TMI Blog2013 (10) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... mption under section 11 of the Act for the income derived by it from the property held under the trust – But this case is not applicable in the present case of the Assessee in hand – Reliance has been placed upon the judgment in the case of CIT v. Sun Engineering Works P. Ltd. [1992 (9) TMI 1 - SUPREME Court], wherein it has been held that the court must carefully try to ascertain the true principle laid down by the decision and not pick out words or sentences from the said judgment divorced from the context of the question considered by the court in that case to support their reasoning – Judgment of the Hon’ble J&K High Court in the case of Ghulam Mohidin is not applicable to the case of the assessee as none of the object of the trust has limited the application of the entire income to a particular community. In the present case, total expenditure incurred by the assessee at ₹ 5,53,27,631 the major expenses of the assessee is on conducting a peace conference which were to the tune of ₹ 4,84,61,830. It was a 10 day peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its message of peace for entire humanity to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 142(1) which has been reproduced in the assessment order and required the assessee to show cause as to why exemption claimed by it under section 11 should not be denied. The Assessing Officer has referred to the objects of the trust which were also mentioned in letter dated November 11, 2009 filed by the assessee as under: (a) To create a fund primarily to promote charitable, educational, moral, socio-economic development and religious activities. (b) To propagate the Islamic faith. (c) (i) To establish, construct, maintain, manage, administer, assist, encourage, promote and extent financial and other support and assistance to schools, orphanages, mosques, madressas, libraries, research and educational institutions, hospital dispensaries convalescence homes and the like ; (ii) to provide food, meals, boarding, lodging, clothing, education, medical and financial aid or assistance, necessaries, comforts or amenities to the old, distressed needy, afflicted, diseased, destitute, handicapped, widows orphans, infirm or indigent persons. (d) To provide relief in the event of natural calamities such as earthquake, fire, flood, riots, civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer held that the trust of the assessee is mixed trust and the provisions of section 13(1)(b) are squarely applicable in the case of the assessee. However, the assessee contended that benefit ofexemption cannot be denied to the assessee in view of the decision of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj). The learned Assessing Officer did not accept such submission of the assessee on the ground that in the said decision of the hon'ble Gujarat High Court the society was a charitable trust as against society being religious trust in the case of the assessee. It is in this manner the learned Assessing Officer has denied exemption to the assessee and has assessed the aforementioned income being taxable in the hands of the assessee. An appeal was filed before the learned Commissioner of Income-tax (Appeals) which has been decided by the impugned order dated June 23, 2011. Before the learned Commissioner of Income-tax (Appeals), the contentions of the assessee were as under: (i) According to the decision of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slam and Muslims globally, to help realise that justice, human rights, moral values and peace be it on any individual or at a worldwide collective level, are a must for effective human progress and realistic global unity (sic). It was submitted that in the peace conference there were eminent speakers from Islamic faith from the world over as well as from other communities. The conference was also attended by Shri Anwar Ibrahim, Ex Deputy Prime Minister of Malaysia, Shri Digvijay Singh, General Secretary of All India Congress Committee, Sri Ravishankar, Founder of Art of Living, Shri Mahesh Bhatt, a noted film directors, Shri Hosbet Suresh, Retired Mumbai High Court judge, Shri Hasan Gaffor, Ex-Police Commissioner of Mumbai, Shri Kolse Patil, retired judge, Pune and many other dignitaries. The aim of the peace conference was to create communal harmony and to create a brotherhood among the people of all faith is so as to maintain peace and harmony in the country in particular and globally in general. This conference was conducted as per one of the objectives of the trust which are described in the aims and objectives of the trust. Thus it was submitted that activities of the trust co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large. The provisions of section 13(1)(b) are not applicable. The decision of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj), is squarely applicable. Denial of exemption under section 11 is not justified. The Director of Income-tax (Exemption) had granted exemption to the assessee on the basis of trust deed filed by the assessee and also did not point out any violation of any of the provisions of the trust deed. Therefore, the learned Commissioner of Income-tax (Appeals) has held that the Assessing Officer was not justified in denying the exemption to the assessee. He directed the Assessing Officer to allow exemption to them under section 11. The Department is aggrieved, hence in appeal and has raised the aforementioned grounds of appeal. It may be mentioned here that when the appeal was received it was marked as a belated appeal. The date of communication of the impugned order passed by the learned Commissioner of Income-tax (Appeals) was mentioned as June 26, 2011 in form 36. However, later on vide letter dated October 10, 2012 which is placed on record, it is mentioned that the captioned order was received by the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our attention the following observation of the Assessing Officer at page 3 of the assessment order. Accordingly, it is held that yours is a mixed trust and the provisions of section 13(1)(b) is squarely applicable in your case. Accordingly, you are requested to show cause why exemption claimed should not be denied. He thus submitted that the Assessing Officer has himself admitted that the assessee-trust is a mixed trust. He invited our attention towards the following observations of the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj) to contend that the provisions of section 13(1)(b) will not be applicable to a mixed trust which is charitable as well as religious (page 501): Further, as stated earlier, in the three different clauses, namely, (a), (b) and (c) of sub-section (1) of section 13, the Legislature has used different phrases. Clause (a) as, stated earlier, deals with a trust for private religious purposes. Clause (b) deals with a trust for charitable purposes or a charitable institution, clauses (c) and (d) deal with a trust for charitable or religious purposes or a charitable or religious institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai City-1, Mumbai. The assessee is not registered under section 80G of the Income tax Act. The aims and objects of the trust are : (1) To create a fund primarily to provide charitable, educational, moral, socio-economic development and religious activities of the Islamic faith. (2) To propagate the Islamic faith. As mentioned in the trust deed, the assessee-trust is following the religious activities. The assessee has submitted the explanations which were called for during the course of assessment proceedings which were examined and discussed. Subject to the above remarks, the assessee's total income is computed as under : Total income as per statement of income-Rs. nil Assessed under section 143(3) of the Income-tax Act. Issue demand notice/RO, etc., to the assessee along with copy of order. He then referred to the assessment order in respect of the assessment year 2004-05, which is an order dated December 29, 2006 passed under section 143(3) of the Act. In that order also the income of the assessee has been assessed at nil, granting exemption to the assessee under section 11 of the Act. Copies of all these documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy heavy tax on the assessee when it was the same project going on for all these period. It was found that the assessee's work once was recognised as charity for several years and the assessee was carrying on same object, it was not for the court to reopen the same point from time to time. (2) Samaj Kalyan Parishad v. ITO [2007] 291 ITR (AT) 1 (Delhi). In this case relying upon rule of consistency the relief was held allowable to the assessee with the following observations (page 15) : 15. Moreover, the Commissioner of Income-tax took proceedings under section 263 to deny the exemption to the assessee-trust for the assessment years 1978-79 and 1979-80 but dropped the proceedings. For the assessment years 1984-85 to 1999-2000 the Assessing Officer himself granted the exemption and these assessments have not been disturbed. For the assessment years 1982-83 and 1983-84, the Tribunal allowed the exemption. In such circumstances, following the rule of consistency also, apart from the reasons given by us earlier, the assessee's claim has to be upheld. The hon'ble Delhi High Court has taken the view in CIT v. Lagan Kala Upvan [2003] 259 ITR 489 (Delhi) and DI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the benefit of a entire Muslim religious community. He submitted that the hon'ble Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) have approved the decision of the Privy Counsel in the case of Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297 (HL), wherein it has been held that a group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propsitus or to several propositi, they are neither the community nor a section of the community for charitable purposes (sic). Referring to the same their Lordships have observed that it is unable to comprehend how the trust of Rana Caste started in Ahmedabad can be regarded as having been introduced in the caste by consideration of their personal status as individual. He submitted that though religious activity has been stated as one of the object in the memorandum of trust, but in fact during the year under consideration the assessee has incurred major expenses only in respect of peace conference which cannot be described as religious activity alone. He in this regard referred to the observations of the learned Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus, if any, could be assessed. For supporting this proposition the learned authorised representative relied upon the decision of the Tribunal in the case of Nirmal Agricultural Society v. ITO [1999] 71 ITD 152 (Hyd), wherein it has been held that where the assessee has been assessed in the status of association of person denying relief under sections 11 and 13, the Assessing Officer could assess only net income of the assessee and not the gross receipts. Thus, it was submitted by him that the order of the learned Commissioner of Income-tax (Appeals) should be upheld and the Departmental appeal should be dismissed. We have carefully considered the rival submissions in the light of material placed before us. We have also carefully gone through the assessment order, the order passed by the learned Commissioner of Income-tax (Appeals), documents referred to before us and the case law relied upon by both parties. In the assessment order the Assessing Officer has not discussed anything about the activities performed by the assessee during the year under consideration. The Income-tax Officer has only referred to the objects of the trust as stated in clauses (a) to (f) and findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption in respect of the part which was applied for charitable purposes. The Appellate Assistant Commissioner also held that the income of the trust was properly applied for the purposes of the trust notwithstanding the fact that the assessee had used the same in the construction of building for commercial purposes. The Tribunal after analysing the clauses 13 and 14 of the trust deed held that the trust was partly charitable and partly religious and as there was no apportionment of income between two objects of the trust and it was left to the exclusive discretion of the trustees to spend whatever they like on any objects, the assessee was not entitled to claim exemption under section 11 of the Act. Their Lordships of the High Court found that clauses 13 and 14 of the instrument which contain objects of the trust were clearly showing that the trust was a religious trust created exclusively for the benefit of persons belonging to a particular religious community, which is the Muslim community. Even the ex gratia grants and loans on easy terms for further studies and research are confined to Muslims. It for that reason their Lordships observed that the trust was covered within the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee regarding exemption under section 11 reliance cannot be placed on the decision of the hon'ble Jammu and Kashmir High Court in the case of Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587 (J K). It has already been pointed out that the Assessing Officer has not discussed the activities of the assessee carried out during the year under consideration. The learned Commissioner of Income-tax (Appeals) has discussed the activities of the trust in detail and he has found that out of the total expenditure incurred by the assessee at ₹ 5,53,27,631 the major expenses of the assessee is on conducting a peace conference which were to the tune of ₹ 4,84,61,830. It was a 10 day peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its message of peace for entire humanity to help, remove misconception, false fear, hate of Islam globally to help realise that justice, human rights, moral values and peace be it on any individual or at world wide collective level are a must for effective human progress and realistic global unity. The said conference was attended by various dignitaries, the names of whom have already been menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee under section 13(1)(b) of the Act. Though it is not the case of the Assessing Officer that exemption under section 11 is not allowable to the assessee applying the provisions of section 13(1)(a), but as this ground has been taken up by the Revenue this aspect of the matter was also argued by the learned authorised representative. According to his submission, section 13(1)(a) is applicable only to the trust for private religious purpose which does not enure for the benefit of the public. Section 13(1)(a) read as under : 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 (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public ; It is not even the case of the Assessing Officer that the assessee is a trust for private religious purposes which does not enure for the benefit of public. Therefore, the assessee-trust cannot be held to be debarred from claiming the exemption under section 11 on the basis of section 13(1)(a). There is also force in the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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