TMI Blog2016 (12) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... orities have to exercise their power in terms of what has been given to them by the statute under which they have been created. If the power of renewal of registration has been taken away by the amendment from 01.10.2009, there was no occasion for the CIT to exercise his power merely on the ground that the petitioner had filed an application for renewal of registration, rather he ought to have acted in the same manner as the Director of Income-tax (Exemption), Delhi by his letter dated 09.09.2010, communicating that in view of the amendment to Section 80G (5) (vi) through Finance Act (No.2), 2009 there was no need to seek renewal of the certificate. It is evident from the legal position as obtained from 01.10.2009 that the registration granted under Section 80G would operate in perpetuity, unless specifically withdrawn. For the aforesaid reasons, we hold that the impugned orders dated 29.09.2010 and 27.10.2010 of the CIT-1, Patna are illegal and invalid and they are, accordingly, quashed. Cancellation under Section 12AA (3) - Held that:- This Court is, of the view that the order dated 28.11.2012 of the CIT-1, Patna cancelling the registration of Imarat Shariah Trust under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Mr. Shekhar Singh : Mrs. Archana Sinha, For Bihar State Board of : Mr. Ganpati Trivedi Religious Trust Mr. Manoj Kumar (In CWJC No.2634 of 2011) Mr. D.V.Pathy Mr. Abhi Sarkar Mrs. Manju Jha For the Respondents : Mr. Rishi Raj Sinha Mrs. Archana Sinha Mr. Rishi Raj Sinha Mrs. Archana Sinha JUDGMENT ( Per : Honourable Mr. Justice Ramesh Kumar Datta ) Heard learned counsels for the petitioners in all the three writ petitions and learned counsels for the Income-tax Department and for the Bihar State Board Of Religious Trust. All the three writ applications raise several common issues and they have, accordingly, been heard together and are being disposed of by this common order. In C.W.J.C. No.20698 of 2010, the petitioner-Shri Mahabir Sthan Nyas Samiti has sought quashing of the order of the Commissioner of Income Tax-1 dated 29.09.2010, by which the application of the petitioner for renewal of grant of exemption under Section 80G of the Income-tax Act, 1961 (In short the Act ) has been refused holding that the assessee- trust does not fulfil the condition laid down in sub-section 5 (iii) of Section 80G of the Act. The prayer is also to quash the notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 3592 dated 12.12.1991 and has continued to be so registered till this day. It is also granted the benefit of exemption under the provisions of Section 80G of the Act since the same period, on the basis of such exemption being granted from time to time. As per the Gazette Notification (Ordinary) No. 37 dated 16.03.1990 of the Bihar State Board of Religious Trust, the objectives for which the fund of the trust shall be applied are the following:- (i) Worship, Raj bhog (food offering to the deity), Akhand Jyoti (continuous lighting of lamp before the deity) religious ceremonies, lectures, etc. (ii) Conservation, beautification and development of the temple. (iii) Establishment and development of educational institutions. (iv) Propagation of Sanskrit and Indian culture. (v) Training of the priests, religious teachers and propounders. (vi) Establishment of library containing published books along with original manuscript or its photo copy and micro-films. (vii) Printing, publication and marketing of books and journals. (viii) Progress and propagation of Hindu religion. (ix) Establishment of hospitals, drug house and health institutions. (x) Establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requested to take necessary action. The hearing according to the petitioner had been concluded, and prayer was made by CIT (ITAT) that it would not make any submission in the case and the hearing was closed. It is not in dispute that the petitioner s expenditure in the three preceding assessment years 2006-07, 2007-08 and 2008-09 were below the 5% ceiling permissible under the provisions of Section 80G (5B). The said letter was handed over by the CIT (ITAT) to the ITAT Bench without supplying a copy to the petitioner. The said letter was officially obtained by the petitioner from the office of the ITAT on 15.12.2010. Thereafter, the Tribunal released the case. It is stated by learned counsel for the petitioner and not denied by the respondents that there was no regular Bench of the ITAT in Patna and the Appellate Tribunal comes after several months either from Kolkata or Delhi for hearing the cases. The Bench in question itself had come after six months. Subsequently the impugned notice for cancellation of Registration granted under Section 12 AA of the Act was issued by the CIT-1, Patna on 13.12.2010. Aggrieved by the same, the petitioner-Nyas Samiti filed the present writ a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 To establish Hospitals Clinics Dispensaries Health Centre. 3.14 To establish orphanges, old people Homes and Rehabilitation Centres. 3.15 To print publish sell and distribute newspapers journals magazines periodicals books pamphlets circulars poster and other forms of literature. 3.16 To acquire by purchase lease exchange or otherwise or to take over a going concern one more printing press or a publication once and to conduct and run such press of presses or such concern for the furtherance of the objects of the trust. 3.17 To impart training in journalism and public speaking. 3.18 To grant scholarship to deserving students of science, technology commerce business management and humanities. 3.19 To give loans to deserving persons to help them settle in life on such terms as the trustees may think expedient. 3.20 To establish liaison and development mutual areas or cooperation with different organizations international, national, state local whether voluntary or official and with specialized institutions groups and individual associations in furtherance of the aims and objects of the Trust to take steps for eradicating illiteracy and spreading ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings or in any securities authorized under the Income Tax Act, 1961 or other applicable laws in force from time to time. 3.34 To create any reserved fund Sinking Fund, Insurance Fund, Provident Fund or any other special fund whether for depreciation or repairs improving extending or maintaining any of the properties on rights of the trust and/or for recoupment of wasting assets and/or for benefits of the employees and for any other purpose for which the Trust deems it expedient or proper to create or to maintain any such fund or funds. 3.35 To do all such other lawful acts deeds or other things either alone or in conjunction with other organization as are incidental or conclusive to the attainment of any of the above objects. 3.36 To provide for the welfare of employees to the Trust. 3.37 To make Rules and Regulations for the conduct of the affairs of the Trust and to add, amend vary or rescind them from time to time 3.38 All activities financed from the fund shall be conducted in accordance with the ideals and objects as stated herein and no discrimination shall be permitted therein on grounds of religion, caste creed or sect provided that any donation ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objects of the trust, in view of the provisions of Section 13 (b) of the Income Tax Act. It is the admitted position that from the year 2002- 2003 and 2009-10 expenditure on religious activities of the trust in question were lower than 5% except for the assessment year 2008-09 wherein it was 6.4%. Learned counsels for the petitioners submit that in view of the amendment to Section 80G (5) (vi) by omission of the proviso, there was no need for any application for renewal by the petitioners for the registration under Section 80G of the Act and it was to operate for perpetuity and thus the CIT-1 was denuded of his power to refuse such renewal even if wrongly the petitioners have filed their applications for renewal. Section 80G (1), (2) (a) (iv), (5) (iii) (vi), (5B) and Explanation 3 to the said Section is reproduced below:- 80G. Deduction in respect of donations to certain funds, charitable institutions, etc. (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,-- (i) in a case where the aggregate of the sums specified in sub- section (2) includes any sum or sums of the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears or years not exceeding five assessment year, as may be specified in the approval. It is asserted by learned counsels for the petitioners that in view of the omission of the aforesaid proviso, the registration which was earlier required to be under Section 80G in the form of approval by the Commissioner in accordance with the prescribed Rules and was being granted for varying periods not exceeding five assessment years has been done away and for any registration which was valid on 01.10.2009 there would be no necessity for any further extension of approval or registration by the Commissioner. In support of the same, learned counsels also rely upon Circular No.05/10 dated 03.06.2010, paragraph Nos. 29.4, 29.5, 29.6 and 29.7 of which are quoted below:- 29.4. Further, as per clause (vi) of sub- section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rule, 1962. The proviso to this clause provides that any approval granted under this clause shall have effect for such assessment year or yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year or years, not exceeding five assessment years, as may be specified in the approval. Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine manner. Therefore, it is proposed to omit the proviso to clause (vi) of sub-section (5) of section 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund. This amendment will take effect from Ist day of October, 2009. Accordingly, existing approvals expiring on or after Ist October, 2009 shall be deemed to have been extended in perpetuity unless specifically withdrawn. It appears that some doubts still prevail about the period of validi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as the plea of alternative remedy is concerned, this Court had at the stage of Admission considered the circumstances that after the hearing had concluded before the Tribunal and observations made, which are admitted in the CIT- 1 letter brought on the record, that the Tribunal expressed intention to allow the appeal under Section 12AA of the Act, and considering the fact that there is no regular Bench of the Tribunal at Patna and that the Tribunal comes to Patna from time to time but after gap of many months (six months in the present matter), the petitioner Nyas Samiti was left with no option in the matter but to approach this Court for grant of appropriate relief, which on a consideration of the facts by this Court had been found to be sufficient and not only the appeal has been admitted for hearing but also stay of the impugned order dated 29.09.2010 and also show cause notice dated 13.12.2010 was granted. In the given circumstances, the plea of availability of statutory remedy could be of no avail as it was sought to be defeated by the statutory authority itself by accepting communication from one of the parties behind the back of the other party, namely, the Nyas Samit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and not compelled by the Department to do so, it was open to the Commissioner to have passed an order refusing renewal under Section 80G of the Act does not have any force. The statutory authorities have to exercise their power in terms of what has been given to them by the statute under which they have been created. If the power of renewal of registration has been taken away by the amendment from 01.10.2009, there was no occasion for the CIT to exercise his power merely on the ground that the petitioner had filed an application for renewal of registration, rather he ought to have acted in the same manner as the Director of Income-tax (Exemption), Delhi by his letter dated 09.09.2010, communicating that in view of the amendment to Section 80G (5) (vi) through Finance Act (No.2), 2009 there was no need to seek renewal of the certificate. It is evident from the legal position as obtained from 01.10.2009 that the registration granted under Section 80G would operate in perpetuity, unless specifically withdrawn. For the aforesaid reasons, we hold that the impugned orders dated 29.09.2010 and 27.10.2010 of the CIT-1, Patna are illegal and invalid and they are, accordingly, quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, castes and communities and not confined for the benefit of any particular religion caste or community. In addition, it is submitted that Nyas Samiti spends huge amount of money for charitable purposes. Every child up to the age of 12 years suffering from cancer gets immediate assistance of ₹ 10,000/- from the Trust and subsequently it also takes care of its treatment expenses and the said facility has now been extended to children up to the age of 18 years. It is also submitted that admittedly the expenditure of the trust for religious purpose has been much lower than 5% of its total budget and thus the religious activities of the Nyas Samiti are of minuscule as compared to its general charitable activities. With regard to the petitioner Imarat Shariah Educational and Welfare Trust, it is submitted by learned counsel for the petitioner that it is evident from the objects clause, which fact has been admitted in the impugned order also that none of the objects of the trust is religious in nature. It is also stated that not only the trust deed makes a clear and unambiguous statement that the trust is created for the benefit of the community at large irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsels place reliance upon the decision of the Supreme Court in the case of Commissioner of Income-tax, Ujjain vs. M/s. Dawoodi Bohra Jamat : (2014) 364 ITR 31. In the said case interpretation of Section 13 (1) (b) of the Act was involved as the Income-tax Department had refused the prayer made for the registration of the appellant trust and the question was examined in detail by the Apex Court. Since the decision squarely applies to the facts of the case, it would be useful to quote the said judgment in detail, paragraph Nos. 36, 38, 39, 40, 41, 42, 43, 44, 45, 46, 49 and 50 of which are as follows:- 36. In certain cases, the activities of the trust may contain elements of both: religious and charitable and thus, both the purposes 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 and also public at large. For example, the practice of optional charity in the form of Khairat or Sadaquah under Mohammadan Law would be covered under both charitable as well as religious purpose. Further, while providing food and fodder to animals especially cow is relig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as expressed limit the service of food on the said occasions only to the members of the specific community. Thus, the activity of Nyaz performed by the respondent-trust does not delineate a separate class but extends the benefit of free service of good to public at large irrespective of their religion, caste or sect and thereby qualifies as a charitable purpose which would entail general public utility. 40. Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2 (15) of the Act. The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The House of Lords in Barralet v. IR, 54 TC 446, has observed that the study and dissemination of ethical principles and the cultivation of rational religious sentiment would fall in the category of educational purposes. The Madarsa as a Mohammedan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular religious community. In our considered view, the said view may not be the correct interpretation of the provision. 45. From the phraseology in clause (b) of section 13 (1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste. 46. Such trust with composite objects would not be expelled out of the purview of Section 13 (1) (b) per se. The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say, it needs to be examined whether such religious- charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large (Sole Trustee, Loka Shikshana Trust v. CIT, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts or even in the activities, by which it could be said that they have been established only for the benefit of any particular religion, community or caste. Learned counsel for the respondents, on the other hand, submits that the show cause in the case of Nyas Samiti and the cancellation of registration under Section 12AA of the Act with regard to the Imarat Shariah Trust are justified in terms of Section 13 (1) (b) of the Act as they indulged in religious activities and therefore not entitled to the benefit of such registration which is available to a charitable trust. It is submitted that the decision in Dawoodi Bohra s case is not applicable to the facts of the present matter. It is further submitted that even providing relief and rehabilitation of poor widows, women empowerment and also help of different types, is for the purpose of encouraging them to come to their religion and is not a purely charitable activity. In our view the decision in Dawoodi Bohra s case squarely applies to the case of the petitioners, rather their case stands on a higher footing as they have established institutions which are created for the benefit of all sections of society and the religio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The will dated October 20, 1918, executed by the Late K. China Venkata Subbaiah had undoubtedly brought into existence a trust for the benefit of the Vysya community. Trustees were duly appointed under the will. Objects were specified and the manner in which the trust fund should be utilized was specified in the will. These requirements are sufficient to render the purpose as coming within the purview of a trust created under the will dated October 20, 1918. There is also a legal obligation imposed under the will to hold the properties for the purposes specified in the will. The Act does not lay down any requirement that in order to be recognized as a public charitable institution, there must be registration under the Societies Registration Act. It is obviously for a collateral purpose that registration has been sought in the present case under the Societies Registration Act and that fact does not militate against the claim that there has been in existence already an institution administered under the will dated October 20, 1918. There is also nothing inconsistent in law in an existing trust augmenting its resources by securing more contributions with the specific purpose of uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the order of cancellation dated 20.08.2011 of the CIT in the case of Imarat Shariah Educational and Welfare Trust are all quashed. The last issue remains with regard to the order dated 27/29.03.2014 passed by the CIT-1, Patna under Section 263 of the Act, by which he has set aside the assessment order under Section 143 (3) dated 28.12.2011 passed by the assessing officer with respect to the Nyas Samiti for the assessment year 2009-10. The stand of learned counsel for the petitioner is that since the order of injunction was still in existence because of the stay granted by this Court, then without getting the stay vacated, the CIT ought not to have passed the order under Section 263 of the Act in the said matter. It is submitted by learned counsel that since the stay order was in existence, the assessing officer was bound to hold that the income of the petitioner Nyas Samity would be nil by virtue of the exemption certificate and therefore, the order of the assessing officer was neither erroneous nor prejudicial to the revenue. In the said circumstances Section 263 of the Act could not have been invoked as the twin precondition has to be satisfied before exercising such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also needed to be ensured that none of these was covered under any of the exceptions provided in the Income Tax Act. The CIT has also noted that the assessee trust has claimed various expenses as debited in its income and expenditure which needed to be examined/verified to ascertain genuineness before it could have been accepted that its claim was applied towards its objects; further separate Trading and income and expenditure accounts were filed along with the return of income in respect of sale of medicines in the Hospital Units in which various deductions towards cost of purchases and expenses have been claimed, but no details either of the receipts or the expenses have been asked for or examined by the assessing officer. It has also been noted that the assessing officer has not examined whether the income of the assessee trust has been applied to the extent stipulated and the accumulation has been done within the permissible limits and invested as per Rules. For the aforesaid reasons, the CIT was of the view that the assessing officer failed to make any enquiry/investigation which he was legally bound to do during the course of assessment, which has resulted in making th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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