TMI Blog2017 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the appeal of the department and confirmed the order of CIT(A). In the cross objection, no substantial question of law is framed. 3. This court while admitting the appeals framed following substantial question of law:- Appeal No.387/2011 admitted on 11.9.2015 Whether the ITAT is right in law in not appreciating that provisions of section 13(1) (b) which have an overriding effect over the provisions of section 11 section 12, are applicable to the assessee society since the society has been created/established for the benefit of a particular community I.e Christians? Appeal No.110/2012 admitted on 4.7.2012 Whether the Tribunal was legally justified in setting aside the order of the CIT passed u/s 12AA(3) cancelling the registration when the Registrar of Societies has also cencelled the registration of the respondent on account of irregularities found, police case and illegal activities carried on by the society? 4. The facts of the case are that the assessee filed return of income at nil and the AO completed the assessment u/s 143(3) of the Act at an income of ₹ 2,02,21,283/-. During the course of assessment proceedings it was noticed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in either case that it shall not be included in the total income of the person in receipt of such income; (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. 12. Income of trusts or institutions from contributions.- (1) Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly. (2) The value of any services, being medical or educational services, made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13, shall be deemed to be income of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society. 5. ₹ 903309/- The society is running orphanages, schools churches etc when guest come from India abroad we provide them food, accommodation, travel, entertainment expenses hotel charges etc. Above expenses are only for collecting more foreign contribution to meet out objectives of the society. 6. ₹ 180640/- when the Donors some to India we encourage them to visit the project side. In such case we use the money of donor through the society. Donors also would like to visit our orphanages, widows and Leper colonies where they presently working. The President Chairman of the organization visit in India and abroad to promote the objective of the society. He visiting the Donor updating them, During the visit they need donors share about the need of Organization, attend conferences. Personally invites medical professional and teachers to come and give free service to orphanages at different places. 7. ₹ 606171/-, Gift given for promotion of fund collection to fulfill objective of the society. 8. ₹ 2513385/- We helped them in the construction of prayer hall/ community centre. Our churches are mainly established and organized t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no change in the facts upon which a decision in the past has already been arrived at . Based on the assessment order, in my opinion, crux of decision of the assessing officer is that various expenses during the year, amounting to ₹ 2,02,21,283/-, were not incurred on charitable purposes and conditions of registration under section 12AA of the I.T. Act, 1961 were violated. The main reason for this decision is his observation that such expenditure was incurred for the benefit of a particular religious community, namely Christians. From a plain reading of section 11, it is evident that benefit of this section is available for both charitable and religious purposes, a view underscored by Hon ble ITAT, Cochin Third Member Bench in the case of The society of Presentation Sisters (ITA # 457/Coch/2007-datd 22.09.09),relevant portion of which is reproduced below: So for as the provision of sec. 11(1)(a) is concerned, no distinction is made between charitable and religious purposes. A charitable institution can have religious purposes; whereas a religious institution may be partly charitable. Even otherwise relief and help to the poor, medical help to the needy, looki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed by higher appellate authorities: no distinction is made between charitable and religious purposes in section 11 of the IT Act, 1961. Further, this view of the assessing officer, based on his assumption that such expenditure was incurred for the benefit of a particular religious community, namely Christians, is incorrect because Memorandum of Association shows that Samiti was not created for the benefit of a community, a creed or a religion. In course of assessment proceedings, the assessing officer did not bring any evidence on record to show that activities of the appellant were meant exclusively for members of the Christian community. As mentioned above, there is evidence to show that Children Homes run by the Samiti do admit Hindu and Muslim children, a fact on which the assessing officer did not make any adverse observation, in course of appeal proceedings. For the sake of argument, even if it is accepted that the appellant was catering only to Christians, in the opinion of the Hon ble Rajasthan High Court, the appellant was still eligible for registration and, thus, entitled to benefit of section 12 A of the IT Act, 1961. It is pertinent that Samiti was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Other expenses are not for religious purposes and have been incurred for Schools, orphanages etc. The Hon ble Jurisdictional High Court in the case of CIT Vs. Digamber jain Mandir, Chaksu (supra) has held that institutions of religious nature can be allowed registration. The main heading for Section 11 is Income from property held for charitable or religious purposes. Section 11(1)(a) says that income derived from property held under trust wholly for charitable or religious purposes is to be allowed exempt in case such income is applied to such purposes in India. The word such purposes referes to the charitable as well as religious purposes. Thus one has to see the requirement that application of income for charitable or religious purposes is to be made to the extent of 85%. The Hon ble Apex Court in the case of Hazrat Pirmahomed Shah Sahib Roza Committee vs. CIT, 63 ITR 490 had an occasion to consider as to whether the income of the Roza property held for wholly religious purposes is exempt from assessment. The Hon ble Apex Court held that the Roza properties were held for wholly religious purposes and income is exempt u/s 4(3)(i) of the Act 1922 corresponding to Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (ii) Whether Section 13(1) and proviso to Section 2(15) will have impact for requiring the cancellation. Copy of order of Registrar of Society and copy of written petition filed before the Hon ble High Court was filed. 20. We have heard both the parties. Section 12AA(3) refers to the power of ld. CIT to cancel the registration of trust or institution. The word cancel of registration has been mentioned in Section 186 of the IT Act and in that provision it has been mentioned as under:- If where a firm has been registered or is deemed to have been registered or its registration has effect u/s 7 of the Section 184 for an assessment year, the AO is of opinion that there was during the previous year no genuine firm in existence as registered, he may, after giving the firm a reasonable opportunity of being heard cancel the registration of the firm for that assessment year. 21. The dictionary meaning of cancellation is to annul, abrogate or terminate. Hence the legislature provided u/s 186 for cancellation for particular assessment year but in Section 12AA(3), it is mentioned that ld. CIT can cancel the registration. It mean the order of registration passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a report from the AO. Satisfaction requires to apply the mind and came to the conclusion that prima facie the action is needed. Hence requirement of satisfaction stands complied. 24. The assessee is saying that report of AO has not been provided. The Ld. CIT is using that report and hence natural justice demands that copy of such report to be provided to assessee. On this grounds that copy of such report to be provided to assessee. On this ground, the order is required to be set aside to be made again. 25. The Registrar of Societies cancelled registration on account of certain irregularities and the following are relevant for Income Tax matter. (a) Without amending the regulations, the posts of president and Chairman were created. Furthermore, father and son were shown as elected for these two posts. (b) Enquiry committee constitute by social weelfare department has noticed serious allegations. A case on the basis of this report is pending with police department. (c) The society is receiving huge sums from foreign services and the society is registered under foreign contribution Act. The sum is not being spent for the purpose for which the funds were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious purposes . Section 11(1)(b) says that income derived from property held under trust wholly for charitable or religious purposes is to be allowed exemption in case such income is applied to such purposes in India. The words such purposes refer to the charitable as well as religious purposes. Thus one has to see that requirement that application of income for charitable or religious purposes is to be made to the extent of 85 per cent. Considering the legal position, the ld. CIT(A) was justified in deleting the addition because the assessee was a religious and charitable society and the expenses have been incurred for the purpose for which society was established-The Society of Presentation Sisters vs. ITO (2009) 125 TTJ (Coch) (TM) 909: (2009) 30 DTR (Coch) (Tribunal) (TM) 1 followed. Conclusion: Assessee being a religious and charitable society, the expenses incurred by it relating to both religious as well as charitable activities were for the purpose for which the society was established and, therefore, the expenses incurred for religious purposes could not be disallowed for the purpose of exemption u/s 11. 27. The Hon ble Jurisdictional High Court has left open ..... X X X X Extracts X X X X X X X X Extracts X X X X
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