessee in contending that the assessee is a publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohras, true path shown by the Prophet is the one indicated and shown by their living guide Dai-al-Mutlaq of the time who is the living and visible guide for Dawoodi Bohras. It is an undisputed fact that for the people believing in Islam, writings in Quran are words of Allah for them. The directions given in the Holy Quran are considered by the people of Islamic faith as orders from Allah and the people of Islamic faith obey such orders as holy and religious. Learned Counsel for the assessee has been able to demonstrate that all the objects of the assessee-trust, as noted above, came out from the writings in Quran and as such these are the orders for them while observing Islamic faith. The learned Departmental representative referred to the registration granted to the assessee-trust under the M. P. Public Trusts Act and referred to the objects of the trust mentioned therein which are not from the objects of the trust as mentioned in the application for registration. Learned Counsel for the assessee however objected to the submission of the learned Departmental representative because in registration certificate the objects of the trust were briefly mentioned to follow directions of " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot utilised for the personal benefit of the Murids, but for the years 1942-43 to 1956-57 a part of the surplus was utilised for running madrassas and a library and giving food to pilgrims attending the roza and the mosque on festive occasions. Some of the Murids who had contributed to the cost of the construction of certain rooms in the roza were entitled to reside in those rooms when they came there. The Murids were also entitled to the dates from certain date trees in the premises of the roza. The roza and the mosque were recognised as a wakf in the revenue records. The minutes of a meeting of the Murids held on October 15, 1888, indicated that until then the general body of the Murids managed the properties. Resolutions were passed at that meeting appointing a managing committee and laying down certain rules for the management and administration of the properties. The committee had been claiming that the wakf was not public but ultimately, upon the application of the committee, the wakf was registered on April 29, 1955, as a public trust under the Bombay Public Trusts Act, 1950. The question was whether the income of the roza properties for the assessment years 1944-45 to 1948 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t following the directions from the Holy Quran on the religious occasions, religious education and religious activities for Dawoodi Bohra community, had been, organising various activities in pursuance with the objects of the trust and as such the decision cited by the Commissioner of Income-tax is clearly distinguishable on facts. 20. On consideration of the rival submissions and the material on record, we are of the view that the objects of the assessee-trust are solely religious in nature and as such the finding of the learned Commissioner of Income-tax in the impugned order that the objects of the assessee are charitable in nature is not justified. The findings of the learned Commissioner of Income-tax to this extent are set aside. 21. Learned counsel for the assessee further submitted that since the assessee trust is a public religious trust, the provisions of Section 13(1)(b) of the Act are not attracted. Learned Counsel for the assessee in support of his contention relied upon the decision of the hon'ble High Court of Gujarat in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 in which it was held that Section 13(1)(b) applies only to the trust which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that the case laws relied upon by the Commissioner of Income-tax in rejecting the application of the assessee are clearly distinguishable because the same are not applicable to the registration matter under Section 12A/12AA of the Act. Learned Counsel for the assessee further submitted that Amil is a priest and salary is given to him who did all the religious activities and rites of the assessee and the Commissioner of Income-tax has not pointed out if any unreasonable payment is made to him. Learned Counsel for the assessee further submitted that all the payments are made for religious purposes and have been properly accounted for and as per Section 13(2)(c) the trust or the institution could pay the reasonable amount for the services offered by the persons referred to in Clause (c) of Section 13(2) of the Act and in this case the learned Commissioner of Income-tax has not made out any such case of making unreasonable payment to Amil. 25. On the other hand, the learned Departmental representative relied upon the order of the learned Commissioner of Income-tax and submitted that Section 13(1)(c) applies to manager or any other person whatever name may be called and si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons ; (ii) from the first day of the financial year in which the application is made, if the Commissioner is not so satisfied ; Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007 ; (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under Section 12AA ; (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below Sub-section (2) of Section 288 and the person in receipt of the income furnishes along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 27. Section 13(1)(b) and (c) of the Income-tax Act provides: 13(1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- ... (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste ; (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof: (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or institution (whenever created or established) is dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gious and charitable purposes. To the similar effect is another decision of the hon'ble Allahabad High Court in the case of CIT v. Pt. Ram Shanker Misra Trust [1996] 222 ITR 252 wherein it was held that expenditure incurred by a trust for the benefit of one community is an expenditure incurred on a public charitable object. The proposition propounded by the hon'ble Supreme Court as well as by the hon'ble Allahabad High Court in the aforesaid judgments clearly shows that the objects of the assessee-trust as indicated in object clause Nos. 3(1) and 3(2) of its trust deed were of charitable nature and since the powers of the Commissioner of Income-tax/DIT (Exemption) conferred under Section 12AA were confined to satisfy himself about the genuineness of the activities of the trust as well as nature of its object being charitable, we are of the view that he was not justified in refusing to grant registration to the assessee-trust under Section 12A merely on the ground that the said objects were violative of the provisions of Section 13(1) (b). As held by the Lucknow Bench of the Income-tax Appellate Tribunal in the case of St. Don Bosco Educational Society v. CIT [2004] 90 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 13 can be applied or invoked in a given case. It also shows that the said provisions can be applied or invoked only at the time of computation of total income of the previous year of the person who is claiming exemption under Section 11 or Section 12. Both these situations contemplated in Section 13 can arise only and only if registration under Section 12A is granted to the said person. If the same is not granted and the person is refused the registration under Section 12A, he would not be entitled to claim any benefit available under Section 11 or 12 and there will be no occasion to the Assessing Officer to invoke or apply Section 13 in his case. This position would not only be contrary to the scheme of the Act as laid down in Sections 11, 12, 12A, 12AA and 13 but the same may also cause prejudice/hardship to the persons in certain cases. For instance, the objects for which the assessee-trust in the present case is established, as indicated in object clauses No. 3(1) and 3(2), no doubt are for the benefits of a particular community, viz., vaish. Nevertheless, as per object clause 3(4), it was also established to run schools, colleges, hospitals etc. for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not a sine qua non to examine the application aspect of income.-New Life in Christ Evangelistic Association v. CIT [2000] 246 ITR 532 (Mad) and Asst. CIT v. Peare Lal Sharma Memorial Trust Society [2001] 70 TTJ (Delhi) 197 : [2001] 77 ITD 50 relied on. 30. The hon'ble High Court of Madhya Pradesh in the case of Sarafa Association v. CIT [2007] 294 ITR 262 held that the Commissioner was required to examine the deed as a whole and consider the effect of various balance-sheets on record. The Commissioner should satisfy himself about the genuineness of the activities of the trust. 31. The hon'ble High Court of Gujarat in the case of CIT v. Gujarat Maritime Board [2007] 289 ITR 139 (headnote of 289 ITR): The assessee, a statutory body created by the Gujarat Maritime Board Act, 1981, was engaged in the activities of development and maintenance of ports in the State of Gujarat. The Commissioner refused registration of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see under Section 12A with effect from April 1, 2002. On appeal: Held, dismissing the appeal, that the Tribunal after detailed discussion held that under the requirement of Section 12A the assessee was a charitable institution and was entitled to the benefit of Section 12A with effect from April 1, 2002. There was no infirmity in the order of the Tribunal. 32. The hon'ble High Court of Bombay in the case of CIT v. Agricultural Produce and Market Committee [2007] 291 ITR 419 held (headnote of 291 ITR): The dominant object of market committees is to regulate procurement and supply of agricultural and other produce and to meet the expenses required to be met in achieving the said object, the Legislature has empowered then to levy cess/fees. Moreover, the surplus remaining in the market fund is ploughed back for carrying out the objects of the 1963 Act. Thus, the surplus remaining in the market fund is neither distributed nor accumulated as profits. In these circumstances, it cannot be said that the market committees are established with profit motive so as to deny registration under Section 12A/12AA of the Income-tax Act, 1961. Prior to April 1, 1984, the words used in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve however relied upon the following decisions: 1. CIT v. Shri Maheshwari Agrawal Marwari Panchayat [1982] 136 ITR 556 (MP) in which the assessee was registered under Section 12A of the Income-tax Act and the Income-tax Officer at the assessment stage held that the assessee could not claim exemption in view of Section 13(1)(b) of the Act. In this case ultimately it was held that the Tribunal was correct in law in holding that the assessee is entitled to the benefit of exemption under Section 11 of the Income-tax Act for its entire income. 2. The decision of the hon'ble High Court of Madhya Pradesh in the case of Shri Dhakad Samaj Dharamshala Bhawan Trust v. CIT [2008] 302 ITR 321 in which, it was held in the absence of any nexus with the religious or charitable purpose being shown, the assessee trust is not eligible for registration under Section 12A in respect of Dharamashala at religious place for stay of members of a particular Samaj and also for non-members, in this case the learned Commissioner of Income-tax refused registration to the trust under Section 12A mainly on the reasons that the object of the trust is to establish Dharamshala only for members of Dhakad Samaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed exemption under Section 11 of the Income-tax Act which was denied by the Assessing Officer and the Tribunal came to the conclusion that the trust was entitled to exemption by virtue of the provisions of the second Explanation to Section 13 of the Income-tax Act. The High Court upheld the finding. The hon'ble Supreme Court held that the trust attracts the provisions of Section 13(1)(b) and as such not entitled to exemption under Section 11 of the Income-tax Act. Learned Counsel for the assessee is therefore, justified in contending that the issue of registration under Section 12A/12AA was not in issue in these cases. Therefore, the same cannot be applied at this stage in rejecting the claim of the assessee for grant of registration. 37. We may also mention that the assessee in the paper book at page 36 has filed a copy of the order of the Commissioner of Income-tax-III, Baroda, in the case of Dawoodi Bohra Jamat, Kawant, in which registration was refused by the Commissioner of Income-tax having the same objects of the trust as of the assessee. However the Commissioner of Income-tax vide order dated September 4, 2006 granted registration to the assessee trust by following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not form part of the total income when the same was applied to its objects and purpose. Similarly, as per Section 14 of the M.P. Public Trusts Act, the previous sanction of the Registrar is required in case of sales etc. of property belonging to a public trust. As per Section 27(2)(d) of the same Act, the court can provide scheme of management of the trust property. Likewise, the safeguard is provided by empowering the Assessing Officer in this regard in the second proviso to Section 11(3A) of the Income-tax Act. These are the sufficient safeguards provided under the Income-tax Act as well as under the M. P. Public Trusts Act therefore even though the learned Commissioner of Income-tax did not decide these issues but her apprehension in the show-cause notice was misconceived. 40. In view of the above findings, we are of the view that the assessee is a public religious trust and that the action of the Commissioner of Income-tax in refusing to grant registration to the assessee-trust on the ground of violation of the provisions, of Section 13(1)(b) and 13(1)(c) of the Act is not justified especially when the learned Commissioner of Income-tax had not doubted either the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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