Vivekananda Seva Samiti,, Medak Dist vs Assessee

These are appeals by assessee-society directed against the common order of the DIT (Exemptions), Hyderabad rejecting assessee's application for grant of registration u/s. 12AA of the Income Tax Act [Act] and consequent rejection of approval u/s. 80G(5) of the Act.

2. Assessee filed appeal No. 1263/Hyd/2013 against the order of 12AA raising grounds both on 12AA registration and also rejection of 80G with 3 days delay. This delay was explained as misplacement of order of DIT in the office of assessee at Ramayampet by the staff and consequent to delay in filing in appeal in Hyderabad with 3 days delay. Considering the explanation of assessee, the delay in filing the appeal is condoned. ITA No. 1799/Hyd/2014 is however, filed with a delay of 417 I.T.A. Nos. 1263/Hyd/2013 :- 2 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

days. It was explained that since the DIT(E) passed a common order, being unknown to the proceedings/procedures, assessee-society preferred a common appeal. Later on it has come to know that two appeals are to be filed separately. Accordingly, assessee preferred a separate appeal to be filed for different sections. Therefore, the second appeal on the issue of 80G was preferred with a delay of 417 days. Considering the explanation of assessee, the condonation requested was granted and accordingly this appeal is also admitted.

3. Briefly the facts are, assessee claiming itself to be a charitable trust created vide registered deed with a registration No. 722/09, filed application seeking registration u/s. 12AA of the Act before the Ld. DIT(E) in the prescribed manner on 18-12-2012. In the course of scrutiny, the DIT(E) has issued a questionnaire on 06-03-2013 asking assessee-society to furnish details on specific points, to produce all original documents of trust and also Books of Accounts and bills and vouchers for verification. After going through the aims and objects of the society, the DIT(E) noticed that society has both charitable and religions objectives. According to him, object clause at Sr. No. XII, XIII and XIV are of religions nature. He extracted them as under:

"Xii. To propagate our dharma and culture by evolving suitable methods to reach various sections of our society.

Xiii. To promote and encourage the use of temples as centers for propagations of Dharmic values to help establish new temples wherever necessary and to take all necessary steps for enabling proper management and administration of temples and their properties.

Xiv. To promote Dharmic awakening and patriotism through festivals, jatharas etc and organizing social bhajans plays, dramas, group songs and other culture activities and to organize social and Dharmic lectures for propagation of Dharmic values".

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4. During the course of proceedings, the President of assessee-society submitted that they have passed resolution for deleting those clauses as from Memorandum of Association. However, the DIT records that such amended Memorandum of Association was not furnished. Therefore, according to him, those object clauses of religious nature are still there in force, notwithstanding a resolution passed by assessee-society. He was of the opinion that assessee-society does not qualify either as a public charitable trust or as a public religious trust. Relying on various case law as recorded in the order, the DIT held that the trust can not be allowed registration under the Act. He extracted the observations of the Hon'ble Jammu and Kashmir High Court in the case of Ghulam Mohidin Trust Vs. CIT [248 ITR 587] to consider that assessee is not eligible for registration. Accordingly, he did not grant registration u/s. 12AA of the Act. Consequently, he also rejected the other application filed in Form 10G for approval u/s. 80G(5) of the Act by the same order dt. 27-06- 2013. Assessee is aggrieved and preferred the present two appeals.

5. Shri M. Bhupal Gowd, Life Member of the society authorized by the President of the society appeared and explained that the above three object causes are not religious in nature. Even then, honouring the opinion expressed by the DIT(E), assessee-society passed a resolution amending the above objects. But due to state government employee's strike (Sakala Janula Samme) at the relevant point of time, they were not able to get the revised/amended objects of the society. He filed a copy of the revised objects of the society for perusal. It was requested that registration may be granted to assessee-society as the objects are charitable in nature.

6. Ld. CIT-DR however, relied on the orders of the DIT(E).

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7. We have considered submissions of the parties and perused the impugned order of Ld. DIT(E) as well as other materials on record. At present, as the assessee-society amended those objects which the DIT(E) considered as religious in nature, the objection of DIT(E) has no merit. Because of the strike at the relevant point of time, assessee could not furnish a revised Memorandum of Association but that could not prevent the DIT(E) in granting registration u/s. 12AA. As per Section 12AA, Ld. CIT/DIT has to satisfy himself about the object of the trust and genuineness of the activities of the trust or institution. On going through the impugned order of the Ld. DIT(E), it is absolutely clear that he accepts the majority of the objects are charitable in nature. Specific objection of Ld. DIT(E) is with reference to three objects which in his view violates the provisions contained in Section 11. The object clause which Ld. DIT(E) considers to be of religious nature are as under:

"Xii. To propagate our dharma and culture by evolving suitable methods to reach various sections of our society.

Xiii. To promote and encourage the use of temples as centers for propagations of Dharmic values to help establish new temples wherever necessary and to take all necessary steps for enabling proper management and administration of temples and their properties.

Xiv. To promote Dharmic awakening and patriotism through festivals, jatharas etc and organizing social bhajans plays, dramas, group songs and other culture activities and to organize social and Dharmic lectures for propagation of Dharmic values".

8. However, on careful analysis of the aforesaid clause, it can be seen that they are neither for the benefit of a particular religion or community nor they are confined to a particular class of people or people of particular caste or creed. On the contrary, these object clauses certainly gives an impression that it is for the benefit of general public. As can be I.T.A. Nos. 1263/Hyd/2013 :- 5 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

seen from Clause-Xii, it speaks of propagating 'Dharma' and 'Culture' by evolving suitable methods to reach various sections of our society. These objectives cannot be treated as for the benefit of a particulars religion or community. Similarly, promoting and encouraging use of temples as centres for propagation of 'Dharmic Values' also cannot be considered to be confined to a particular religion or community. Promoting 'Dharmic Awakening' and patriotism through festivals, Jathras etc., and organising Social Bhajans, plays, Dramas, Group songs and other cultural activities and to organise social and Dharmic lectures for propagation of 'Dharmic Values' cannot be considered to be for a particular religion or a community. In fact these are for the benefit of general public. Just because the word 'Dharma' is used in the above clauses, it does not mean that it pertains to a religious activity. 'Dharma' can be of any religion or for any social order which is for the benefit of society in general.

9. Thus, on careful reading of the object clauses in general specifically clauses on which Ld. DIT(E) has raised concern stating that they are of religious nature, the impression one gets is there is nothing in these clauses which can lead one to believe that they are for the benefit of a particular religion or community, hence coming within the mischief of Section 13(1)(a) or 13(1)(b) of the Act. On the contrary, these clauses if at all they can be called to be of religious nature are for the benefit of general public, hence, can be considered to be in the nature of any 'other object of general public utility' as engrained in the definition of 'charitable purpose' u/s. 2(15) of the Act. Law is well settled that 'any other object of general public utility' is of the widest connotation as the word 'general' in said expression signifies a whole class. Hence, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of I.T.A. Nos. 1263/Hyd/2013 :- 6 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

individuals would be a charitable purpose. Considered in the aforesaid perspective, there cannot be any doubt that the main object of assessee- trust is charitable in nature, as it is for the benefit of general public. The Hon'ble Supreme Court in the case of Addl. CIT Vs. Surat Art Silk Cloth Manufacturers Association [121 ITR 1 (SC)] and a number of other decisions held that if the primary purpose and predominant objects of a trust are to promote welfare of the general public, the purpose would be charitable purpose. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the trust or institution from being a charitable trust.

10. Even in a case where there are mixed objects, there is both charitable and religious, the registration cannot be denied and this issue was elaborately discussed by the co-ordinate bench in the case of Shiva Shakthi Shiridi Sai Anugraha Mahapeetam in ITA No. 1232/Hyd/2014 dt. 03-12-2014 as under:

"11. Even assuming that appellant trust has mixed objects i.e. both charitable and religious, let us examine whether for this reason alone it becomes ineligible for availing exemptions u/s 11 and being registered u/s 12AA of the Act. Ld. DIT(E) in his order has observed that appellant trust is having both charitable and religious objects, further the religious objects are for the benefit of particular religion. After perusing the objects we are inclined to hold that they cannot be considered to be for the benefit of a particular religious community, rather, in our view, the object clauses specifically referred to by ld. DIT(E) are for the benefit of the general public and not confined to any particular religious class or community. Reverting back to the issue whether having objects of both charitable and religious nature disentitles from availing exemption u/s 11. Let us examine the said provision which reads as under:

"11. (1) [(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so I.T.A. Nos. 1263/Hyd/2013 :- 7 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

accumulated or set apart is not in excess of [fifteen] per cent of the income from such property;"

According to ld. DIT(E) the words 'charitable or religious' appearing in the aforesaid provision would mean, a trust or institution can either have charitable or religious objects and not both. In our view, such a narrow interpretation cannot be given to section 11(1)(a) of the Act. Section 11(1)(a) of the Act makes no distinction between religious or charitable institution so far as grant of exemption is concerned, save and except the conditions imposed u/s 13 of the Act. The word 'or' between charitable and religious as used in section 11(1)(a) is not disjunctive but conjunctive in nature, therefore, it is necessary to read that income derived from property held under trust wholly for charitable or religious purposes or both are exempt. The Hon'ble Supreme Court in case of CIT Vs. M/s Dawoodi Boharh Jamat, Civil Appeal No. 2492 of 2014 observed, in certain cases 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 or also public at large. Feeding animals or cow may be a religious activity for a particular community but may be charitable for others. Similarly, feeding poor people or giving water to thirsty may be religious for some but charitable for others. Analysing the objects of the trust by keeping the aforesaid principles in view, hon'ble Apex Court finally held as under:

"41.Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 of the Act shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of Section 13. The activities of the trust under such objects would therefore be entitled to exemption accordingly.

42.We would now proceed to examine the objects under the provisions of Section 13(1)(b) of the Act. It becomes amply clear from the language employed in the provisions that Section 13 is in the nature of an exemption from applicability of Sections 11 or 12 and the examination of its applicability would only arise at the stage of claim under Sections 11 or 12. Thus, where the income of a trust is eligible for exemption under section 11, the eligibility for claiming exemption ought to be tested on the touchstone of the provisions of section 13. In the instant case, it being established that the respondent-trust is a public charitable and religious trust eligible for claiming exemption under Section 11, it becomes relevant to test it on the anvil of Section 13.

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43.Thus, the second issue which arises for our consideration and decision is, whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under Section 11 of the

Act in view of provisions of Section 13(1)(b) of the Act.

44.In the instant case, the Tribunal has found on facts after analysing the objects of the trust that the respondent trust is a public religious trust and its objects are solely religious in nature and being of the opinion that Section 13(1)(b) is solely meant for charitable trust for particular community, negated the possibility of applicability of Section 13(1)(b) of the Act at the outset. The High Court has also confirmed the aforesaid view in appeal and observed that Section 13(1)(b) would only be applicable in case of income of the trust for charitable purpose established for benefit of 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 trusts 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, (1975) 101 ITR 234 (SC)). The section of community sought to be benefited must be either sufficiently defined or identifiable by a common quality of a public or impersonal nature.

(CIT v.Andhra Chamber of Commerce, 55 ITR 722).

47.This Court in CIT v. Palghat Shadi Mahal Trust, (2002) 9 SCC 685 the muslim residents of Kerala constituted a trust "for the purpose of constructing and establishing at Palghat-a-Shadi Mahal and other institutions for the educational, social and I.T.A. Nos. 1263/Hyd/2013 :- 9 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

economic advancement of the Muslims and for religious and charitable objects recognised by Muslim law ..." and later clarified that the proceeds would be utilized for the benefit for public at large and upon this basis, the trust made a claim for exemption from tax under Section 11. This Court held that the resolution clarifying the object would not validly amend the object of the trust-deed and since the object confined the benefit to only muslim community, it would be covered by the restriction under Section 13(1)(b) of the Act even though it functioned for public benefit. Thus, therein the object sufficiently defined or expressly stated beneficiary class and restricted the activities of the trust to a specific community.

48.Further, in State of Kerala v. M.P. Shanti Verma Jain, (1998) 5 SCC 63 this Court has held that propagation of religion and restriction of benefits of activities of trust in its objects to the said community would render the trust as ineligible for claiming exemption under similar provisions of Kerala Agricultural Income Tax Act, 1950. The Court observed as follows:

"...The Deed of Trust and the rules run into more than thirty pages out of which six pages of the Trust Deed narrate the philosophy of Jain Dharma. The objects of the Trust clearly show that the Trust is meant for propagation of Jain religion and rendering help to the followers of Jain religion. Even medical aid and similar facilities are to be rendered to persons devoted to Jain religion and to non-Jains if suffering from ailments but the medical aid could be given to them only if any member of the families managing the Trust, shows sympathy and is interested in their treatment. The Tribunal, in our opinion, was right in its conclusion that the dominant purpose of the Trust in the present case was propagation of Jain religion and to serve its followers and any part of agricultural income of the Trust spent in the State of Kerala also could not be treated as allowable item of the expenses."

49.In the present case, the objects of the respondent-trust based on religious tenets under Quran according to religious faith of Islam. We have already noticed that the perusal of the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community. The objects, as explained in the preceding paragraphs, do not channel the benefits to any community if I.T.A. Nos. 1263/Hyd/2013 :- 10 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

not the Dawoodi Bohra Community and thus, would not fall under the provisions of Section 13(1)(b) of the Act.

50.In that view of the matter, we are of the considered opinion that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that Section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under Section 11 of the Act."

12. In case of The Society of Presentation Sisters and others Vs. ITO, 318 ITR(AT)287, the Hon'ble Third Member while concurring with the view expressed by Hon'ble Accountant Member, held as under:

"It is clear from plethora of authorities where after considering the provisions of section 11(1)(a) that so far as the aforesaid provision 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. Most of the decisions were given under the 1961 Act. Even where the decision was on consideration of 1922 Act, there is no material difference as is demonstrated in the above discussion. Their Lordships of the Supreme Court have held, as noted earlier, that charitable and religious purposes overlaps in India. Even otherwise relief and help to the poor, medical help to the needy, looking after of deity and temples (mosque, church included) are no doubt religious purposes but these are also considered as charitable in India. Therefore, the view taken in the two cases before me that exemption under section 11(1)(a) cannot be allowed to a charitable trust as it is also carrying some purposes which are termed as 'religious' is totally unwarranted. The above view is totally contrary to the well established an settled law in India, as laid down by their Lordships of the Supreme Court.

The other reason given by the learned Judicial Member is that two trusts in question are partly charitable or religious trusts established after April 1, 1962. Therefore, on account of language of the statute in section 11, there is prohibition from income derived from property held for charitable or religious purposes. According to him, income under both charitable and religious purposes cannot be combined together and the assessee has to choose either of the charitable activities or religious activities, but I.T.A. Nos. 1263/Hyd/2013 :- 11 -: & 1799/Hyd/2014 Vivekananda Seva Samithi

not both. I had to state that in my humble opinion, there is no statutory provision to support proposition of law, stated by the learned Judicial Member. The learned Judicial Member, like the revenue authorities, misconstrued the legal implication of the word 'or' in section 11(1)(a).

13. The principle of law emerging from the aforesaid decisions are a trust/institution having charitable and religious objects will be eligible for exemption u/s 11 unless hit by restrictions imposed u/s 13(1)(a) or 13(1)(b) of the Act. As in the present case, ld. DIT(E) has not brought any material on record to show that provisions of section 13(1)(a) or 13(1)(b) applies to the assessee, denial of registration u/s 12AA for alleged violation of section 11(1)(a), in our view, is not justified. Moreover, applicability of section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by ld. DIT(E) while exercising power u/s 12AA of the Act. In aforesaid view of the matter, we are inclined to set aside the impugned order of ld. DIT(E) and direct him to grant registration to the appellant trust u/s 12AA of the Act".

11. In view of the above decision of the co-ordinate bench, we find that the trust/institution having charitable and religious objects will also be eligible for exemption u/s. 11, unless hit by restrictions imposed u/s. 13(1)(a) or 13(1)(b) of the Act. The DIT(E) has not brought any material on record to show that provisions of Section 13(1)(a) or 13(1)(b) applies to assessee, denial of registration u/s. 12AA for alleged violation of Section 11 in our view is not justified. Moreover, applicability of Section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by the DIT(E) while exercising power u/s. 12AA of the Act. Moreover, at present assessee also excluded the three object clauses objected to by the DIT(E). Therefore, the objections raised by DIT(E) does not survive. In view of the above, we are inclined to set aside the impugned order of DIT(E) and direct him to grant registration to the appellant-trust u/s. 12AA of the Act from the period it applied for registration. Accordingly, appeal in ITA No. 1263/Hyd/2013 is considered allowed.

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12. Since the DIT(E) refused approval u/s. 80G only on the reason that registration u/s. 12AA was denied to assessee, we direct the DIT(E) to examine the application and grant registration u/s. 80G, if other conditions are satisfied. Accordingly, appeal in ITA No. 1799/Hyd/2014 is considered allowed for statistical purposes. The order of DIT(E) on this issue is set aside with a direction to consider the application and grant registration u/s. 80G after due verification.

13. In the result, both the appeals are considered allowed for statistical purposes.

Order pronounced in the open Court on 29th July, 2015.

Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 29th July, 2015

TNMM

Copy to :

1. Vivekananda Seva Samithi, H.No. 17-132/1, Ramayampet, Medak District. C/o. P. Krishna Reddy, 2-1-267/268, Nallakunta, Hyderabad.

2. The Director of Income Tax (Exemptions), Hyderabad.

3. The DDIT(E)-I, Hyderabad.

4. D.R. ITAT, Hyderabad.

5. Guard File.