Income Tax Appellate Tribunal - Hyderabad
M/S Venkateswara Vardhakya Seva ... vs Assessee on 11 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 450/Hyd/2013 - A.Y. 2013-14
ITA No. 451/Hyd/2013 - A.Y. 2013-14
M/s. Venkateswara vs. The Director of Income-tax
Vardhakya Seva Kendram (Exemptions)
Welfare Trust, Kurnool Hyderabad
PAN: ABHPV6963F
Appellant Respondent
Appellant by: Sri A.V. Raghuram
Respondent by: Sri Phani Raju
Date of hearing: 11.07.2013
Date of pronouncement: 11.07.2013
ORDER
PER CHANDRA POOJARI, AM:
These two appeals by the assessee are directed against the common order of the Director of Income-tax (Exemptions) [DIT(E)] , Hyderabad dated 29.1.2013. ITA No. 451/Hyd/2013 is with regard to rejection of application for registration u/s. 12AA and ITA No. 450/Hyd/2013 is with regard to non-granting of approval u/s. 80G of Income-tax Act, 1961.
2. Brief facts of the case are that the assessee applied for registration u/s. 12AA as well as approval u/s. 80G of the Act in prescribed form. According to the DIT(E) the object clause No. 9 of the assessee is not fully secular. For ready reference, we reproduce clause No. 9, as under:
"To arrange and to encourage sponsor, coordinate temporary feeding (Annadanam Choultries) for all people on secular lines at all religious places like 2 ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================ Antharvedi, Annavaram, Mahanandi, Srisailam and any other place or places as may be decided by the Board of Trustees by raising donations for the purpose."
3. According to the DIT(E), though, in the above object clause, there is mention for arranging for feeding of all people on secular lines at all religious places, but from the specific emphasis giving on four religious places, i.e., Antharvedi, Annavaram, Mahanandi and Srisailam, which are associated with Hindu Pilgrimage, it shows religious inclination on part of the assessee trust to a particular religion. Such object clause thus, being found to be of religious nature, and when the trust is having other charitable objects, under the circumstance, the trust in this case thus has got mixed objects and since it has been formed on 17.12.2011 i.., after 1.4.1962, it does not qualify either as a public religious trust or as a public charitable trust. Under this circumstance and having regard to the provisions of sec. 12AA r.w.s. 11 of the Act and keeping in view the ratio of decision of, Hon'ble Supreme Court in the case of State of Kerala s. M.P. Shanti Varma Jain (1998) 231 ITR 787 (SC) and CIT v. Palghat Shadi Mahal Trust (2002) 254 ITR 212 (SC) and CIT v. Upper Ganges Sugar Mills Ltd. (1997) 227 ITR 578 and of the Hon'ble Jammu & Kashmir High Court in Ghulam Mohiddin Trust vs. CIT [2001] 248 ITR 587, the above Trust cannot be allowed registration u/s. 12A of the Act. In this context it important to keep in mind, the following observations made by the Hon'ble Jammu & Kashmir High Court at Page No. 593-594 of the said decision in Ghulam Mohiddin Trust vs. CIT (supra):
"....because the law is well-settled that if there are several object of the trust, some of which are charitable and some non-charitable and the trustees in their discretion are to apply the income to any of the objects, the whole trust would fall and no part of its income would be exempt from tax. The reason is that in such a 3 ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================ case no definite part of the property or its income is allocated for charitable purposes and it would be open to the trustees to apply its income to any of the non- charitable objects or religious purposes."
4. Further the DIT(E) observed that there is no mention about irrevocable nature of the trust, in the trust deed when the assessee trust claims to be a public charitable organisation. In absence of such clause, pointing out to irrevocable nature of the trust, the assessee trust in this case cannot be considered as a public charitable organisation and hence, under that circumstance, is not eligible for registration u/s 12AA of the Act. In view of the foregoing discussions, he observed that the above trust cannot be granted registration u/s 12AA of the Act and accordingly, he rejected the application in Form No. 10A filed by the assessee society. Consequently, the other application filed in Form No. 10G for approval u/s 80G(5) of the Act, was also rejected by him. Against this, the assessee is in appeal before us.
5. The learned AR submitted that the DIT(E) is not justified in rejecting the application of the assessee for registration u/s. 12AA non-granting of approval u/s. 80G of the Act. The AR further submitted that the order of the DIT(E) rejecting application of the assessee for approval under section 80G of the Income Tax Act, 1961, is perverse, illegal and unsustainable in law. The order of the DIT(E) is void ab initio as the same was passed in gross violation of principles of natural justice. The DIT(E) did not give any opportunity of being heard before rejecting registration. Without prejudice, the order of DIT(E) is invalid as the preliminary enquiry was conducted by ITO (Hqrs.) who is not competent authority to grant registration u/s. 12AA of the Act. The DIT(E) ought to have appreciated that authority empowered to take decision must alone conduct enquiry after giving opportunity to 4 ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================ the person who is likely to be affected. The DIT(E) failed to appreciate that it is no compliance with the principles of natural justice if hearing is conducted by sub-ordinate authority and decision is taken by another authority.
6. The AR submitted that the DIT (E) failed to consider the registered Rectification Deed dated 01.12.2012 whereby sub- clause (9) of Clause 11 of the Original Deed of Trust was substituted and so as to make explicit sub-clauses (iii) and (iv) were added to render the Trust irrevocable and power to amend made subject to approval of the Commissioner of Income Tax. The DIT(E) failed to appreciate the matter in proper perspective in that the Trust founded with the main and sole object of serving senior citizens in rural areas and that the activities are to be carried out on secular lines without any discrimination. The AR submitted that, without prejudice to above, the finding of the DIT(E) that the objects of the assessee are religious is factually incorrect. The DIT(E) failed to appreciate that the clause with which he dealt did not restrict the places only to those mentioned in such clause but states that any other place or places as may be decided by the Board of Trustees and even otherwise the learned DIT(E) erred in giving a finding a place to be religious, when it cannot be so.
7. The AR submitted that the DIT(E) is wrong in assuming that the activity of the assessee is associated with only Hindu Pilgrimage and there was no occasion for such assumption. At any rate it has been held time and again that Hinduism is not a religion but it is only a way of life. The reliance placed by the DIT(E) on various decisions is totally misplaced and irrelevant. The finding of the DIT(E) that assessee trust cannot be considered to be a public charitable organisation in the absence of mention about irrevocable nature of the trust is erroneous and legally 5 ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================ untenable. The DIT(E) failed to appreciate that a public charitable trust is always irrevocable and there is no need to mention the same in the trust deed. He submitted that the DIT(E) ought to have appreciated that a public charitable trust can be formed without even a formal deed. Accordingly, the AR prayed that the appeal may be allowed.
8. The learned DR submitted that the object clause of the assessee trust is not secular in nature. He relied on the order of the DIT(E) for not granting registration u/s. 12AA and denying approval u/s. 80G of the Act.
9. We have heard both the parties and perused the material on record. In this case registration was not granted on the reason that the object of the assessee trust was not secular and found to be religious and charitable in nature. The learned AR relied on the order of the Tribunal in the case of Abid Rasool Khan Charitable & Educational Trust vs. DIT(E) in ITA No. 1368/Hyd/ 2012 dated 28.6.2013 wherein the Tribunal granted registration by observing that even if the assessee is engaged in helping and guiding Muslim community in various fields such as employment, medical camps, various Government schemes and website hosting and operating by the assessee trust is meant for the benefit of one particular community cannot warrant denial of registration u/s. 12AA of the Act. Further, in the case of Rehoboth Mission vs. DIT(E), Hyderabad reported in 42 SOT 149 wherein the Tribunal observed as follows:
"6. We have gone through the provisions of sec. 13(1)(b) of the Act. There is nothing in the language of this provision to suggest that an institution of mixed objects is precluded from getting registration u/s 12AA of the Act. It is also seen from the objects of the trust in question that the assessee is carrying on no non-6
ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================ charitable or non-religious activities. We place reliance on the judgement of ACIT v. Barkate Saifiyah Society 213 ITR 492 (Guj) and CIT v. Chandra Charitable Trust 294 ITR 86 ( Guj), wherein it was held that a trust can either be for religious purposes or for charitable purposes or it can be for both. Only a trust which is for religious purpose is excluded and debarred from registration u/s 12AA of the Act. A trust whose object is charitable as well as religious is not debarred from registration. Further, in the case of New Life in Christ Evangelistic Association v. CIT & Others 246 ITR 532 (Mad), wherein it was held that for granting or refusing registration u/s 12A in relation to such trust, the only condition precedent is that an application for registration should be made in time and the accounts of the institute should be audited. No enquiry about objects of the trust can be made u/s 12A of the Act. We have gone through all the judgements cited by the learned counsel for the assessee. The facts of the case in the case considered by the Gujarat High Court squarely apply to the facts of the case on hand. The department has not brought any contrary decision to our notice. In our opinion, in the circumstances under consideration, the DIT(E) should not have rejected the application of the assessee for registration u/s 12AA of the Act on this reason. Commenting on the Honourable Gujarat High Court decision, the DIT(E) has observed that the Hon'ble High Court has introduced a new concept known as "charitable religious trust." According to him, trust has to be either wholly religious or wholly charitable. Otherwise, it is not entitled for registration and the Hon'ble Gujarat High Court did not consider the word "or" which has been employed u/s 11(1)(a) and sec. 12 of the Act and the Hon'ble High Court has interpreted sec. 13(1)(b) of the Act. We are unable to agree with the DIT(E) as to how and why the judgement of the Hon'ble Gujarat High Court is not applicable to the facts of the present case. There is no such bar since there is no jurisdictional High Court's judgement on this issue, to the contrary and this observation of the DIT(E) is unwarranted. Consequently, we direct the DIT(E) to grant registration to the assessee society subject to fulfilment of other conditions, if any."7
ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================
10. Further, in the case of Shiv Mandir Devsttan Panch Committee Sanstan vs. CIT reported in 150 TTJ 452 (Nag) (79 DTR
276) the Tribunal held as follows :
"9. The charitable purpose has been defined u/s. 2(15) of the Act. The definition of charitable purpose is inclusive one. It includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. The objects as enumerated above held on by the assessee trust are charitable within the meaning of section 2 of sub section 15. Some of the objects fall within the "advancement of any other object of general public utility". Proviso to section 2 sub section 15 restricts the meaning "advancement of any other objects of general public utility". But CIT(A) has not stated that proviso to section 2 sub section 15 is applicable in the case of the assessee.
12. Even we noted that all the building maintenance expenses, free food expenses and festival , prayer and daily expenses cannot be regarded to be the one incurred for religious object ,even if the object is regarded to be religious one. It is not denied that in the building the assessee was carrying yoga centre, tailoring training centre as well as food for the needy and optical centre for the poor.
13. Explanation 3 to section 80G(v) states that "in this section, "charitable purpose" does not include any purpose the whole or substantially the whole of which is of a religious nature." This explanation takes note of the fact that an institution or fund shall be for a charitable purpose and may have a number of objects. If any one of these objects is wholly or substantially wholly of a religious nature, the Institution or Funds falls outside the scope of section 80G and the donation to it will not make the donor entitled for the deduction u/s. 80G. The objects as per Explanation 3 must be wholly or substantially whole of which must be of religious nature. The assessee has submitted all the evidence including the objects and how the expenditure has been incurred by it. The onus, in our opinion, gets shifted on the Revenue to prove that the assessee-trust is wholly or substantially for the religious purpose. There is no allegation on the part of the revenue that the whole or substantially whole of the object of the 8 ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================ trust is to propagate or advance support to a particular sect. We may observe that Hinduism is a way of life of a civilized society. It as such is not a religion. In this regard we rely on the case of T T Kuppuswamy Chettiar vs. State of Tamil Nadu (1987) 100 LW 1031 in which it was held " The word "Hindu" has not been defined in any of the texts nor in judgment made law. The word was given by British administrators to inhabitants of India, who were not Christians, Muslims, Parsis or Jews. The alleged Hindu religion consists of four castes Brahmins, kshatriyas, vaishyas and sudras belonging ultimately to two schools of law, mitaksharas and dayabhaga. There is, however, no religion by the name 'Hindu'. It only shows that so called Hindu religion has been called for convenience." CIT must be aware of that the Hindu consists of a number of communities having the different gods who are being worshipped in a different manner, different rituals, different ethical codes. Even the worship of god is not essential for a person who has adopted Hinduism way of life. Thus, Hinduism holds within its fold men of divergent views and traditions who have very little in common except a vague faith in what may be called the fundamentals of the Hinduism. The word 'community' means a society of people living in the same place, under the same laws and regulations and who have common rights and privileges. This may apply to Christianity or moslem but not to Hinduism. Therefore, it cannot be said that Hindu is a separate community or a separate religion. Technically Hindu is neither a religion nor a community. Therefore, expenses incurred for worshipping of Lord Shiva, Hanuman, Goddess Durga and for maintenance of temple cannot be regarded to be for religious purpose. Under these facts and circumstances, we are of the view that the CIT is not correct in law in not allowing the approval to the assessee trust u/s. 80G of the Act. We accordingly, set aside the order of the CIT and direct the CIT to grant approval to the assessee-trust u/s. 80G(5)(vi) of the Act.
11. In view of the above discussion, we are of the opinion that even if the assessee is having mixed object, charitable as well as religious, is entitled for registration u/s. 12AA of the Act and also can avail approval u/s. 80G of the Act.
9ITA Nos. 450 & 451/Hyd/2013 M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, Kurnool ============================
12. Further, if there is any inconsistency in the trust deed relating to no mentioning about irrevocable nature of the trust, the same could be rectified by the assessee in its trust deed to the satisfaction of the DIT(E). In view of this, we are inclined to remit the entire issue to the file of the DIT(E) with a direction to reconsider the application of the assessee for registration u/s. 12AA and approval u/s. 80G of the Act in the light of our above directions.
13. In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open court on 11th July, 2013.
Sd/- Sd/-
(SAKTIJIT DEY) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 11th July, 2013
tprao
Copy forwarded to:
1. M/s. Venkateswara Vardhakya Seva Kendram Welfare Trust, c/o. M/s. K. Vasantkumar, A.V. Raghuram, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad.
2. The Director of Income-tax (Exemptions), 3rd Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.
3. The ADIT(E)-II, Hyderabad.
4. The DR - 'A' Bench, ITAT, Hyderabad