Madhya Pradesh High Court
Shri Dhakad Samaj Dharamshala Bhawan ... vs Cit on 5 December, 2006
Author: S.K. Seth
Bench: S.K. Seth
ORDER S.K. Kulshrestha, J.
1. This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as, 'the Act') has been filed to assail the order dated 24-11-2003, passed by the Tribunal, Indore Bench, Indore, by which the claim of the appellant-trust for registration under Section 11 as declined by the Commissioner has been affirmed in appeal before the Tribunal.
2. This appeal has been admitted by this Court by order dated 23-11-2004 onthe following substantial question of law:
Whether the Tribunal was justified in holding that the appellant trust is not entitled to claim the registration under Section 12A of the Income Tax Act, thereby not entering into claim for exemption available under Section 11 of the Act ?
3. The appellant claiming to be a trust on the basis of the trust deed (Annex.P/l) , applied on 11-9-2002 to the Commissioner Ujjain, in Form No. 10-A for registration under Section 12A of the Act along with a copy of the registered trust deed and audited accounts for the past years. The Commissioner, vide his order under Section 12A dated 28-3-2003, refused registration to the trust under Section 12A, mainly on the basis that : (1) object of the trust is to establish a 'Dharamshala' only forthe members of Dhakad Samaj; (2) Dhakad Samaj is not a backward class as it is not limited to Dhakad community, but includes person from Brahmin, Jain, Maheshwari and Kirar communities; and (3) it is not a religious trust as providing accommodation to the pilgrims, cannot be said to be a religious function nor has the trust so far carried out any religious activity.
4. The Tribunal has, on appeal, affirmed the order passed by the Commissioner. It has observed that it is a very well known fact that Ujjain is a place of religious importance and from throughout India people from Hindu community visit for performing Pooja, but providing accommodation to pilgrims in Dharamshala cannot be termed as religious purpose. It was further observed that admittedly, Dharamshala was not meant for persons of the Samaj living in States of Madhya Pradesh and Rajasthan only where they have been recognised as backward class.
5. Section 11 of the Income Tax Act provides for the exclusion of income from property held for charitable or religious purposes. It lays down that subject to the provisions of Sections 60 and 63, the income enumerated in els. (a), (b), (c) and (d) shall not be included in the total income of previous year of the person in receipt of the income. The income referred to is the 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 accumulated or set apart is not in excess of fifteen per cent of the income from such property. We may pause here to observe that purpose of Section 11 is to exempt such income as is held for charitable or religious purposes.
6. Learned Counsel for the appellant has submitted that registration requested by the appellant has been declined by the Commissioner only on the ground that Dhakad caste also exists in Rajasthan, Maharashtra and Uttar Pradesh and Dhakad Samaj includes certain other castes also which are not recognised as other backward classes; though it was not disputed that in Madhya Pradesh and Rajasthan, Dhakads are recognised as backward class by the Government and by the report of the Mandal Commission. It was in this context that the learned Counsel referred to Section 13(l)(b) providing for the exclusion in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of the Act, the income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste. If the said provision is read in apposition with Section 11, the dominant purpose for the grant of exemption should be income from property held for charitable or religious purposes. In order to overcome the hurdle provided in Section 13(b) of the Act, learned Counsel has referred to Expln. 2 providing that a trust or institution created or established for the purposes of scheduled castes, backward classes, scheduled tribes or women and children shall not be deemed to be trust or institution created or established for the benefit of a religious community or caste within the meaning of Clause (b) of Sub-section (1). The learned Counsel, therefore, submits that by virtue of the trust being of Dhakad Samaj, recognised backward class, the embargo contained in Section 13(l)(b) is removed and the authorities below should have considered the case of the appellant trust in the light of Expln. 2, providing for a special provision in their case. The Tribunal observed in para 8 of its decision that considering the totality of the facts and circumstances of the case, as discussed, it was of the view that aims and object of the trust are also not composite i.e., religious as well as charitable and provisions of Section 13(1)(b) will be applicable as held by the Tribunal in the case of Barkate Saitiyan Society upheld by the Hon'ble Gujarat High Court that Section 13(l)(b) of the Act applies to trust which were purely for charitable purposes.
7. While it is true that the Commissioner in declining the registration has taken into account certain extraneous consideration such as Dhakad caste also exists in Rajasthan, Maharashtra and Uttar Pradesh and includes certain other castes which are not recognised as other backward classes which has been explained by the learned Counsel for the appellant that merely because the members of the Samaj spread to far-flung areas for making a living, it cannot be said that they have become inhabitants of outside State and have ceased to the members of Dhakad community. However, we find from the order passed by the Tribunal that the trust has been created only to provide Dharamshala for the stay of pilgrims who, as admitted by the learned Counsel for the appellant need not necessarily be from Dhakad community. It has further observed that merely because Dharamshala has been constructed in a religious place namely, Ujjain, it cannot be said that it is for charitable or religious purposes.
8. In our considered view, since Section 11 of the Act provides for exemptions to the trust registered under the Act, it is primarily the purpose of Section 11 that will dominate or prevail over other consideration. Section 11 provides for this exemption only if the property held is for charitable or religious purposes. It is only when such a purpose is shown that registration can be granted. It is in this context that in the case of trust for charitable purposes or charitable institution created or established after the commencement of the Act, the income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste, shall be excluded. Reference to the religious community or caste will have to be read ejusdem generis with the purposes for which the exemption is to be granted under Section 11 which is charitable or religious purpose. Thus, even though the bar contained in Clause (b) of Sub-section (1) of Section 13 may not be attracted in view of the Expln. 2 providing that in case of scheduled castes, backward classes, scheduled tribes or women and children, it will not be deemed to be created or established for the benefit of a religious community or caste, within the meaning of Clause (b) of Sub-section (1) of Section 13, the said provision cannot be construed de hors the purpose contained in Section 11. It is only when it is proved that the property is consecrated for charitable or religious purposes that the trust may become entitled to registration subject to fulfillment of other conditions.
9. In the application of the appellant, before the Commissioner the purpose shown was to provide Dharamshala for persons from the Samaj and outsiders. It is not disputed that though the provision has been made for charging a token amount from the persons belonging to Dhakad Samaj, the charges for stay in the case of persons not belonging to the Samaj are many times the charges for the persons belonging to the Samaj. Merely because the accommodation created is in a religious place, it cannot be said that providing Dharamshala is for religious purposes. There should be something more to suggest its nexus with the religious or charitable purpose. It may not be with an intention to make money, but at the same time it does not fulfil the requirement of Section 11. Under these circumstances, we find that the registration declined by the Commissioner and affirmed by the Tribunal, does not suffer from any infirmity, patent or latent. Thus, we answer the question against the appellant and in favour of the respondent and this appeals is dismissed.