TMI Blog2012 (4) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... quent years. In other words, the section would continue to apply, and the approval valid, for the years for which the said limit is not exceeded – Decided partly in favor of assessee for statistical purposes. - IT Appeal NO. 1107 (JP) of 2011 - - - Dated:- 23-3-2012 - R.K. GUPTA, SANJAY ARORA, JJ. ORDER Sanjay Arora, Accountant Member This is an Appeal by the Assessee, arising out of the Order by the Commissioner of Income-tax, Kota ('CIT for short) dated 03-11-2011, withdrawing the exemption u/s. 80G(5) of the Income-tax Act, 1961 ('the Act' for short). 2. It would be relevant to recount the back-ground facts of the case. The assessee is a charitable institution constituted as a Trust vide trust deed dated 31-08-1998, registered u/s. 12A of the Act (vide order dated 10-05-1999 w.e.f. 10-03-1999), as also granted approval u/s. 80G(5) of the Act. The said approval, granted periodically, was, as per latest order valid up to 31-03-2010. Accordingly, the assessee applied for renewal of the approval on 19-03-2010 (vide application in the prescribed form dated 16-03-2010), which stood denied by the ld. CIT, being the competent authority for the purpose under the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes exemption u/ss. 11 12 - a pre-requisite for the grant of approval u/s. 80G(5) - to any trust or institution created or established after the commencement of the Act where it is so for the benefit of a particular religious community or caste, would not stand attracted in the instant case. The said activity must thus be regarded as only charitable, being for and toward the advancement of an object of general public utility, even as held in the case of CIT v. Social Service Centre [2001] 250 ITR 39 (AP). Further on, even where regarded as of a religious nature, the same is limited to one year, i.e., financial year 2007-08. As such, the denial of approval or sanction u/s. 80G, which would operate in future as well, is neither reasonable nor just. 3.2 The ld. CIT-DR, on the other hand, would submit that the issue is not of application or otherwise of section 13(1)(b), but of the assessee-trust being ousted u/s. 80G(2)(a)(iv). This is as section 80G(5)(vi) read with Explanation 3 to the section, clearly excludes a trust or institution engaged in a charitable purpose, the whole or substantially the whole of which is of a religious nature, by defining the word 'charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent. of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. Explanation 1 Explanation 3 .-- In this section, "charitable purpose" does not include any purpose the whole or substantially the whole of which is of a religious nature.' 4.2 The assessee's challenge to the impugned order resting on it disputing the classification or understanding of its activity in organizing 'Shrimad Bhagwat Katha' as of a religious nature, we may, therefore, address this aspect of the matter first. In CIT v. Upper Ganges Sugar Mils Ltd. [1997] 227 ITR 578 (SC), the issue was whether in view of the object clause 2 (h) of the applicant-trust, reading as under, the approval u/s. 80G stood rightly denied it to or not: '2( h ): 'to establish, maintain, and to grant and/or aid to public places or worship and prayer halls;' The assesse's argument in that case was that the object to establish or mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeches man to understand and know his real nature. To, without identifying himself with his temporal existence in this world, seek and establish himself in his true identity as a spark/manifestation of the one divine, permeating all creation, expressing/realizing his fundamental kinship with all. The terms 'religion' and 'public' or 'of public character' are not contradictory or antithesis or inconsistent with each other. The ld. CIT has clearly stated that in view of the said decision, prayer or worship by recitation of religious scripture, as the 'Srimad Bhagwat', can only be regarded as of a religious nature, irrespective of its public character being emphasized upon by the assessee. The requirement of section 13(1)(b) is different, and which we find as even otherwise covered by the provision of section 80G(5)(iii) of the Act, which has not been applied by the Revenue in the instant case. Such an issue also arose in the case of Kasyapa Veda Research Foundation v. CIT, Calicut [2011] 131 ITD 370 (Cochin) [also: 11 ITR (Trib) 468], where a similar plea, by emphasizing the universality of appeal of the Vedas, so that they are being increasingly adopted and embraced the world ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT when she says that the Vedas are for the hindus, i.e., that they would be more inclined to follow the vedic teachings and precepts. Some overlap between the 'religious' and the 'charitable' is inherent in the very definitions of the two concepts, and has to be admitted and respected. Continuing further, we also observe that the activities of the trust are not confined to these activities alone, but is also undertaking purely charitable activities. As apparent from the Object Clause 2(c), (d),(f),(i), (j) and (k) of its Trust Deed, as well as the activities undertaken in pursuance of the same, as listed in the 'Note on its activities' (refer PB pg. 8,9 and 10). In our considered view, therefore, the appellant-trust qualifies to be a charitable trust as well. Accordingly, it is to be allowed the status of a religious and charitable trust.' It was thus opined that the assessee trust qualified to be a charitable trust as well. Accordingly, it was to be allowed the status of a religious and charitable trust. 4.3 The assessee's plea with regard to mutuality, so that the contributories of the donation as well as well as the beneficiaries thereof are the same, is also wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a debilitating effect only for the year where the threshold limit of 5% is exceeded. This as section 80G(5B) prescribes a positive test and not a negative one. That is, section 80G would apply to the applicant institution or fund, so that it is entitled for an approval u/s. 80G(5)(vi) for each year for which the said limit is not exceeded. By implication, the section would not apply for any year for which the expenditure of religious nature exceeds the qualifying limit of 5%, as for AY 2008-09 in the instant case and, accordingly, the applicant is not exigible for being approved u/s. 80G(5) for such year. In other words, the section would continue to apply, and the approval valid, for the years for which the said limit is not exceeded. Continuing further, the Revenue, as afore-stated, has not pointed out even a single object clause of the assessee's trust deed as authorizing an activity of a religious nature, or though of a charitable nature, comprising wholly or substantially wholly a purpose of religious nature. No doubt, it is open to; rather, incumbent on the competent authority to satisfy himself as to the genuineness of the activities of the applicant-trust, making such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of breach of the 5% limit, we are not prepared to assume a fact and, consequently, issue a finding in its respect on the basis of a presumption. Further, there could have been a breach for any of the years subsequent to f.y. 2009-10 as well and, in any case, could take place in future. Also, granting approval subject to the condition that such expenditure shall not exceed the limit of 5% of the income for any year would not be a practical course, given the law whereby there is no occasion for the Revenue to periodically review assessee's financials. 5. Under the circumstances, and the law in the matter, including the legal position as discerned by us, as discussed hereinabove we, vacating the findings of the ld. CIT, hold as under: ( a ) confirm the action of withdrawal of approval u/s. 80G(5) of the Act for the financial year 2007-08; and ( b ) restore the matter for consideration of the withdrawal of approval w.e.f. 01- 04-2008 back to the file of the ld. CIT. Not only would the ld. CIT examine the assessee's claim with regard to its spending on religious purpose/s for these years, disallowing the approval for those where the same may have exceeded the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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