Income Tax Appellate Tribunal - Chennai
Kayalpatnam Baithulmal Trust, ... vs Assessee on 9 October, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE Dr. O.K.NARAYANAN, VICE-PRESIDENT
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA Nos.1506 & 1507(Mds)/2012
Kayalpatnam Baithulmal The Commissioner of
Trust, 181-Arampalli Street, Vs. Income-tax-I,
Kayalpatnam-628 204. Madurai.
PAN AABTK1854D.
(Appellant) (Respondent)
Appellant by : Shri N.Devanathan, Advocate
Respondent by : Sri Shaji P Jacob, IRS, Addl.CIT
Date of Hearing : 9th October, 2012
Date of Pronouncement : 9th October, 2012
ORDER
PER Dr.O.K.NARAYANAN, VICE PRESIDENT These two appeals are filed by the assessee. One appeal is against the order of the Commissioner of Income-tax rejecting the application of the assessee for registration under section 12AA of the Income-tax Act, 1961. The other appeal is against the order of the same Commissioner of Income-tax
-2- ITA 1506 & 1507 of 2012 refusing approval under section 80G of the Income-tax Act, 1961.
2. In his order passed under section 12AA(1)(b)(ii) dated 26-6-2012, the Commissioner of Income-tax has rejected the application for registration under section 12AA, put in by the assessee on the following grounds:-
(i) The objects of the assessee trust are admixture of both religious and charitable in nature.
(ii) No irrevocability or utilization clauses are available in the trust deed.
(iii) There is a restrictive clause in the deed of the trust.
The membership of the trust is confined to the members of a particular religious community.
3. The application put in by the assessee for approval under section 80G has been dismissed by the Commissioner of Income-tax in consequence of his order rejecting the application for registration under section 12AA of the Act.
-3- ITA 1506 & 1507 of 2012
4. The grounds raised in both the appeals are interconnected and intermingling. We heard Shri N.Devanathan, the learned counsel appearing for the assessee and Shri Shaji P Jacob, the learned Commissioner of Income-tax appearing for the Revenue.
5. We have gone through the copy of the trust deed produced before us. The object of the trust is mainly to improve the education, well being and health of poor and backward people living in and around Kayalpatnam. In pursuance of the above objective, the assessee has provided for establishing small-scale industrial training centres, hospitals, old-age homes, educational institutions and other similar social service organizations.
6. A perusal of the above objects proclaimed by the assessee trust shows that it is nowhere stated that the objects are religious in nature. The objects are definitely charitable in nature. Therefore, the Commissioner of Income-tax is not justified in rejecting the application of the assessee by stating that the objects of the assessee trust are a mixture of charitable as well as religious activities.
-4- ITA 1506 & 1507 of 2012
7. Even if, for the sake of argument, it is found that the objects of the assessee trust are a mixture of both charitable and religious activities, still the assessee is entitled for the benefit of registration under section 12AA. This is because the exemption under section 11 is available to an assessee carrying on charitable activities or religious activities or both charitable and religious activities. This position has been made very clear by the Hon'ble Madras High Court in the judgment of their Lordships in the case of CIT vs. Arulmigu Sri Kamatchi Amman Trust, through their judgment dated 25-1-2012 in Tax Case Appeal No.643 of 2011. The Hon'ble court has held that section 12AA of the Act does not make any difference between the trusts created with the object of charitable and religious purposes and even if the trust is not created with both the objects, law does not make any disqualification for the trust to make an application for registration.
8. Regarding the irrevocability of the trust, it is stated in the trust deed that "the trust is irrevocable since it has been established for the benefit and in the interest of the minority." Regarding the utilization of funds, it is stated that the income of
-5- ITA 1506 & 1507 of 2012 the trust shall be solely utilized towards its objectives. It was further stated that the members and the office bearers of the trust are not entitled to any share, profit, interest or any other benefits from the trust. It is also stated in the trust deed that in the case of dissolution of the trust, the properties and funds shall be handed over to the trust having identical objects enjoying exemption under section 80G or to any institution under the control of the Government for the benefit and welfare of the public.
9. The above clauses incorporated in the trust deed clearly show that the other objections pointed out by the Commissioner of Income-tax regarding the utilization of funds and irrevocable nature of the trust, are without any basis. Those basic conditions have been properly satisfied in the trust deed executed by the assessee.
10. Another object pointed out by the Commissioner of Income-tax is that the members of the trust belonged to a particular community. It is true that the members of the assessee trust are from Sunni Muslims. But that does not make the trust ineligible for registration under section 12AA of the Act.
-6- ITA 1506 & 1507 of 2012 It is to be seen that even a religious trust is entitled for the benefit of section 11. In a religious trust it is obvious that the members shall belong to a particular religious community. In the case of a charitable society also there is no rule that the members should not be from a single community. In India usually many of the charitable institutions are promoted by noble people of different religions. Christians are running a number of charitable institutions in this country, where trusts are formed by Christians as well as the representatives of the church. Hindu community is running a number of charitable institutions, whose members are from Hindu community. Muslim community is also running a number of charitable institutions consisting of their own members. If the reasoning of the Commissioner of Income-tax is accepted, then there cannot be a charitable society formed exclusively by members of the Dalith community or minority community. The observation of the Commissioner of Income-tax in this regard is not only against law but also against the proclaimed policy of the State.
11. In the facts and circumstances of the case, we find that the Commissioner of Income-tax has grossly erred in
-7- ITA 1506 & 1507 of 2012 refusing registration to the assessee under section 12AA of the Act. His order is set aside. The Commissioner of Income-tax is directed to grant the assessee trust registration under section 12AA of the Income-tax Act, 1961.
12. In view of the above finding, we also set aside the order of the Commissioner of Income-tax passed under section 80G of the Act. He is further directed to grant approval to the assessee trust under section 80G of the Act.
13. In result, these two appeals filed by the assessee are allowed.
Order pronounced in the open court at the time of hearing on Tuesday, the 9th of October, 2012 at Chennai.
Sd/- Sd/-
(Vikas Awasthy) (Dr. O.K.Narayanan)
Judicial Member Vice-President
Chennai,
Dated, the 9th October, 2012.
V.A.P.
Copy to: 1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. GF.