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2015 (11) TMI 428 - ITAT BANGALORE

2015 (11) TMI 428 - ITAT BANGALORE - TMI - Registration sought by it u/s.12AA denied - mixed objects of religious and charitable nature - Held that:- 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. ACIT [2008 (7) TMI 621 - ITAT .....

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le.

There can be mixed objects of religious and charitable nature - if the trusts are partly religious and partly 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 VIJAYARAGHAVA .....

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aghavendra 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 trust having mixed objects, some of which are charitable and some of which are religious. 04. We have perused the order and heard the contentions of the Ld. DR. Main objects of the trust as it appears at para .....

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ed to the temples. b. To promote better social understanding and amity among different communities. c. To make a comparative study of philosophical preaching and religious principles of Hindu Dharma and bring together persons who have faith in Hinduism and Hindu Philosophy. d. To take more effective steps to implement the teaching of great noble and learned to social upliftment and community and community understanding. e. To encourage and organize the study course, seminars, publish, journals, .....

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e area. i. To establish and to run a baby Sitting, Nursery, Primary, High Schools, CBSC, ICSE schools, College, Technical institutions, Adult education, Commerce training college, Computer education, Self employment, Evening College, Vocational training center, etc. j. To conduct health awareness programmes camp, organize camps blood donations camps, etc. k. To help the poor, orphans, physically and mentally handicapped people, widows and other disabled persons, by providing monetary or any othe .....

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ersons 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 .....

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carefully considered all the facts as well as precedents relied on by both the parties. From the arguments advanced by both the parties, the controversy in both these cases is common, i.e., the allowability of the exemption to both these assessees as claimed by them under s. 11(1)(a)of the Act. To make the summary of the controversy, we can give the reasons in both these cases for denying the claim of the assessees under s. 11(1)(a) of the Act. 16. Now we take up the reasons given by the AO in t .....

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charitable institutions run by the assessee trust. (iv) If the assessee is partly engaged in the activity which is a religious and partly charitable, then in view of the decision of the Hon ble High Court of Jammu & Kashmir in the case of Ghulam Mohidin Trust (supra) assessee cannot be given the benefit of exemption under s. 11(1)(a) of the Act. 17. Now we refer to in a summary way the reasons for denying the exemption to another assessee, i.e., Markazu Ssaquafathi Ssunniya (ITA No. 641/Coc .....

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igh Court in the case of Ghulam Mohidin Trust (supra), assessee cannot claim the exemption under s. 11(1)(a) of the Act. 18. In short, it is not the case of the AO 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 o .....

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at 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 reads as under : 11. (1) Income from property held for charitable or religious purposes.-Subject to the provisions of ss. 60 to 63, the followin .....

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h property; 20. We may refer here the observations of Lord Denning LJ (quote) : The English language is not an instrument of mathematical precision. Our literature would be much poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A Judge believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other am .....

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assed to remedy, and then he must supplement the written word so as to give force and life , to the intention of legislature. A Judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out. He must then do so as they would have done. A Judge must not alter the material of which the Act is woven but he can and should iron out the creases. (unquote) 21. The above observations are quoted in N.S. Bi .....

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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 no .....

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the case of Ahmedabad Rana Caste Association (supra) by the Hon ble Supreme Court. As far as religious purpose is concerned means religious purpose within the meaning of personal law applicable to the assessee as held by the Hon ble High Court of Bombay in the case of Bai Hirbai Rahim Aloo Paroo & Kesarbai Dharamsey Kakoo Charitable & Religious Trust vs. CIT (1968) 68 ITR 821 (Bom). There are innumerable examples where there will be very thin line of demarcation between the purposes to .....

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onsideration. The interpretation given by the AO as well as by the CIT(A) is that the purpose should be wholly charitable or wholly religious. We are afraid, whether such interpretation can be accepted. In our opinion, said interpretation given by both the authorities is only academic. When the legislature has categorically defined the purposes like religious and charitable and if the assessee is engaged as per their objects in mixed activities, which are partly charitable and partly religious, .....

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d argument for the reason that in s. 12A of the Act also the application of the mind by the CIT was involved. During the course of argument it was brought to our notice that though the exemption is refused to both the assessees, registration granted under s. 12A stand as it is. 23. In our opinion, once the registration 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 .....

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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 expenditu .....

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of the trust or institution is to be seen. The identical view has been taken in the case of Andhra Chamber of Commerce (supra) by the Hon ble Supreme Court that if the primary purpose is advancement of objects of general public utility, it will remain charitable even if an incidental entry into the political domain. In sum and substance, the dominant and primary objects are decisive to decide the nature or character of the institution. 25. In the case of Ghulam Mohidin Trust (supra), by referen .....

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d Muslim theology among Muslim intelligentsia, was hit by the provisions contained in cls. (a) and (b) of sub-s. (1) of s. 13 ? 25.1 The facts of the said case can be stated as under : The assessee claimed the exemption of its entire income under s. 11 of the Act. AO rejected the claim of the assessee on the ground that the trust was not charitable trust and it was hit by the provision contained in s. 13(1)(b) of the Act. The reason for rejection of the assessee s claim was that income was not a .....

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retion 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 t .....

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is specifically provided that the selection for such grants has to be confined to Muslims only. The trustees, however, have been given a discretion to extend this benefit to such other communities as in their opinion, are backward in this regard. It is obvious that the author of the trust felt, as indicated in cl. 14 of the instrument of trust that the Muslims of the State and some other sections of the population had lagged behind in this particular branch of learning and it was to improve that .....

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come under s. 11 of the Act. Clause (a) of s. 13(1) of the Act will also be attracted in this case because the income has been derived by the assessee from property held under trust, which does not enure for the benefit of the public. Moreover, even if we hold that the object is not only promotion of Muslim theology amongst the Muslim intelligentsia, but also promotion of science and technology among them, the income of the trust would not be exempt under s. 11 of the Act because the law is well .....

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urposes. In the instant case, the trustees are at liberty to apply the whole of the income for the promotion of Muslim theology among the Muslim intelligentsia. 26. In our opinion, both the authorities have misinterpreted the judgment in the case of Ghulam Mohidin Trust (supra). In that case it was held that as per the objects of the trust it was partly charitable and partly religious but as far as the present these two cases are concerned, nowhere it is the case of the AO that in both these cas .....

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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 .....

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which they are made. 29. The learned Departmental Representative tried to argue that prior to introduction of s. 12AA of the Act, i.e., prior to 1st April, 1997 s. 12A was a mere formality under which the CIT has granted the registration to both these assessees. If we examine the scheme of s. 12A of the Act, which was applicable prior to introduction of s. 12AA, it cannot be said that it was a mere formality. Getting a registration is one of the conditions for claiming the benefits of ss. 11 an .....

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y empty formality and our view is supported by the decision of the Hon ble High Court of Gujarat in Hiralal Bhagwati vs. CIT (2000) 161 CTR (Guj) 401 : (2000) 246 ITR 188 (Guj), which is approved by the Hon ble Supreme Court in Asstt. CIT vs. Surat City Gymkhana (2008) 216 CTR (SC) 23 : (2008) 170 Taxman 612 (SC). 30. For the reasons stated above, we are of the opinion that both these assessees are eligible to claim the exemption under s. 11 of the Act. We therefore cancel the order of the CIT(A .....

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rt of the provision of s. 11 which reads 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 .....

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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, and the advancement (sic). However, the phrase charitable purpose is defined under s. 2(15) of the Act which reads as under : (15) charitable purpose includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involvi .....

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er the Mohamedan law would be considered to be a religious activity. The said activities may be for a charitable purpose to some. Hence, in many cases, both the purposes may be overlapping. The purposes may have both the elements, charity as well as religious. 9. While dealing with what is religious or charitable purpose it is observed by the Supreme Court in the case of Ramchandra Shukla vs. Shree Mahadeoji, AIR 1970 SC 458, that there is no line of demarcation in the Hindu system between relig .....

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term charity in the Statute of Elizabeth, and, therefore, all purposes which according to English law are charitable will be charitable under Hindu law, the Hindu concept of charity is so comprehensive that there are other purposes in addition which are recognised as charitable purposes. Hence, what are purely religious purposes and what religious purposes will be charitable purposes must be decided according to Hindu notions and Hindu law. 10. As observed by Mukherjea in Hindu Law and Religious .....

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ts 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 .....

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) of the Act, charitable purpose was defined to mean as including the relief of poor, medical relief or the advancement of education or of any other object of general public utility. The definition of religious purpose under s. 2(n) is as under : 2(n) religious purpose means a purpose connected with religious worship, teaching or service or any performance of religious rites ; (page 1724). 13. Under s. 6 of the said Act, exemption is given to corporations and institutions established exclusively .....

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eld as under : No doubt the popular meaning of the words charity and charitable does not coincide with their legal meaning ; and no doubt it is easy enough to collect from the books a few decisions which seem to push the doctrine of the Court to the extreme, and to present a contrast between the two meanings in an aspect almost ludicrous. But still it is difficult to fix the point of divergence, and no one as yet has succeeded in defining the popular meaning of the word charity . The learned cou .....

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s ; trusts for the relief of poverty ; trusts for the advancement of education ; trusts for the advancement 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 .....

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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 corpus of these properties settled upon trust must be used for Dawat purposes, that is, for the benefit of the Dawoodi Bohra community. Though the words of cls. 6, 7 and 8 are very wide in terms, in fact, that appa .....

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he time being is confined within the four corners of these two overriding factors and in view of these two overriding factors it must be held that the properties in question settled by the two deeds of 12th Jan., 1937, were settled upon trust for charitable or religious objects and were, therefore, entitled to exemption under s. 11(1)(a) of the Act of 1961. We must make it clear that the real controversy between the parties is regarding exemption under s. 11(1)(a) of the Act of 1961 and not whet .....

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particularly in the light of the decision of the Bombay High Court in Advocate-General of Bombay vs. Yusuf Ali, AIR 1921 Bom 338, that the apparently wide discretion has to be exercised within the four corners of the wakf and for Dawat purposes. What are Dawat purposes, have been described by Marten J., at page 1102, in Advocate-General of Bombay vs. Yusuf Ali, AIR 1921 Bom 338, and, in our opinion, it is only within the four corners of Dawat purposes as recognised by the Dawoodi Bohra community .....

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oresaid 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 commencemen .....

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art 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-s. (3) ; . . . (d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year- (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1 .....

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a corporation established by or under a Central, State or Provincial Act) are held by the trust or institution after the 30th day of November, 1983. 19. By reading the aforesaid section, it is clear that it carves out an exception to s. 11 or 12 by providing that in those cases which are covered by cls. (a), (b), (c) and (d), the provisions of s. 11 or 12 shall not operate. Broadly speaking, it is divided into three categories and exception is carved out in the case of private religious trusts, .....

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any income of a trust for charitable institution is created or established after the commencement of IT Act (sic). In each case the authority is required to find out whether the trust for charitable purposes is established 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 religiou .....

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oes 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 religious. Hence it can be stated that if a charitable trust is established only fo .....

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made nugatory by merely using the words in trust deeds that the trust was established for religious and charitable purposes. He, therefore, submitted that the authority is required to determine the predominant purpose of the trust and if the predominant purpose is a charitable purpose it is difficult to accept the said contention mainly because it is nowhere provided in the section that in each case the authority shall find out the predominant purpose of the trust. Further, as stated earlier, in .....

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