IT : Where revenue could not point out any expenditure which could be said to have been incurred exclusively for a particular religion, denial of exemption under section 11 on ground that objects of assessee were religious one could not be upheld
■■■
[2013] 33 taxmann.com 469 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'I'
Additional Director of Income-tax (E)-II (1)
v.
Islamic Research Foundation*
I.P. BANSAL, JUDICIAL MEMBER
AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER
IT APPEAL NO. 6069 (MUM.) OF 2011
[ASSESSMENT YEAR 2008-09]
[ASSESSMENT YEAR 2008-09]
JANUARY 9, 2013
Section 11, read with section 13, of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under [General] - Assessment year 2008-09 - Assessing Officer denied exemption under section 11 to assessee-trust on ground that objects of assessee were partly religious and partly charitable and thus provisions of section 13(1)(b) were applicable - Documents on record showed that major expenses of assessee was incurred on conducting a peace conference and focus of conference was to create communal harmony - Whether since revenue could not point out any expenditure which could be said to have incurred exclusively for a particular religious community, denial of exemption to assessee could not be justified - Held, yes - Whether further even assessee was a mixed trust, clause (b) of section 13(1) was not applicable as such clause was applicable to purely charitable trust - Held, yes [Paras 7.1 & 7.2] [In favour of assessee]
FACTS
| ■ | The assessee-trust was registered with Director of Income tax (Exemption) under sections 12A and 80G and had been availing benefits under said sections. | |
| ■ | During the year under consideration the Assessing Officer found that objects of the assessee also included to propagate to Islamic faith and he, accordingly, held that assessee-trust was a mixed trust and consequently provisions of section 13(1)(b) were applicable in the case of the assessee. Accordingly, Assessing Officer denied exemption under section 11 to the assessee and brought the income to tax. | |
| ■ | The Commissioner (Appeals) considering the objects and activities of the assessee held that aim and object of assessee was not confined to Muslim alone but all community at large. He accordingly, held that provisions of section 13(1)(b) was not applicable in case of assessee and directed the Assessing Officer to grant benefit under section 11 to the assessee. | |
| ■ | On second appeal: |
HELD
| ■ | The Assessing Officer has not discussed the activities of the assessee carried out during the year under consideration. The Commissioner (Appeals) has discussed the activities of the trust in detail and he has found that out of total expenditure incurred by the assessee at Rs. 5,53,27,631 the major expenses of the assessee is on conducting a peace conference which were to the tune of Rs. 4,84,61,830. It was a 10 days peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its message of peace for entire humanity to help, remove misconception, false fear, hate of Islam globally to help realize that justice, human rights, moral values and peace be it on any individual or at worldwide collective level are a must for effective human progress and realistic global unity. The said conference was attended by various dignitaries. The said peace conference cannot be held to be a mere religious activity for the benefit of a particular community. | |
| ■ | The revenue could not point out any of such expenditure which can be stated to have incurred exclusively for the purpose of a particular religious community. Therefore, simply on the basis of one or two objects stated in the objects of the trust which are limited to religious activity, it cannot be said that in the year under consideration the assessee has suddenly become purely religious trust. In one of the assessment orders, Assessing Officer has specifically mentioned about the issue of religious nature of trust and exemption has been granted to the assessee under section 11 after satisfying with the reply submitted by the assessee. Therefore, the case of the assessee is also acceptable on the basis of principle of consistency. [Para 7.1] | |
| ■ | Even if one has to go by the observation of Assessing Officer in the assessment order that assessee is a mixed trust, even then clause 13(1)(b) cannot be applied as it is applicable to purely charitable trust as held by Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492. [Para 7.2] | |
| ■ | Thus, there was no infirmity in the order passed by Commissioner (Appeals) vide which it has been held that assessee has wrongly been denied benefit of exemption under section 11. [Para 7.5] |
CASE REVIEW
Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587/114 Taxman 543 (J&K) (para 7) distinguished.
CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj.) (para 7.2) and Nirmal Agricultural Society v. ITO [1999] 71 ITD 152 (Hyd.) (para 7.4)followed.
CASES REFERRED TO
CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj.) (para 2.2), CIT v. Dawoodi Bohara Jamat [2009] 317 ITR 342/184 Taxman 222 (MP)(para 3), Trustees of the Charity Fund v. CIT [1959] 36 ITR 513 (SC) (para 3), CIT v. Sri Gujarathi Mandal [1999] 240 ITR 293/[1998] 101 Taxman 647 (Mad) (para 3), Addl. CIT v. Ahmedabad Millowner's Association [1977] 106 ITR 725 (Guj.) (para 3.1), Bar Council of Maharashtra v. CIT [1980] 126 ITR 27 (Bom.) (para 3.1), Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) (para 6.4), CITv. Shree Ram Memorial Foundation [1986] 158 ITR 3/[1987] 33 Taxman 438 (Delhi) (para 6.5), Samaj Kalyan Parishad v. ITO [2007] 105 ITD 29 (Delhi) (SB) (para 6.5), Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) (para 6.7), Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297 (PC) (para 6.7), CIT v. Chandra Charitable Trust [2007] 294 ITR 86/[2006] 156 Taxman 19 (Guj.) (para 6.7),Shiya Dawoodi Bohra Jamat v. CIT [2011] 133 ITD 271/15 taxmann.com 154 (Ahd.) (para 6.7), Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587/114 Taxman 543 (J&K) (para 6.8), State of Kerala v. M.P. Shanti Verma Jain [1998] 231 ITR 787 (SC) (para 6.8), Nirmal Agricultural Society v. ITO [1999] 71 ITD 152 (Hyd.) (para 6.9) and CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) (para 7).
P.K. Shukla for the Appellant. Vijay Mehta for the Respondent.
ORDER
I.P. Bansal, Judicial Member - This is an appeal filed by the Revenue. It is directed against the order passed by Ld. CIT(A)-I, Mumbai dated 23/6/2011 for assessment year 2008-09.
The grounds of appeal read as under:
| "1. | Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai, erred in directing the AO to allow the exemption u/s.11 of the I.T. Act ignoring the elaborate discussion of the issues and facts." | |
| 2. | "Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai, erred in directing the AO to allow the exemption u/s.11 of the I.T. Act which is in contrary to the provisions of clause (a) and (b) of section 13(1) of law." | |
| 3. | The appellant prays that the order of the Commissioner of Income Tax (Appeals)-I, Mumbai be set aside and that of Assessing Officer be restored." |
2. The assessee is registered with the Director of Income Tax (Exemption), Mumbai, under section 12A and 80G of the Income Tax Act, 1961 (the Act). During the year under consideration the AO denied the benefit of exemption to the assessee and has assessed it at an income of Rs. 8,15,58,623/- in place of nil income returned by the trust. The AO issued notice to the assessee under section 142(1) which has been reproduced in the assessment order and required the assessee to show cause as to why exemption claimed by it under section 11 should not be denied. The AO has referred to the objects of the trust which were also mentioned in letter dated 11/11/2009 filed by the assessee as under:-
| "(a) | To create a fund primarily to promote charitable, educational, moral, socio-economic development and religious activities. | |
| (b) | To propagate the Islamic Faith. | |
| (c) | (i) To establish, construct, maintain, manage, administer, assist, encourage, promote and extent financial and other support and assistance to schools, orphanages, mosques, madressas, libraries, research and educational institutions, hospital dispensaries convalescence homes and the like; (ii) To provide food, meals, boarding, lodging, clothing, education, medical and financial aid or assistance, necessaries, comforts or amenities to the old, distressed needy, afflicted, diseased, destitute, handicapped, widows orphans, infirm or indigent persons; | |
| (d) | To provide relief in the event of natural calamities such as earthquake, fire flood, riots, civil commotions or otherwise. | |
| (e) | To put in joint efforts with other organizations for humanitarian and religious advancement. | |
| (f) | To give scholarships, prizes and educational support to the deserving students." |
2.1 The AO observed that the objects of the assessee trust inter-alia included to propagate the Islamic faith and to promote religious activities of Islamic faith. According to AO "religious purpose" is not definite in the Act, but it will include advancement, support or propagation of a religion and its tenets and AO observed that there being also charitable objects, the trust is "Religious and Charitable Trust". It is also noticed by the AO that assessee trust was started in Feb.1991. Reference is made by the AO to the following decisions:
1. Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587 (J&K), in which it has been held that Tribunal was right in holding that the object of the trust providing for promotion of Science and Technology and Muslim theology amongst the Muslims intelligentsia was hit by the provisions of clause (a) and (b) of section 13(1) of the Act. According to AO such observations in respect of vulnerability of mixed object was the subject matter of comments in Landmark cases in 249 ITR 17 as under:
"Where a trust is purely religious in its objects, there is no difficulty in getting exemption as a public religious trust, through the donors would not be eligible for tax deduction under section 80G of the Income Tax Act. Where there is admixture of charitable and religious objects, it may get disqualified on the ground that it is for the benefit of a particular religious community, but also forfeit its claim as a public religious trust, because of its other objects, if such trust had been established on or after 1st April, 1961. This was the fact of the trust in Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587 (J&K), which as a trust established after 01/01/1961 had to conform to the requirement of Section 11. Since it was a public trust partly religious, it was found to be ineligible for exemption, following a number of decisions of the Supreme Court as for example in State of Keralav. M.P. Shanti Verma Jain [1998] 231 ITR 787."
2.2 Accordingly AO held that the trust of the assessee is mixed trust and the provisions of section 13(1)(b) are squarely applicable in the case of the assessee. However, assessee contended that benefit of exemption cannot be denied to the assessee in view of the decision of Hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492/78 Taxman 6. Ld. AO did not accept such submission of the assessee on the ground that in the said decision of Hon'ble Gujarat High Court the society was charitable trust as against society being religious trust in the case of the assessee. It is in this manner Ld. AO has denied exemption to the assessee and has assessed the aforementioned income being taxable in the hands of the assessee.
3. An appeal was filed before Ld. CIT(A) which has been decided by the impugned order dated 23/6/2011. Before Ld. CIT(A) the contentions of the assessee were as under:
| (i) | According to the decision of Hon'ble Gujarat High Court in the case of Barkate Saifiyah Society (supra), where the trust is involved in the activity of charitable as well as religious provisions section 13(1)(b) are not attracted. | |
| (ii) | The decision relied upon by AO could not be applied to the facts of the assessee's case. | |
| (iii) | The exemption to the assessee cannot be denied in view of the following decisions and facts; |
| (a) | CIT v. Dawoodi Bohara Jamat [2009] 317 ITR 342/184 Taxman 222 (MP), in which it was held that section 13(1)(b) is not attracted in the case of public religious trust as the same is applicable only to charitable trust. | |
| (b) | Trustees of the Charity Fund v. CIT [1959] 36 ITR 513 (SC), in which it has been held that charitable trust created after 1st April, 1962 would lose exemption on account of section 13(1)(b) if it is for the benefit of any particular religious community or caste but a religious trust by definition would be for the benefit given to religious community. Thus trust for the establishment and worship of idols and performance of religious festivals would be exempt under section 11, though they may be for the benefit of a particular religious community or caste. However, it may be noted as charitable trust will not lose exemption merely because a discretion is given to the trustees to give preference, other things being equal, to the members of a particular religious community or caste. | |
| (c) | CIT v. Sri Gujarathi Mandal [1999] 240 ITR 293/[1998] 101 Taxman 647 (Mad.)Sri Gujrathi Mandal (supra) in which it has been held that section 13(1)(b) would have no application if what is sought to be done by the trust is to promote the interest of a linguistic group, as language cannot be equated to religion. The main object of the trust was to impart knowledge and education, primarily in Gujarati language and to hold, promote religious, social and moral stands of the mandal members, which was capable of including the promotion of the interest of diverse religions followed by its members and exemption under section 11 was granted. | |
| (d) | Reference was made to Schedule B of the accounts of the society trust to show that out of total expenditure incurred by the assessee of Rs. 5,53,27,631/-, an expenditure of Rs. 4,84,61,830/- was incurred on the peace conference, which was focused on creating communal harmony and an awareness and understanding of Islam and its message of peace for entire humanity, to help remove misconception, false fear and hate of Islam and Muslims globally, to help realize that justice, human rights, moral values and peace be it on any individual or at a worldwide collective level, are a must for effective human progress and realistic global unity (sic). It was submitted that in the peace conference there were eminent speakers from Islamic faith from the the world over as well as from other communities. The conference was also attended by Shri Anwar Ibrahim, Ex Dy. Prime Minister of Malaysia, Shri Digvijay Singh, General Secretary of All India Congress Committee, Sri Sri Ravishankar, Founder of Art of Liming, Shri Mahesh Bhatt, a noted film directors, Shri Hosbet Suresh, Retired Mumbai High Court Judge, Shri Hasan Gaffor, Ex-Police Commissioner of Mumbai, Shri Kolse Patil, Retired Judge, Pune and many other dignitaries. The aim of the peace conference was to create communal harmony and to create a brotherhood among the people of all faith is so as to maintain peace and harmony in the country in particular and globally in general. This conference was conducted as per one of the objectives of the trust which are described in the aims and objectives of the trust. Thus it was submitted that activities of the trust could not be held to be as confined only to a particular caste or community. |
3.1 After considering the aforementioned contentions of the assessee and going through the details Ld. CIT(A) has observed that assessee is enjoying registration under section 12A of the Act. Aims and objects of the trust are quite in its spirit and contents and the aims and objects do not reveal that benefits are meant only to a particular religious community. The benefits are available to general public at large. Provisions of section 13(1)(b) are not applicable to the facts of the case as the same can be applied only in the cases of the trust which are solely and exclusively created for benefit of particular religious community or caste. The decisions of Jammu & Kashmir High and Kerala High Court relied upon by Ld. AO suggest that both the trusts were created solely and exclusively for the benefit of a particular religious community or caste and therefore, those cases are different from the case of the assessee trust. The assessee has convened international peace conference in Mumbai which was attended by aforementioned dignitaries. The purpose of convening peace conference was not merely for the purpose of religious community. The object was of general public utility. Ld. CIT(A) has referred to the decisions in which the term "general public utility" has been considered namely: Addl.CIT v. Ahmedabad Millowners Association [1977] 106 ITR 725 (Guj.). He also referred to decision of Bombay High Court in the case of Bar Council of Maharashtra v. CIT [1980] 126 ITR 27, wherein it has been held that 'general' means pertaining to whole clas, 'public' means the body of people at large including any class of the public and 'utility' means usefulness. Thus Ld. CIT(A) arrived at a conclusion that advancing any object beneficial to the public or a section of public as distinguished from an individual or group would be a charitable purpose. The object of the trust is, therefore, to provide the benefit to all the communities by giving a clear and loud message of peace as a whole. The aim and object cannot be held as object for particular community or caste and thus not confined to Muslim alone but all community at large. Provisions of section 13(1)(b) are not applicable. The decision of Hon'ble Gujarat High Court in the case ofBarkate Saifiyah Society (supra), is squarely applicable. Denial of exemption under section 11 is not justified. The DIT (Exemption) had granted exemption to the assessee on the basis of trust deed filed by the assessee and also did not point out any violation of any of the provisions of the trust deed. Therefore, Ld. CIT(A) has held that the AO was not justified in denying the exemption to the assessee. He directed the AO to allow exemption to the under section 11. The department is aggrieved, hence in appeal and has raised aforementioned grounds of appeal.
4. It may be mentioned here that when the appeal was received it was marked as a belated appeal. The date of communication of impugned order passed by Ld. CIT(A) was mentioned as 26/6/2011 in form No.36. However, later on vide letter dated 10/10/2012 which is placed on record, it is mentioned that the captioned order was received by the office of the appellant on 12/9/2011, therefore, the last day of filing of appeal was 9/9/2011 as against that the department has filed the appeal on 30/8/2012, which is within the time. After verifying the record it was seen that in the authorized memo itself it was written that the order of the Commissioner was received on 12/7/2011, therefore, contention of the department appears to be correct and the appeal filed by the department is not belated one. Hence, we proceed to decide the appeal filed by the department.
5. After narrating the facts Ld. DR vehemently submitted that objects of the trust clearly stated that it was to propagate the Islamic faith, thus the trust is religious trust and, therefore, it was not entitled to get exemption under section 11. Relying upon the cases which have been relied on by the AO and which have been discussed in detail in the above part of this order it was submitted by Ld. DR that the AO was right in denying the exemption to the assessee under section 11 of the Act. He submitted that the decision of Hon'ble Jammu & Kashmir High Court (supra) it was held that the Tribunal was right in holding that where the object of the trust provide for promotion of scientific, technical and Muslim theology amongst Muslim intelligentsia the trust was hit by the provisions of section 13(1)(a) & (b). Relying upon the order passed by the AO it was submitted by him that the Ld. CIT(A) has wrongly granted the relief to the assessee and his order should be set aside and that of AO be restored.
6. On the other hand, referring to the assessment order and the observations of the AO at various places in the assessment order, it was submitted by Ld. AR that AO has held that trust of the assessee is mixed trust. Firstly, he invited our attention to the following observation of AO at page-2 of the assessment order:
"From the aforesaid objects of the Trust and other Objects as mentioned in the Trust Deed which are Charitable in nature it is evident that the assessee trust is 'Religious and Charitable Trust'.
Secondly, he also invited our attention the following observation of the AO at page-3 of the assessment order.
"Accordingly, it is held that yours is a mixed trust and the provisions of Section 13(1)(b) is squarely applicable in your case. Accordingly, you are requested to show cause why exemption claimed should not be denied.
6.1 He thus submitted that AO has himself admitted that the assessee trust is a mixed trust. He invited our attention towards following observations of Hon'ble Gujarat High Court in the case of Barkate Saifiyah Society (supra) to contend that provisions of section 13(1)(b) will not be applicable to a mixed trust which is charitable as well as religious.:-
"Further, as stated earlier, in the three different clauses, namely, (a)(b) and (c) of sub-section (1) of section 13, the Legislature has used different phrases. Clause (a) as, stated earlier, deals with a trust for private religious purposes. Clause (b) deals with a trust for charitable purposes or a charitable institution, clauses (c) and (d) deal with a trust for charitable or religious purposes or a charitable or religious institution. From this different phraseology used by the Legislature in clauses (a), (b) and (c), it can be inferred that the Legislature intended to cover only trust for charitable purposes under clause (b). That means, if a trust is composite, that is, for religious and charitable purposes, then it would not be covered. It is also apparent that if the trust is only for religious purposes, clause (b) would not be applicable.
In view of the aforesaid discussion, in our view, the Tribunal has rightly held that section 13(1)(b) applies only to trusts which were purely for charitable purposes and the assessee trust was charitable as well as religious in nature and the assessee was entitled to exemption under section 11. Hence, question No.1 is answered in the affirmative in favour of the assessee and against the Revenue."
6.2 Thus it was pleaded by Ld. AR that even as per the version of AO, applying the provisions of section 13(1)(b) benefit of exemption under section 11 cannot be denied to the assessee. He submitted that this argument of the assessee is without prejudice to the other arguments.
6.3 He submitted that the first case of the assessee is that the trust is in existence since 4/10/1990 and it has never been denied exemption under section 11 by the revenue and since then it has been enjoying the benefit of registration under section 12A. He submitted that this is the only year when the department has denied the exemption to the assessee. He submitted that for A.Y 2006-07 AO required the assessee to explain as to why the exemption under section 11 should not be denied to the assessee as the assessee trust was to propagate Islamic religion and a detailed reply dated 15/12/2008 was filed. The AO after considering the reply has granted the exemption to the assessee by way of an order dated 30/12/2008 passed under section 143(3) of the Act. He submitted before us a copy of the detailed reply filed by the assessee running into 13 pages and the assessment order vide which assessee's return filed at nil was accepted with the following observations:
"The trust is registered under the Bombay Public Trust Act 1950 and has also been registered under Section 12A of the I.T. Act 1961 by the Commissioner of Income Tax, Mumbai City-1, Mumbai. The assessee is not registered u/s. 80-G of the I.T. Act.
The aims and objects of the trust are:
| 1. | To create a fund primarily to provide charitable, educational, moral, socio-economic development and religious activities of Islamic faith. | |
| 2. | To propagate the Islamic Faith. |
As mentioned in the Trust Deed, the assessee trust is following the religious activities. The assessee has submitted the explanations which were called for during the course of assessment proceedings which were examined and discussed.
Subject to the above remarks, the assessee's total income is computed as under:
Total income as per statement of income Rs. NIL
Assessed u/s. 143(3) of the I.T. Act. Issue demand notice/RO etc. to the assessee along with copy of order."
He then referred to the assessment order in respect of A.Y 2004-05, which is an order dated 29/12/2006 passed under section 143(3) of the Act. In that order also the income of the assessee has been assessed at Nil, granting exemption to the assessee under section 11 of the Act. Copies of all these documents were also given to Ld. D.R.
6.4 Referring to the aforementioned assessment orders it was submitted by Ld. AR that the case of the assessee is acceptable simply on the basis of rule of consistency which has been recognized by Hon'ble Apex Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248. He submitted that the said case was also a case of religious and charitable trust, wherein accepting the plea of consistency their Lordship have held that assessee is entitled to get exemption under section 11 & 12 on the basis of consistency. He invited our attention towards following observation of their Lordship from the decision.
"We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter - and, if there was no change, it was in support of the assessee -we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961".
6.5 To further support such proposition Ld. AR relied on the following decisions:
| 1. | CIT v. Shree Ram Memorial Foundation [1986] 158 ITR 3/[1987] 33 Taxman 438 (Delhi). In that case the department had already allowed similar type of expenses in earlier three years and noting that there was no change in law it was held that it was not appropriate on the part of the revenue to take different view suddenly and levy heavy tax on the assessee when it was the same project going on for all these period. It was found that assessee's work once was recognized as charity for several years and assessee was carrying on same object, it was not for the Court to re-open the same point from time to time. | |
| 2. | Samaj Kalyan Parishad v. ITO [2007] 105 ITD 29 (Delhi) (SB). In this case relying upon rule of consistency the relief was held allowable to the assessee with the following observations: | |
| "9. Moreover, the CIT took proceedings under section 263 to deny the exemption to the assessee-trust for the assessment years 1978-79 and 1979-80 but dropped the proceedings. For the assessment years 1984-85 to 1999-2000 the Assessing Officer himself granted the exemption and these assessments have not been disturbed. For the assessment years 1982-83 and 1983-84, the Tribunal allowed the exemption. In such circumstances, following the rule of consistency also, apart from the reasons given by us earlier, the assessee's claim has to be upheld. The Hon'ble Delhi High Court has taken the view in CIT v. Lagan Kala Upvan [2003] 259 ITR 489/126 Taxman 205 andDIT v. Lovely Bal Shiksha Parishad[2004] 266 ITR 349/135 Taxman 34 that the income-tax authorities cannot take inconsistent views on the same set of facts. Respectfully following these decisions and applying the rule of consistency, the assessee's claim requires to be upheld. This reasoning of ours is independent of the other reasons given by us in the earlier paragraphs to uphold the assessee's claim." |
6.6 Coming to the merits of the case it was submitted by Ld. A.R that under section 11(1) religious activity of a trust is not a bar. Referring to the language of the section he submitted that income derived from the property held under trust established wholly for charitable or religious purposes shall not be included in the total income of the previous year of the person who has received such income and which is applied for such purposes in India. He submitted that bar regarding religious activities, if any, is mentioned in section 13(1)(c) which specifies the category of the trust which carry out the religious as well as charitable activities. He submitted that section 13(1)(a) is applicable on the trust which are private religious trust. Section 13(1)(b) applies to the institution who are established for carrying out activities of charitable in nature. He submitted that religious and charitable trust are categorized by section 13(1) in three categories namely (1) private religious trusts; (2) charitable trusts and; (3) trusts which are carrying out mixed activities of religious as well as charitable.
6.7 He submitted that it has already been contended that even AO has held that the assessee's trust is a mixed trust and even if case of AO is accepted then also only section 13(1)(c) is applicable as per law laid down in the decision of Hon'ble Gujarat High Court in the case of Barkate Saifiyah Society(supra). He submitted that in the aforementioned case it has been held that where the trust is composite i.e., for religious and charitable purposes, then it will not be covered by the provisions of section 13(1)(b), which has been applied by the AO. He submitted that though the objects of assessee's trust contain the provisions regarding activities of religious nature but that is not confined to a particular class, but is for the benefit of a entire Muslim religious community. He submitted that Hon'ble Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 have approved the decision of Privy Council in the case of Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297, wherein it has been held that a group of person may be numerous, but, if the nexus between them is their personal relationship to a single propsitus or to several propositi, they are neither the community nor a section of the community for charitable purposes. (sic). Referring to the same their Lordship have observed that it is unable to comprehend that how the trust of Rana Caste started in Ahmedabad can be regarded as having been introduced in the caste by consideration of their personal status as individual. He submitted that though religious activity has been stated as one of the object in the memorandum of Trust, but in fact during the year under consideration the assessee has incurred major expenses only in respect of peace conference which cannot be described as religious activity alone. He in this regard referred to the observations of Ld. CIT(A) vide which it was mentioned that the peace conference was attended by the dignitaries of all the religions prevailing in India. Further supporting his case, to contend that section 13(1)(b) would be applicable only to charitable trust, apart from relying upon the aforementioned decision of Hon'ble Gujarat High Court Ld. AR relied upon the following decisions:
| 1. | CIT v. Chandra Charitable Trust [2007] 294 ITR 86/[2006] 156 Taxman 19 (Guj.), wherein it has been held that Jainism was accepted to be a religion, from the covenants of the trust deed it could be spelt out that not only to propagate Jainism or help or assist maintenance of temple, Sadhus, Sadhvis, etc. yet other goals were set in the trust deed. The trust would then become a charitable trust and also a religious trust or it could be addressed as a charitable religious trust, and if that be so section 13(1)(b) would not be applicable. | |
| 2. | Shiya Dawoodi Bohra Jamat v. CIT [2011] 133 ITD 271/15 taxmann.com 154 (Ahd.), wherein it was held that assessee was religious trust for benefit of community, the registration was rejected on the ground that assessee trust was not established for the benefit of general public and had violated the provisions of section 13(1)(a) and 13(1)(b). It was the contention of the assessee that section 13(1)(b) would not be applicable to religious trust. It was held that section 13(1)(b) is applicable to a trust which is established for charitable purposes and does not applicable for religious trust. |
6.8 Ld. A.R distinguished the decisions relied upon by AO. He submitted that in the case of Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587/114 Taxman 543 (J&K), though the decision of Gujarat High Court was existing but was not considered. He submitted that applicability of section 13(1)(b) was not examined. So it relates to another case of State of Kerala v. M.P. Shanti Verma Jain [1998] 231 ITR 787 (SC) the trust was a private family trust, therefore, the same is not applicable to the facts of the present case. He submitted that as per well established principle of law, for applying decision a context considered by the Court should be considered relevant.
6.9 Alternatively, he submitted that what has been assessed by the AO is the gross receipts without giving set off of expenditure. He submitted that only net surplus, if any, could be assessed. For supporting this proposition Ld. AR relied upon the decision of the Tribunal in the case of Nirmal Agricultural Society v. ITO [1999] 71 ITD 152 (Hyd.), wherein it has been held that where the assessee has been assessed in the status of AOP denying relief under section 11 and 13, AO could assess only net income of the assessee and not the gross receipts. Thus it was submitted by him that order of Ld. CIT(A) should be upheld and departmental appeal should be dismissed.
7. We have carefully considered the rival submissions in the light of material placed before us. We have also carefully gone through the assessment order, order passed by Ld. CIT(A), documents referred before us and the case law relied upon by both the parties. In the assessment order AO has not discussed anything about the activities performed by the assessee during the year under consideration. The ITO has only referred to the objects of the trust as stated in clause (a) to (f) and finding that the assessee's object included religious activities the AO has held that assessee is a mixed trust on which provisions of section 13(1)(b) are applicable. A show cause notice was given to the assessee which has been reproduced in the assessment order and assessee was asked to explain as to why it being mixed trust provisions of section 13(1)(b) should not be applied and exemption should not be denied. In response to such notice the assessee placed reliance on the decision of Hon'ble Gujarat High Court in the case of Barkate Saifiyah Society (supra). The AO did not accept such case of the assessee on the ground that the decision of Hon'ble Gujarat High Court is totally different from the case of the assessee. He observed that in the case of Barkate Saifiyah Society (supra) the trust was charitable trust, whereas the assessee is religious trust. It is in these circumstances he has denied the exemption to the assessee and has assessed the entire gross receipts as income of the assessee out of which only establishment expenses and depreciation have been allowed. It is in this manner AO has assessed the assessee at a sum of Rs. 8,15,58,620/- against the nil income. For arriving at a conclusion that assessee is not entitled to get exemption under section 11 AO has mainly referred to the decision of Hon'ble Jammu & Kashmir High Court in the case of Ghulam Mohidin Trust (supra). In the said case the ITO had rejected the claim of assessee for grant of exemption under section 11 on the ground that assessee trust was not charitable trust and it was hit by the provisions contained in section 13(1)(b). The claim was also rejected on the ground that income was not applied for charitable purposes, but only for construction of building for commercial purposes which was not one of the objects of the trust. In appeal AAC found that the trust is partly charitable and partly religious in nature. Therefore, AAC held that part of the income, which was used for charitable purposes, was exempted under section 11 of the Act. He directed the AO to bifurcate the income of the assessee in the two objects and allow exemption in respect of the part which was applied for charitable purposes. The AAC also held that the income of the trust was properly applied for the purposes of the trust notwithstanding the fact that the assessee had used the same in the construction of building for commercial purposes. The Tribunal after analyzing the clauses 13 & 14 of the trust deed held that the trust was partly charitable and partly religious and as there was no apportionment of income between two objects of the trust and it was left to the exclusive discretion of the trustees to spent what ever they like on any objects, the assessee was not entitled to claim exemption under section 11 of the Act. Their Lordship of the High Court found that clause 13 & 14 of the instrument which contain objects of the trust were clearly showing that the trust was a religions trust created exclusively for the benefit of persons belonging to a particular religious community, which is Muslim community. Even the ex-gratia grants and loans on easy terms for further studies and research are confined to Muslims. It for that reason their Lordship observed that the trust was covered within the ambit of clause (b) of section 13(1) which denies exemption of income to such trusts under section 11 of the Act. Their Lordship further observed that clause (a) of section 13(1) of the Act was also attracted because whole of the income from property held under the trust, which is private religious trust does not enure for the benefit of the public. Thus in these circumstances it was held that Tribunal was right in holding that assessee trust was not entitled to claim exemption under section 11 of the Act for the income derived by it from the property held under the Trust. As mentioned earlier, AO had applied this decision of Hon'ble Jammu & Kashmir High Court to the case of the assessee. According to well settled principle of law in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) a judgment of a Court has to be read in the context in which the question arose for decision in that case. It was further held that it is not desirable or permissible to pick out a word or sentence from the judgment of the Court, divorced from the context of the question under consideration and treat it to be the complete "law" declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the question which were before the Court. The decision of the Court takes its colour from the question involved in the case in which it was rendered and while applying decision to a later case, the Court must carefully try to ascertain the true principle laid down by the decision and not pick out words or sentences from the said judgment divorced from the context of the question considered by the Court in that case to support their reasoning. Considering the facts of the decision in the case of Ghulam Mohidin Trust (supra), it cannot be said that the said case is applicable to the case of the assessee as none of the object of the trust has limited the application of entire income to a particular community. From the facts of that case it was observed by the Hon'ble High Court that the trust was in the nature of private religious trust and therefore, it did enure for the benefit of the public. These observations of their Lordship are stated in para 5 of the said judgment. Therefore, to reject the claim of the assessee regarding exemption under section 11 reliance cannot be placed on the decision of Hon'ble Jammu & Kashmir High Court in the case of Ghulam Mohidin Trust (supra).
7.1 It has already been pointed out that AO has not discussed the activities of the assessee carried out during the year under consideration. Ld. CIT(A) has discussed the activities of the trust in detail and he has found that out of total expenditure incurred by the assessee at Rs. 5,53,27,631/- the major expenses of the assessee is on conducting a peace conference which were to the tune of Rs. 4,84,61,830/-. It was a 10 days peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its message of peace for entire humanity to help, remove misconception, false fear, hate of Islam globally to help realize that justice, human rights, moral values and peace be it on any individual or at world wide collective level are a must for effective human progress and realistic global unity. The said conference was attended by various dignitaries, the names of whom have already been mentioned in the earlier part of this order. The said peace conference cannot be held to be a mere religious activity for the benefit of a particular community. In fact during the course of hearing referring to the details of expenditure incurred Ld. AR was specifically required to describe that as to which expenditure can specifically be assigned as religious expenditure incurred exclusively for Muslim community. It was submitted by Ld. AR that the major expenses were on peace conference and none of the expenses can be said to have incurred exclusively for religious activity. Ld. DR also could not point out any of such expenditure which can be stated to have incurred exclusively for the purpose of a particular religious community. It has already been mentioned that AO has not pointed out any such expenditure. Therefore, simply on the basis of one or two objects stated in the objects of the trust which are limited to religious activity, it cannot be said that in the year under consideration the assessee has suddenly become purely religious trust. Ld. AR has carried us through assessment orders of earlier years. In one of the assessment order AO has specifically mentioned about the issue of religious nature of trust and exemption has been granted to the assessee under section 11 after satisfying with the reply submitted by the assessee. The contents of the assessment order have already been reproduced in the above part of this order. Therefore, the case of the assessee is also acceptable on the basis of principle of consistency relying upon the decision referred by the Ld. AR, which has already been discussed in the above part of this order.
7.2 Even if one has to go by the observation of AO in the assessment order that assessee is a mixed trust, even then clause 13(1)(b) cannot be applied as it is applicable to purely charitable trust as held by Hon'ble Gujarat High Court in the case of Barkate Saifiyah Society (supra). The relevant observations have already been reproduced in the earlier part of this order in para 6.1. Therefore, also benefit of exemption under section 11 cannot be denied to the assessee under section 13(1)(b) of the Act.
7.3 Though it is not the case of AO that exemption under section 11 is not allowable to the assessee applying the provisions of section 13(1)(a), but as ground has been taken by the revenue this aspect of the matter was also argued by the Ld. AR. According to his submission section 13(1)(a) is applicable only to the trust for "private religious" purpose which does not enure for the benefit of the public. Section 13(1)(a) read as under:
"13. (1) Nothing contained in section 11 or section 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;"
It is not even the case of AO that the assessee is a trust for private religious purposes which does not enure for the benefit of public. Therefore, the assessee trust cannot be held to be debarred from claiming the exemption under section 11 on the basis of section 13(1)(a).
7.4 There is also force in the contention of Ld. AR that entire gross income could not be assessed as income of the assessee as in case it is held that trust is not eligible for exemption under section 11, then net income should be assessed and such arguments is supported by decision relied by the Ld. AR in the case of Nirmal Agricultural Society (supra) and no contrary decision has been brought to our notice.
7.5 In view of the above discussions, we find no infirmity in the order passed by Ld. CIT(A) vide which it has been held that assessee has wrongly been denied benefit of exemption under section 11 of the Act. We decline to interfere and the appeal filed by the revenue is dismissed.
8. In the result, the appeal filed by the revenue is dismissed.
USPRegards
Prarthana Jalan
__._,_.___
No comments:
Post a Comment