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Spirit and Truth Foundation Versus Commissioner of Income-tax, (Exemptions) , Hyderabad

Registration u/s.12AA rejected - trust has mixed objects - Held that:- There is no dispute that the assessee has mixed objects thereof charitable as well as religious. But the fact is that the CIT(E) has refused to grant registration because he has analysed only three initial objects of the society and came to the conclusion that the objects are not ascertainable and going further he observed that assessee had received certain donations and met some expenditure, which are purely religious. He ob .....

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are to promote welfare of the general public, the purpose would be charitable purpose, any other object which might not be charitable, but which is ancillary or incidental to the dominant purpose, would not prevent trust or institution from being a charitable trust. - In the given case, no doubt the trust has mixed objects but what is important, can it be distinguishable. Ld. CIT(E) himself observed that the trust has incurred expenditure towards charitable as well as religion. He even disti .....

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he whole objects and appreciated the overall aspects are charitable purpose in the creation of the trust. As long as it is beneficial to the society, it should be appreciated. - With regard to objects of the religious purpose, wherever the objects or activities which are contravening the provisions of section 13(1)(b), the relevant income and expenditure can be eliminated at the stage of assessment, it should not be considered at the stage of granting registration. At this stage, CIT(E) shou .....

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exemption only on charitable activities, separate books to be maintained, both books be subject to audit etc. - With the above observations, we remit the issue back to the file of CIT(E) with a direction to grant registration. - Decided in favour of assessee. - ITA No. 861/Hyd/2015 - Dated:- 29-6-2016 - Smt P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member Assessee by : Shri K. Chennubotlu Revenue by : Shri T. Venkata Reddy ORDER Per S. Rifaur Rahman, A. M. This a .....

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on No.65/2014 dt.13.11.2014 (F.No.187/38/2014 (ITA-I) u/s 120(1)&(2) of the LT. Act, 1961 (SO no.2754(E) published in the gazette of India, extraordinary part-II, Sec.3(II) on 22.10.2014 & subsequent notification in this regard, the said application was received on transfer. Thus, a notice was issued to the assessee vide letter dt.20.01.2015, fixing the case for hearing on 23.02.2015 and asking the assessee to produce its original Memorandum of Association (MoA) for verification and furn .....

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16 falls under Medical and object nos.6, 9 & 14 fall under Relief of the poor. It was submitted that the remaining object nos. 1, 2, 3, 7, 11 & 13 fall under General Public Utility. CIT(E) observed that the explanation is not satisfactory and hence, not acceptable. The CIT(E) observed that in fact, from those 16 objects as per the MoA, (English translation of which was filed during the course of assessment proceedings), it is noticed that the dominant objects in the case of the assessee .....

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ere it is mentioned, to encourage cultural activities and Fine Arts and for developing the same, the actual activity the assessee intends to undertake in that regard, is not ascertainable. Having regard to such main objects as mentioned in clause (1), (2) & (3), the assessee in this case, is not eligible for registration u/s.12AA. Further, from the copies of Income & Expenditure a/c in the case of the assessee for the preceding three accounting years ended on 31.03.2012, 31.03.2013 & .....

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hown as donation for church how can it be said that the assessee was engaged in charitable activity during the year. Rather from the nature of such income it shows the assessee is for religious purposes. Further, from a separate note on activities furnished during the proceedings, it is noticed that the assessee is mainly for development of Christianity. In this context, it is pertinent to reproduce the first part of the said report, which is as under: Since the inception of Sprit & Truth Fo .....

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. Under these circumstances, the actual purposes and also the main object in the case of the assessee are not verifiable, and hence, having regard to the provisions contained in Sec.12AA(1(b) of the Act read with subclauses (i) & (ii) there under, the assessee in this case, in CIT(E) s view, is not eligible for registration u/s.12AA. 3. 3 In view of the above observations, the CIT(E) rejected the application filed by the assessee in Form No. 10 seeking registration u/s 12AA of the Act. As su .....

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rred in rejecting the application on the ground that the dominant objects of the society are not ascertainable. 3. The learned Commissioner of Income Tax (Exemptions) Hyderabad grossly erred in rejecting the application of the appellant on the ground that the society is for religious purpose. 4. The learned Commissioner of Income Tax (Exemptions) Hyderabad has erred in rejecting the application on the ground that the main objects are not verifiable. 5. The learned Commissioner of Income Tax (Exe .....

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that the society is having mixed objects and eligible for registration u/s 12AA of the Income Tax Act, 1961 8. For these and such other grounds that may be advanced at the time of hearing the appeal, the appellant prays that the Commissioner of Income Tax (Exemptions) Hyderabad may be directed to register the society u/s 12AA of the Income Tax Act, 1961 5. Before us, the ld. AR of the assessee filed written submissions wherein the Aims and objects of the society as mentioned in the Memorandum of .....

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o strive for developing the same. f) To establish stitching and weaving classes and to establish Cottage Industries for the benefit of women and to strive for developing the same. g) To conduct Sports and Games Competitions for developing mental ability of the people. h) To establish a Library in the Village and to strive for development of Science. i) To strive for banning Dowry and to encourage inter-caste marriages. j) To strive for encouraging Family Planning. k) To facilitate training in Ag .....

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y handicapped people by establishing Ashrams for them. p) To strive for ensuring good health to the Cattle by providing Medical facilities in the Villages. Ld. AR submitted that all the above objects fall within the definition of Section 2 (15) of the Income Tax Act. 5.1 The ld. AR stated that the Id. Commissioner of Income Tax (Exemptions) Hyderabad has not commented anything adversely about the Charitable nature of the objects of the society. The Id. Commissioner of Income Tax (Exemptions) Hyd .....

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of the expenditure, like funeral expenses, Medical help to the poor falls under the objects of "Relief of the Poor" and expenses like distribution of school bags, feeding of poor school children falls under the objects of "Education" and expenses like Wine and Charity falls under the objects of "Religious". When this is the actual facts, the Id. Commissioner of Income Tax (Exemptions) Hyderabad has picked up one head of expenditure pertaining to religious activity a .....

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e trust and genuineness of the activities and has not to go further. Here in the present case, the Id. Commissioner of Income Tax (Exemptions) Hyderabad has not commented any thing adversely about the charitable nature of the objects and the activities of the society. His comments and reason for rejecting the 10A application is that the dominant objects are not ascertainable and the dominant objects are religious. 5.3 Ld. AR stated that no where in the Act it is mentioned or stipulated that the .....

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rving that the manner of application of funds and as to whether the assessee-assessee can claim the benefit of exemption in terms of section 11 and 12 is a question which has to be examined by the assessing officer at the stage when it is urged and not by the CIT when such question is not before the CIT. It is hereby clarified and emphasized that while registration in accordance with the provisions of section 12A by itself, will not automatically confer the benefits of section 11 and 12 on a tru .....

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Officer. Even for argument sake, if the checking of the expenses and income falls under the purview of the Commissioner of Income Tax (Exemptions) Hyderabad, at the time of granting the registration u/s 12AA of the Income Tax Act, then also the income pointed out by the Commissioner of Income Tax (Exemptions) falls under "religious nature" which was one of the objects of the society. As far as the expenditure picked up by the Commissioner of Income Tax (Exemptions) is concerned also fa .....

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jects or with Religious objects or with mixed objects of charitable and religious is eligible for registration u/s 12AA of the Income Tax Act. For this proposition, he relied on the decision of the Hyderabad Bench of Income Tax Appellate Tribunal in ITA No.352/HYD/2010, wherein it was held as under: "We have gone through the provisions of Sec. 13(l)(b) of the Act. There is nothing in the language of this provision to suggest that an institution of mixed objects is precluded from getting reg .....

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from registration u/s 12AA of the Act. A trust whose object is charitable as well as religious is not debarred from registration. Further, in the case of New Life in Christ Evangelistic Association v CIT & others 246 ITR 532 (Mad), wherein it was held that for granting or refusing registration u/s 12A in relation to such trust, the only condition precedent is that an application for registration should be made in time and the accounts of the institute should be audited. No enquiry about the .....

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this reason . ........ (Emphasis supplied) 5.7 In addition to the above the ld. AR relied on the following case laws: 1. CIT v Jaipur Charitable Trust 811TR 1 (Del) 2. Zenith Tin Works Charitable Trust V ITO 102 ITR 119 (Bombay) 3. CIT V Ahmedabad Rana Caste Association 88 IATR 354 (Guj) 4. CIT v Chandra Charitable Trust 294 AITR 86 (Guj) 6. On the other hand, ld. DR relied on the order of the CIT(E) as well as relied on the decision of the ITAT Cochin Bench in the case of Tellicherry Minority W .....

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t ascertainable and going further he observed that assessee had received certain donations and met some expenditure, which are purely religious. He observed that this trust is established mainly for promoting a particular religion. In the present case, CIT(E) has not disputed the fact that the trust can have mixed objects. CIT(E) has objected to the objects which are not ascertainable. Otherwise also, the concept of mixed objects are already settled issue, as held in the case of ACIT Vs. Surat A .....

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harh Jamat, Civil Appeal No. 2492 of 2014 observed, in certain cases activities of the trust may contain elements of both religion and charitable and thus, both the purpose may be overlapping. More so, when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community or also public at large. From the above decision of the Hon ble Apex Court, the trust can have mixed objects and as long as it gives benefits to pub .....

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titutions formulate their objects in such a fashion that they try to address in global level, then comes down to their main objects. In the given case also, it appears unascertainable but they try to cover overall general objects, which may not look ascertainable. But in our considered view, CIT(E) should have looked at the whole objects and appreciated the overall aspects are charitable purpose in the creation of the trust. As long as it is beneficial to the society, it should be appreciated. 9 .....

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