TMI Blog2015 (11) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable, so long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious, exemption under s. 11(1)(a) will be applicable to the assessee. See CIT v. Barkate Saifiyah Society [1993 (11) TMI 13 - GUJARAT High Court] - Decided in favour of assessee. - I.T.A No. 818/Bang/2015 - - - Dated:- 30-10-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Assessee : None For The Revenue : Shri. Sudhakar Rao, CIT DR-I ORDE R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by assessee, its grievance is that CIT (Exemptions), Bengaluru vide his order dt.27.03.2015 denied the registration sought by it u/s.12AA of the Income-tax Act, 1961 ( the Act in short). 02. Nobody appeared for the assessee at the time of hearing. Though a vakalathnama in favour of Y. K. Raghavendra Rao Raghavan M, Advocates, Bangalore, is available on record, no authorised person from the said office was there when the case was called up for hearing. 03. Ld. DR strongly supporting the order of the CIT stated that the Act did not contemplate grant of registration to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree of cost. l. To provide for encourage and promote welfare of the society and to undertake various forms of social welfare measures such as medical, welfare of women, running and maintenance of Home for the aged, orphanages, shelters for the home-less street children etc., looking after and uplifting the social and economic status of the mentally retarded and handicapped persons and such other measures. m. Education, awareness creation and organization building of the poor both urban as well as rural with special emphasis to women and children. n. Creating consciousness on the importance of literacy and providing functional literacy to the people especially to the marginalized section of the society. o. Alternative technology to the urban, rural poor artisans and peasants to improve their skills and promote self help developments. 05. No doubt some of the objects are charitable in nature, whereas some others are religious in nature. However the class of beneficiaries are undoubtedly public or a wide section of public. We find that a similar issue had come up before the Cochin Bench of this Tribunal in the case of Calicut Islamic Cultural Society v. ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the CIT(A) that both the assessees are either not fully or partly engaged in the nonreligious or the non-charitable activities. In fact, from the assessment order, we find that the AO has undisputedly accepted the fact that, more particularly in the case of Calicut Islamic Cultural Society (supra), the assessee is not constituted only for the benefits of the backward community alone but for the benefit of the entire public as such. Moreover, in the institutions run by the assessee, more particularly the educational institutions, the members of the other community are also admitted. The assessee is also giving support to the poor. In the same way, in the case of another assessee, it is not the case of the AO that the activities of the assessee are not otherwise than religious and charitable activities. It is interpreted that as per the words used in s. 11(1)(a) of the Act, for any institution or trust it must have either wholly charitable or wholly religious activities. The entire controversy is revolving around the interpretation of s. 11(1)(a) of the Act. 19. We may refer here s. 11(1)(a) of the Act, which has undergone the interpretation by both the authorities, which re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture as per the language used in cl. (a) to s. 11(1) of the Act that save the provisions of ss. 60 to 63 of the Act for claiming the income exempt which is derived from the property held under the trust which must wholly for the charitable or wholly religious purposes. If the institution or trust are engaged into the mixed object which are partly religious and partly charitable or as per the case of the AO as well as the CIT(A) the institution or trust is having the mixed activities of charity as well as religion then the exemption cannot be claimed. The argument of the learned senior counsel is that there is a very thin line of demarcation between the charity and religion. Every religion is having the principles of the charity and many charitable purposes may not have the principles of religion, though the religion is the question of faith. It is to be mentioned here that charitable purpose in s. 2(15) of the Act making the inclusive definition and trying to make the charitable purpose more elaborate but there is no definition of the religious purpose under the Act. No doubt the law recognises no purpose as charitable unless it is of the public character. In short, it should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is granted to the assessee by the CIT, AO cannot go into probing the objects and the purposes of the trust or institution and that is within the exclusive domain and jurisdiction of the CIT. What AO can do that he can at the most investigate the matter within the four corners of s. 13 of the Act. In this case the AO has gone with investigating and probing the basic objects of the trust by entering into shoes of the CIT and such exercise is not permissible. 24. Both the senior counsels relied on the plethora of decisions to emphasize that the concept of charitable purpose is very much wide. In the case of H.H. Sir Shahaji The Chhatrapati Maharajasaheb of Kolhapur (supra), which is a case under the GT Act, while interpreting the phrase charitable purposes occurring in s. 5(1)(vi) of the GT Act, the Hon ble High Court of Bombay held that the charitable purposes includes the public religious purposes also. The other precedent relied by the learned senior counsels, more particularly, Andhra Chamber of Commerce s case (supra), Social Service Centre s case (supra), is on the proposition that even the expenditure made on the mosque or on the church constitute expenditure on the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there was no apportionment of income between the two objects of the trust and it was left to the exclusive discretion of the trustee to spend whatever they like on any objects and hence the assessee was not entitled to claim exemption under s. 11 of the Act. The matter was carried to the Hon ble High Court by way of reference. The operative part of the observation of the Hon ble High Court is as under : The ratio of the above decision squarely applies to the facts of the present case. In this case also the objects of the assessee trust contained in cls. 13 and 14 of the instrument of trust clearly show that the dominant purpose of the trust is promotion of Muslim theology among the Muslim intelligentsia. Another object is promotion of science and technology but that too among the Muslim intelligentsia. Similarly, in cl. 14 of the instrument of trust which confers powers on the trustees to give financial assistance by way of ex gratia grants or loans on easy terms to scholars of educational institutions to enable them to prosecute their further studies and research in science and technology, it is specifically provided that the selection for such grants has to be confined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the AO that in both these cases the objects of the assessee are partly non-charitable or partly non-religious. Further, in that case there was no proper apportionment of the income between the two objects of the trust as it was left to the exclusive discretion of the trustees to spend whatever they like. In short, it was an arbitrary discretion given to the trustees to apply the income for the non-charitable and non-religious purposes. Moreover, in that case it was held that s. 13(1)(b) of the Act is attracted as the trust was intended to promote science and technology and Muslim theology among Muslim intelligentsia, which was the main and dominant object of the trust. In the present two cases it is not the case of the AO. In our opinion, the principles laid down by the Hon ble High Court of Jammu Kashmir has no application as far as the facts of the present these two cases are concerned. 27. We may mention here that the AO himself has accepted that as per the bye laws and regulations of the assessees, even the persons having faiths of other religions were given benefits. Nowhere, it is the case of the AO that the income is applied for private religious purposes not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : Income from property held for charitable or religious purposes.-(1) Subject to the provisions of ss. 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent. of the income from such property ; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India ; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twentyfive per cent. of the income from such property. 7. The phrase religious purpose includes relief of the poor, education, medical relief, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation in the Hindu system between religion and charity. Indeed, charity is regarded as part of religion, for, gifts both for religious and charitable purposes are impelled by the desire to acquire religious merit. According to Pandit Prannath Saraswati, these fell under two heads, Istha and Purta. The former meant sacrifices, and sacrificial gifts and the latter meant charities. Among the Istha acts are Vedic sacrifices, gifts to the priests at the time of such sacrifices, preservations of vedas, religious austerity, rectitude, vaisvadev sacrifices and hospitality. Among the Purta acts are construction and maintenance of temples, tanks, wells, planting of groves, gifts of food, dharamshalas, places for drinking water, relief of the sick, and promotion of education and learning. (cf. Pandit Prannath Saraswati s Hindu Law of Endowments, 1897, pages 26- 27). Istha and Purta are in fact regarded as the common duties of the twice born class. (cf. Pandit Saraswati, page 27). 11. In view of the aforesaid discussion, it can be said that a trust can be either for religious purposes or for charitable purposes or it can be for both charitable and religious purposes. 12. An identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of religion ; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads. 15. Thereafter, the Court held that for satisfying the test for charitable purpose, there must always be some element of public benefit. 16. Hence the words trust for charitable purpose would include even trust for advancement of religion. At this stage, we would note that the definition of charitable purpose under the IT Act goes much further than the definition of charity to be derived from the English cases because it specifically includes medical relief and embraces all objects of general public utility subject only to the condition imposed by the restrictive words not involving the carrying on of any activity for profit . While dealing with s. 11, a Division Bench of this Court in the case of Addl. CIT vs. A. A. Bibijiwala Trust [1975] 100 ITR 516 (Guj), has observed as under (at page 523) : Similarly, in the case before us also, the property is settled upon wakf, that is, for purposes which are considered to be religious, pious or charitable according to the notions of members of the Dawoodi Bohra community and further the income in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious, exemption under s. 11(1)(a) will be applicable to the assessee. 18. Keeping in mind the aforesaid discussion, now we will refer to the relevant portion of s. 13 which carves out an exception to the aforesaid provisions. It reads as under : Sec. 11 not to apply in certain cases.-(1) Nothing contained in s. 11 or s. 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 ; (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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed for the benefit of a particular religious community or caste. If it is so established, then the provisions of s. 11 would not be applicable. Thirdly, cls. (c) and (d) carve out an exception in the case of a trust for charitable or religious purposes or a charitable or religious institution. It provides for certain cases in which any income thereof enures, or is used or applied, directly or indirectly, for the benefit of any person referred to in sub-s. (3). In cls. (c) and (d) the Legislature wanted to include trusts for charitable and religious purposes, and this is specifically provided by using the phrase trust for charitable or religious purposes. In cls. (c) and (d), theLegislature has used the phrase trust for charitable purposes or charitable institution. It does not deal with a trust for religious purposes. It only deals with a trust for charitable purposes or charitable institutions which are established for giving relief to the poor or medical relief or for education of any particular religious community or caste. Clauses (c) and (d) would be applicable to a trust which is either for charitable purposes or religious purposes or partly charitable purposes and partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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