Income Tax Appellate Tribunal - Rajkot
Rajkot Visha Shrimali Jain Samaj ... vs Income Tax Officer on 1 June, 2006
Equivalent citations: (2007)109TTJ(RAJKOT)286
ORDER
R.C. Sharma, Accountant Member
1. This is an appeal filed by the assessee against the order of the CIT(A) dated 8.2.06 for the AY 2002-03. Following three effective grounds have been taken by the assessee:
That the ld. CIT(A) has grievously erred in contending that trust is not entitled to the benefit of Section 11 on the expenditure of Rs. 4,81,221 so incurred by it on providing the earthquake relief.
2. That the ld. CIT(A) has erred in contending that the provisions of Section 13(1)(b) of the Act are applicable to the trust and consequently the trust is not entitled to the benefit of Section 11.
3. That the ld. CIT(A) has erred in contending that the first proviso to Section 13 is applicable to the appellant.
2. Rival contentions have been heard and record perused. The assessee is a public charitable Trust duly registered under Bombay Public Trust Act and Under Section 16 of the I.T. Act. The Trust was incorporated on 11.8.1960, copy of certificate of incorporation was filed before the lower authorities. The return was filed for the relevant assessment year under consideration showing deficit of Rs. 5,723 after claiming permissible deduction Under Section 11. During the year the assessee trust has incurred expenditure of Rs. 4,82,221 towards earthquake relief. The AO declined to allow the expenses on the plea that since the charitable nature of activities of the Trust was limited to the Visha Shrimali Jains which was a small community, the assessee Trust had contravened the provisions of Section 11A. Accordingly, the benefit of Section 11 was denied and expenditure incurred on earthquake relief was not allowed by invoking the provisions of Section 13(1)(b) of the I.T. Act.
3. By the impugned order, the CIT(A) confirmed the action of the AO by observing that the assessee Trust has applied fund for the benefit of a religious community, therefore, covered by the provisions of Section 13(1)(b) of the I.T.Act. The contention raised before the CIT(A) to the effect that assessee trust was created before commencement of I.T.Act 1961, hence, provisions of Section 13(1)(b) are not applicable to the assessee's case, was declined to be entertained on the plea that this plea was not before the AO. Hence, this plea remained to be verified. He therefore held that Section 13 is applicable in the assessee's case in respect of expenditure of Rs. 4,81,221.
4. Aggrieved by the order of the lower authorities, the assessee is now before us.
5. I have considered the rival contentions and carefully gone through the orders of the authorities below. As per my considered view, an object of public utility need not be an object in which the whole of the public is interested, it is sufficient if the well-defined section of public benefits by the object. The expression "object of general public utility" as appearing in Section 2(15), is not restricted to objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. As per my considered view, to serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It is sufficient if the intention is to benefit a section of the public as distinguished from specified individuals. Furthermore, an object which is beneficial to a section of the public is an object of general public utility. In order to serve a charitable purpose, it is not necessary that the job should be to benefit the whole of mankind or all persons in a country or state. It will be more than sufficient if the intention is to benefit a section of the public as distinguished from specified individual. The section of the community sought to be benefited must be sufficiently definite and/or identifiable by some common quality of public or impersonal nature. The personal element or personal relationship which takes a group out of a section of the community for charitable purpose is of the nature which is to be found in cases where the nexus between them is their personal relationship to a single propositus or to several propositi. I, therefore, do not find any merit in the conclusion of the lower authorities to the effect that since the assessee trust is created for the benefit of particular community being the Visha Shrimali Jain Samaj which is a small community, benefit of Section 11 should be denied.
6. With regard to non-application of provisions of Section 13(1)(b), I found that the assessee trust was incorporated on 1.9.60 prior to the coming into force of I.T. Act 1961. The provisions of Section 13(1)(b) are therefore not applicable to the assessee Trust. Documentary evidence with regard to incorporation of the assessee Trust on 11.8.1960, was very much before the AO. The legal issue even though raised for the first time before the CIT(A) is liable to be accepted in view of the verdict of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT 229 ITR 383 wherein it was held that where additional ground raises a purely legal plea which goes to the very root of the matter, the same deserves to be admitted. Whether provisions of Section 13(1)(b) are applicable to the assessee is purely a legal issue. As the entire facts relating to incorporation of the assessee trust were already on record, I do not find any merit in the action of the CIT for declining to accept the legal ground and to adjudicate the same. From the assessment order itself, I found that on page No. 2, it has been clearly mentioned that the said trust was incorporated in SY 2016. This fact was also mentioned in the copy of Memorandum and Articles of Trust submitted to the AO. The AO has not controverted this fact which is already on record. I therefore do not find any merit in the action of the lower authorities for declining the exemption claimed Under Section 11, by invoking provisions of Section 13(1)(b) of the I.T. Act.
7. Hon'ble Madhya Pradesh High Court in the case of CIT v. Maheshwari Marwadi Pandhyat 136 ITR 556 held that the Trust established before the commencement of the 1961 Act for the benefit of a particular religious community, bar Under Section 13(1)(b) would not be applicable, and the trust will be entitled to exemption in respect of its entire income.
8. In view of the above, all the four grounds of the assessee's appeal are allowed.
9. In the result, the appeal of the assessee is allowed.
10. Order pronounced in the open court on. 1.06.06