TMI Blog2008 (3) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the trust and as such the finding of the ld CIT in the impugned order that the objects of the assessee are charitable in nature is not justified. The findings of the ld CIT to this extent are set aside. In view of our finding above that the assessee is a religious trust, the provisions of section 13(1)(b) are not applicable because the same are applicable in the case of trust being established for charitable purposes. The decisions in CIT v. Barkate Saifiyah Society [ 1993 (11) TMI 13 - GUJARAT HIGH COURT] and CIT v. Chandra Charitable Trust [ 2006 (7) TMI 96 - HIGH COURT , GUJARAT] by learned counsel for the assessee squarely apply to this case. The findings of the CIT that the provisions of section 13(1)(b) apply to the assessee-trust is therefore, set side. Applicability of section 13(1)(c) - HELD THAT:- In the case of Sarafa Association v. CIT [ 2006 (11) TMI 93 - HIGH COURT, MADHYA PRADESH] held that the CIT was required to examine the deed as a whole and consider the effect of various balance-sheets on record. The CIT should satisfy himself about the genuineness of the activities of the trust. In the absence of any specific finding in the impugned order w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 establish Madarsa and such organisation. (e) To assist/help to the needy people for religious activities. (f) To carry out all religious activities according to Shariat and direction of Shariat-e-Mohammediyah for the prosperity of the Dawoodi Bohra community. 6. The Commissioner of Income-tax examining the unaudited books of account for the financial year 2006-07 noted that the total expenditure incurred during the year is to the amount of Rs. 1,28,824. The expenses incurred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [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 submitted that in this case the objects of the trust was to promote Jainism or help and assist maintenance of temple, sadhus, sadhvis, shravikas and shravaks and other goals were also set in the trust deed. It was held by the hon'ble High Court as the trust is charitable as well as religious, the provisions of Section 13(1) (b) are not applicable. (v) Certain portion from the decision in the I. T. A. No. 219 to 222/ Ind/2007 and I. T. A. No. 155/Ind/2007 and 156/Ind/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 religious activities is covered under the object. 9. The assessee relied upon following decisions before the learned Commissioner of Income-tax: 1. Kalikamata Seva Mandal Trust 2. Dawoodi Bohra Jamat, Kawant 3. CIT v. Chandra Charitable. Trust [2007] 294 ITR 86 (Guj) and CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj); 4. Advocate-General of Bombay v. Yusuf Ali Ebrahim AIR 1921 Bom 338. 10. The learned Commissioner of Income-tax howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 trust besides giving salary to him therefore, the provisions of Section 13(1)(c) are clearly applicable and did not allow registration to the assessee trust on that count also. The Commissioner of Income-tax further noted that out of the total expenditure incurred to the amount of Rs. 1,28,824 under the various heads is mainly expenditure incurred on account of payments made to Amil on various accounts and only negligible amount has been incurred f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 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 such it is clear that all the objects are based on religious tenets according to the religious faith and the Quran. For the people believing in islamic faith, writings in Quran are the words of Allah which came out of mouth of the prophet Hazrat Mohd. Piagambar. The directions given in Quran are considered as orders from Allah and the people of islamic faith obey such orders as holy and religious and as such all the objects of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic 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 public religious trust. Section 2(4) of the M. P. Public Trusts Act, 1951, provides the meaning of public trust means an express or constructive trust for a public, religious or charitable purpose and includes a temple, a math, a mosque, a church, a waqf or any other religious or charitable endowment and a society formed for a religious or charitable purpose. The words religious purpose or public worship as found in enactments relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Dawat-e-Haidyah and for Dawoodi Bohras the path shown by the prophet is one indicated and shown by their living guide Dai-al-Mutlaq. Learned Counsel for the assessee submitted that the objects given in the registration under the M. P. Public Trusts Act were briefly the same as above elaborated in the application for registration which are in the interest of Bohra Samaj with regard to observing and solemnising the religious activities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1948-49 were assessable to tax under the Income-tax Act, 1922. The Tribunal held that the original purpose of the wakf was confined to the maintenance of the roza and the mosque and celebration of festive occasions, that all Muslims had unrestricted access to the roza and the mosque, and that therefore the wakf was established for a wholly religious purpose. On a reference to the High Court considered that the maintenance of madrassas a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 purely for charitable purposes and in that case the assessee-trust was charitable as well as religious in nature. Therefore, the question was answered in favour of the assessee and against the Revenue. Learned Counsel for the assessee also relied upon the decision of the hon'ble High Court of Gujarat in the case of CIT v. Chandra Charitable Trust [2007] 294 ITR 86, in which it was held if the objects of the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner 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 since Amil is a manager, payments made to him are covered by Section 13(1)(c) of the Act. The learned Departmental representative submitted that as per the trial balance, the receipts of the assessee were more than Rs. 50,000 therefore, the accounts should have been audited. He submitted that all the payments are made to Amil which have to be subjected to accountability of the expenses which the assessee has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed . . . (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of Sections 11 and 12 shall apply in relation to the income of such trust or institution from the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal 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 during the previous year used or applied, directly or indirectly for the benefit of any person referred to in Sub-section (3). 28. The Income-tax Appellate Tribunal, Delhi Bench in the case of Aggarwal Mitra Mandal Trust v. DIT (Exemption) [2007] 293 ITR (AT) 259 considering the identical question held (page 264): We have considered the rival submissions and also perused the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 ITD 477, the Commissioner of Income-tax under Section 12AA is empowered to satisfy himself only about the object of the trust and about the genuineness of the activities of the trust and such power does not extend to eligibility of the trust/institution for exemption under Section 11 read with Section 13 which falls within the domain of the Assessing Officer. To the similar effect is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the benefit of public at large. In this situation, if the registration applied for under Section 12A is not granted to it for violation of the provisions of Section 13(1)(b) and it is ultimately found that the assessee-trust actually accomplished the objects as indicated in clause No. 3(4) only for the benefit of public at large without there being any activity undertaken as per object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 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 assessee under Section 12A of the Income-tax Act, 1961, on the ground that the assessee could not be considered a lawful trust within the meaning of the term 'trust' used under Sections 11, 12 and 13 as it was created as a local authority within the meaning of 'person' for the purpose of the Act. The Tribunal held that there was no mention of either trust or inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 Section 2(15) of the Act were 'advancement of any other object of general public utility not involving the carrying on of any activity for profit'. By the Finance Act, 1983, with effect from April 1, 1984, the Legislature has omitted the words 'not involving the carrying on of any activity for profit' from Section 2(15) of the Act. Thus, after April 1, 1984 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely 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. Dhakad Samaj is not a backward class as it is not limited to Dhakad community, but includes persons from Brahmin, Jain, Maheshwari and Kirar communities and it is not a religious trust. It was held that Section 11 provides for this exemption only if the property held is for charitable or religious purpose. It is only when such a purpose is shown that registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts 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 the order of the Income-tax Appellate Tribunal, Ahmedabad Bench, dated March 10, 2006, holding that the assessee-trust is entitled to registration under Section 12A of the Act. A copy of the same is filed at page 39 of the paper book. 38. In view of the above finding, though it is not necessary to enquire into the finding given with regard to applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 of its objects or genuineness of the activities of the trust. In this view of the matter, we set aside the impugned order and direct the learned Commissioner of Income-tax, Ujjain, to grant registration to the assessee-trust under Section 12A/12AA of the Income-tax Act. 41. As a result, the appeal of the assessee-trust is allowed. 42. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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