TMI Blog2014 (9) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 21-03-2012 and allow the appeal filed by the assessee. - Decided in favour of assessee - ITA No. 994/PN/2012 - - - Dated:- 16-9-2014 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER For the Appellant: Shri Arivind V. Shonde For the Respondent: Shri A.K. Modi ORDER PER R.S. PADVEKAR, JM:- This appeal is filed by the assessee challenging the impugned order of the Ld. CIT-II, Kolhapur dated 21-03-2012 passed u/s. 12AA(3) of the Income-tax Act, cancelling the registration of the assessee granted u/s. 12A of the I.T. Act, 1961 dated 15-09-1999. The assessee has taken the following grounds: 1. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax erred in withdrawing the registration granted under Section 12A of the Act vide certificate dated 15/09/1999. 2. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax failed to appreciate that the requisite conditions specified in section 12AA(3) of the Act to withdraw the registration were not satisfied. 3. On the facts and circumstances of the case and in law the learned Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust, being predominantly religious in nature. The Ld. Commissioner has also observed that the assessee trust has prima-facie mis-stated its income and also incurred expenditure which is not charitable in nature which was being incurred predominately for religious purpose, as well as incurred for personal benefit of trustees. The Ld. Commissioner also referred to the management of the assessee and observed that conducting the activities of the assessee was congregated with the family of the chief trustees, i.e. Shri Narendra Baburao Surve, and due to the amendment to the trust deed, the public at large was barred having any access to the properties/funds of the assessee trust and subsequent utilization thereof. 3. The assessee resisted the action of the Ld. Commissioner by taking the contention that the donations were received by it were with specific directions and therefore, form part of corpus and not includible in income of the trust. In respect of the charge of the religious nature of the activities, the assessee took the contention that it has not constructed any temple, but the same was a Donation-in-kind (Vasturup Denagi) from the devotees and the construction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of Section 2(15) of the Income tax Act, 1961. It is also necessary to clarify that the Commissioner has, and always had, inherent powers under section 12AA(3) of the I.T. Act, 1961, to verify / re-verify and confirm the correctness of the registration u/s 12AA of the Act granted earlier, at any time in subsequent future. This fact becomes more prominent on considering the recent amendments to section 80G, and the explanatory note to the amendment. Of course, there has to be some concrete information available with the Commissioner for conducting such a review, on any subsequent date, even in the very next month of granting of registration. In the assessee's case it was noticed that it had been receiving huge amount of sums running in Crores of Rupees every year, over the different financial years, and has been claiming it as part of corpus donations , which is exempt from tax. Therefore, it had become essential to ascertain that the trust was not covered by the provisions of sec. 11(1)(d), as well as sec. 115BBC, of the I.T. Act, 1961. Moreover, it was also noticed that the activities carried by the trust includes construction of Temples, Auditorium, Stadium, ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . the people who visit the premises of the trust undertake meditation, discuss the matters relating to spiritual aspects, blind faith, etc., and in the process visit the temples of Ganesha, Shri Ram within the premises of the trust and meditate in the meditation centre......... . And that, ........the intention of the trust in constructing and letting out the property is only to fulfill the objective of the trust, viz. education of masses, meditation, curing blind faith spiritual progress, progress of moral and social values, achieving purity of thoughts and soul, and the like...... And also that, .......the primary objective of construction of meditation centre is to create as sound and healthy atmosphere with good moral values .....' While explaining the material distribution at a function, the assessee has stated that, ........the discourses and lectures are conducted in the stadium and auditorium and therefore they are purely on the objects of the trust and are of a charitable nature..... 11. As can be seen from the above submissions that the assessee s intention expenditure of construction of Temple, Meditation centre, Stadium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the assessee was requested to submit on 19-03-2012, (i) an copy of f trust deed/memorandum of association (ii) Complete details of the trustees (iii) copies of Audited statement of accounts, and (iv) brief note on the activities carried out by the said trust. However, till date the assessee has not furnished the same. However, whatever may be the constitution of the said trust, it is not going to change the nature of services rendered by that trust, which is admittedly Religious'' in nature. Whether the assessee does these activities himself, or get it done through somebody else, it is not going to change the nature of such activities, which is essentially religious in nature. Hence, the involvement of the assessee in religious activities is present. 14. It is also seen that the assessee is trying to project that the so called Spiritual and Moral upliftmenf is a sort of education, and is therefore, a charitable activity. At this juncture, it is relevant to be seen as to what meaning has been given to the word 'education' which occurs in section 2(15) of the Act. The word 'education' must be confined to the meaning assigned thereto as contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords of the last consecutive three years that the major portion of the expenditure is on religious purposes, as under : Sr.No. A.Y. Gross Receipt Expenditure on Addition to building (i.e. Temples, Auditorium, Stadium, Meditation Centre, etc. Expenditure on other activities of nature discussed above Total expenditure of the nature discussed above Percentage of expenditure to gross income 1 2011-12 37622001 40410567 2871283 43281855 115.04 2 2010-11 54098196 44501504 7706380 52207884 96.50 3 2009-10 85037349 46596773 7503013 54099786 63.61 19. From above, it is clear that the assessee is incurring major portion of its expenditure on the activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvival of the organizations, and can neither be utilized for attainment of objects of the trust, nor tied to a particular activity. A corpus funds are not earmarked for a specific purpose. The exemption provided in the statute to exclude from income is in respect of such donations, and not in respect of donations received for expenditure on the objects of the trust. Essentially, the corpus donations are not earmarked for a specific purpose, and thus the trust is free to use them as required. However, in the case of the assessee, the so-called Corpusdonations are credited to various earmarked funds as per the purpose of these funds. It is also pertinent to note that the assessee has shown donations to such funds under the head Other earmarked funds which is seen to be independent than that of Corpus Fund . 23. Moreover, by no stretch of imagination the direction of the donor, as is envisaged in provisions of sec. ll(l)(d) of the Act, can be oral, as is being claimed by the assessee. To claim a donation to be corpus donation it is necessary that the donor gives a written direction, at the time of making donation. As per the assessee's own submission, no such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out of ordinary in such a clause . , and also that, .....Considering the reputation of the Trust and its followers in public at large, this provision is made to keep continuous faith in the activities of the trust which public at large looks from the affairs of the head of the organization and therefore he has to be selected carefully.....''. It is further contended that, ......considering the complex nature of Indian. Society one has to keep in mind their sentiments and faith in their gurus which is an age old tradition . 27. Thus, from above it is clear that the trust has made amendments which has taken away the very sprit of the Public Charitable Trust, as all the powers are vested in the hands of Chief Trustee, and the participation of the public at large in the day to day activities, as well as in the nomination of the Chief Trustees/ Trustees has been reduced almost to nil. Moreover, the membership to the trust is very restricted and guided by the clauses of the trust deed. This goes against the very sprit of the charitable trust, as is envisaged for the purpose of the Income tax Act, .1961. Even the essential element of natural justice, has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #2325;ो./ मुख्या.3/217/S-540/43/190/99-2000 on 15-09-1999 is, hereby cancelled Now, being aggrieved the assessee is in appeal before us. 4. The Ld. Counsel for the assessee submits that it is the first objection of the Ld. Commissioner that the assessee is having mixed objects partly charitable and partly religious which is apparently clear from the discussion in Para Nos. 9 to 17 and it is so clearly expressly in Para No. 19. He submits that the Ld. Commissioner has tried to impress her own thoughts on the concept of the spiritual and moral values. He argues that the religion is a matter of faith but each charitable activity may not be related to religious faith. He submits that the law is well settled on the objection of the Ld. Commissioner that no exemption can be denied merely because the objects of the trust are partly charitable and partly religious. For that proposition the Ld. Counsel relied on the decision of the ITAT, Cochin Bench Third Member in the case of The Society of Presentation Sisters Vs. ITO (2009) 30 DTR 1 (Cochin) and Calicut Islamic Cultural Society Vs. ACIT, Circle-2(1), Kozhikode (2009) 28 SOT 148 (Cochi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces pertaining to eradication of superstition, deaddiction, eradication of the dowry system, propagating ideas of de addictions, by holding camps for this purpose since its inception. The camps are held irrespective of caste, creed and religion. Thousands of people and families have been benefited from these services, which are rendered free of cost. The Chief trustee has played pivotal role in rendering these services. He addresses the general public in respect of matters stated above on various occasions during the year. People gather in thousands to hear him. The stadium and the auditorium are constructed to enable the trust to provide these services to all these peoples. He submits that stadium is not a playground, but is a structure constructed for accommodating the public at large who attend the discourses and various camps in respect of above activities. The people who attend de-addiction programs are required to stay at the premises and undergo meditation programs. These programs help them to remain focused on the de-addiction objective. It makes their mind stronger and resists it from their ill habits of addiction. It gives them and their families' mental peace which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects of the trust. He submits that the Ld. Commissioner has also made the observation on the alleged violation of Sec. 13(1)(c) but that is within the domain of the Assessing Officer as held in the case of Agarwal Mitra Mandal Trust (supra). He submits that so far as the objection of Ld. Commissioner is concerned that there must be a written direction for the donations to form part of the corpus is also against the well settled proposition of law. He relied on the decision in the case of DIT (Exemption) Vs. Sri Ramkrishna Seva Ashram Pavagada, ITA No. 248 of 2010 judgment dated 17-10-2011 (Karnataka High Court). 5.4 Ld. Counsel further submits that the Chief Trustee devotes his entire time and attention for the benefit of the trust. His message to the society is live and other to live. The Chief Trustee regularly attends the public, who approach to the trust for the services rendered by the trust, with various issues relating to de-additction (Vyasan Mukti), Blind faith (Andh Shraddha Nirmulan) and meditation etc. and teaches them moral values, ethics, social values and responsibilities etc. He travels' all over India for providing these services rendered by the trust. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was satisfied on these issues. He further submits that during the course of renewal of recognition u/s 80G for the period from 01.04.2006 to 31.03.2009, a show cause notice was issued by the CIT - II, Kolhapur on 31.07.2006 (Paper Book no 1 Page No. 81) requesting the trust to whether there is any violation of provisions of section 13(l)(c) in respect of payment of honorarium and payment of LIP in respect of the Trustee. The detailed submission replying the queries was filed and after consideration the said reply, the renewal of recognition u/s 80G was granted to the trust vide certificate dated 04.08.2006 (Paper Book No 1 page no 82) which clearly shows that the CIT was satisfied on these issues. He pleaded for cancelling the order passed u/s. 12AA(3) of the Act and restoring the registration granted to the assessee trust. Per contra, the Ld. CIT (DR) supported the action of the Ld. Commissioner cancelling the registration of the assessee. 6. Before we go into the issues, we may like to refer to the relevant provisions of the Act in which the Ld. Commissioner has passed the present impugned order. 6.1 Sec. 12AA(3) reads as under: Sec. 12AA(3) (1) .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The first reason given by the Ld. Commissioner is that the assessee trust is having mixed objects, partly religious and partly charitable. It is seen that the said observation is based on the fact that the assessee has incurred the expenditure on the construction of the Temples, Auditorium Center, Stadium, Conducting Discourse, etc. The Ld. Commissioner has interpreted the term spiritual and moral and came to the conclusion that if the activity of the trust is essentially for spiritual and moral upliftment of the people then it is a religious activity. 9. In the case of CIT Vs. Barkate Saifiyah Society-213 ITR 492 (Guj. H.C.) it is held as under: 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 involving the carrying on of any activity for profit ; 8. It is to be noted that definition of the phrase charitable purpose is inclusive and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riests 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. 10. In the case of Calicut Islamic Cultural Society (supra) it is observed and held as under: 21. The above observations are quoted in N.S. Bindra s Interpretation of Statutes (Ninth Edition, page No. 15). In short, the English language cannot be treated as instrument of mathematics precision. Now the question is can it be said that it is the intention of the legislature as per the language used in cl. (a) to s. 11(1) of the Act that save the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, it cannot be said that s. 11(1)(a) of the Act does not contemplate such situation. 11. Now, the next objection of the Ld. Commissioner is that there is a violation of Sec. 11(1)(d) as there is no evidence to show that the donations were given with the specific direction that they should form part of the corpus. In our opinion the finding of the Ld. Commissioner on the said aspect is beyond the powers vested u/s. 12AA(3) of the Act. Moreover, in the case of Agarwal Mitra Mandal Trust (supra) it is held as under: 6. We have considered the rival submissions and also perused the relevant material on record. It is observed that any trust or institution seeking to avail the benefit of the provisions of ss. 11 and 12 is required to apply for registration under s. 12A. The procedure for registration is prescribed in s. 12AA and as per the provisions of sub-s. (1) of that section, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that he was not justified in refusing to grant registration to the assessee trust under s. 12A merely on the ground that the said objects were violative of the provisions of s. 13(1)(b). As held by Lucknow Bench of Tribunal in the case of St. Don Bosco Educational Society vs. CIT (2004) 84 TTJ (Lucknow) 805 : (2004) 90 ITD 477 (Lucknow), the CIT under s. 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 s. 11 r/w s. 13 which falls within the domain of the AO. To the similar effect is the decision of Delhi Bench of Tribunal in the case of Aryan Educational Society vs. CIT (2005) 94 TTJ (Del) 462 : (2005) 93 ITD 546 (Del) wherein it was held that so long as the provisions of ss. 11, 12 and 12A are complied with, the exemption cannot be denied merely because there is any violation of the provisions of s. 13. 7. As already noted, the procedure for registration laid down in s. 12AA requires the CIT to satisfy himself about the genuineness of activities and object of the trust or institution and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 s. 12A is not granted to it for violation of provisions of s. 13(1)(b) and it is ultimately found that the assessee trust actually accomplished the objects as indicated in cl. 3(4) only for the benefit of public at large without there being any activity undertaken as per object cls. 3(1) and 3(2), it would be deprived of any benefits which otherwise were available to it under s. 11 or s. 12. This certainly is not the legislative intention as reflected in the scheme laid down in ss. 11, 12, 12A, 12AA and 13. On the contrary, the phraseology of s. 13, as already discussed, makes it explicitly clear that the said provisions become operative or relevant only at the stage of assessment when the AO is required to examine the claim of the assessee for benefits under s. 11 or s. 12 while computing the total income of the assessee of the relevant previous year. The application of s. 13 thus falls within the exclusive domain of the AO and the provisions contained therein can be invoked by him while framing the assessment and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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