Income Tax Appellate Tribunal - Hyderabad
Sri Kodandarama Trust,, Hyderabad vs Assessee on 13 November, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 1133/Hyd/2013
Sri Kodandarama Trust, vs. The Director of Income-tax
Hyderabad. (Exemptions)
Hyderabad.
PAN: AALTS9964J
Appellant Respondent
Appellant by: Sri Mohd. Afzal
Respondent by: Sri P. Soma Sekhar Reddy
Date of hearing: 13.11.2013
Date of pronouncement: 13.11.2013
O RDE R
PER CHANDRA POOJARI, AM:
This appeal by the assessee is directed against the order of the Director of income-tax (Exemptions) [DIT(E)], Hyderabad dated 29.05.2013.
2. The grievance of the assessee in this appeal is with regard to non-granting of registration sought u/s. 12AA of Income-tax Act, 1961.
3. Briefly the facts of the case are that the assessee applied for registration u/s. 12AA of the Act in Form No. 10A on 27/11/2012. The DIT(E) observed that from the objects of the trust as contained in the said trust deed, it is noticed that the applicant trust intends to pursue both religious and charitable objectives. In this context, it is relevant to refer to the object clauses from (1) to (4) and (7) as 2 ITA No. 1133/Hyd/2013 Sri Kodandarama Trust ============================= mentioned at page 2 of the said trust deed, which are reproduced as under:
(1) To maintain a Temple of Sri Kodandarma Trust at Munnaturu, Kanchikacherla Mandal, Krishna District.
(2) To arrange for the regular pujas in the Temple.
(3) To do all type of activities for the worship of Lord Sri Kodandarama according to the Hindu Pranalika including building of Prayer Halls and Temples.
(4) To do all type of activities for propagation of religion by way of celebrating the festivals.
(5) To make available information and activities of the trust by periodical publications and through dedicated internet websites as deemed necessary from time to time.
(6) To actively assist and cooperate with other organisations with similar objectives as deemed suitable. To open, finance, construct buildings, maintain and operate facilities in support of above objectives. To pursue all above objectives as a worthwhile contribution to society's welfare irrespective of any caste, race or religious considerations.
(7) To pursue any other activity including works of charity or offer scholarships in consonance with our objective to make presentations on our objectives, raise and collect funds, participation or assistance required for our activities from general public, NGOs and/or any government branches or departments as found necessary. All finances and profits, if any, accrued to the trust shall be used only towards pursuit of the objectives of the trust.
4. The DIT(E) noted that as seen, the aforementioned objects from (1) to (4) are of religious nature. Further, as per the object clause (7), the trust intends to pursue any other activity including works of charity. First of all, from 3 ITA No. 1133/Hyd/2013 Sri Kodandarama Trust ============================= such mention, 'any other activity', it shows the trust intends to carry on activity not specifically mentioned in the trust deed. Under this circumstance, when the entire objects of the assessee trust are riot verifiable, in my view, it cannot be granted registration. Secondly, in that object clause(7), when it is mentioned 'to pursue any other activity including works of charity or offer scholarships', it shows the assessee trust also intends to carry out charitable works. Under this circumstance, thus, it may be noticed that, the assessee is having intention of both charitable and religious objectives, the latter as per the object clauses (1) to (4), reproduced above.
5. Further, the DIT(E) observed that since, the applicant trust in this case is having both charitable and religious objects, under that circumstance, having regard to the provisions of section 11(1)(a) of the Act, wherein there is reference to wholly charitable purposes or religious purposes, in that case, having regard to provisions of sections 12A(1) of the Act together with the provisions of clause (aa) there under, in my view, the applicant trust would not be eligible for registration u/s 12AA of the Act.
6. Further, the DIT(E) observed that a trust created after 1-4-1962, for the purpose of exemption of its income, has to be wholly either for charitable purposes or wholly for religious purposes. 'Charitable purpose' as defined in Explanation-3 to section 80G(5) of the Act, does not include any purpose the whole or' substantially whole of which is of a religious nature. Though 'Charitable Purpose' is not defined separately in section 11(1) of the Act, such definition as given under section 80G(5) of the Act, holds good for the purpose of section 11 of the Act.
4 ITA No. 1133/Hyd/2013Sri Kodandarama Trust ============================= As per such definition, as may be noticed, 'charitable purpose' is entirely different and distinct from 'religious purpose'. It is only when a trust created after 1-4-1962, is having entirely 'charitable purposes' or entirely 'religious purposes', that the same, as per the provisions of section 11(l)(a) rws 12A(1) of the Act, would be eligible for exemption of income.
7. The DIT(E) observed that, thus, clause (a) to sub- section (1) to section 11 of the Act, it may be seen that, only when a trust has got objectives fully of charitable nature or fully of religious nature, that it would be eligible for exemption of its income and thus, would be eligible for grant of registration under section 12AA of the Act. It is the nature of objective of such trust or institution, as mentioned in that clause (a) to sub-section (1) to section 11 i.e, either 'wholly charitable' or 'wholly religious', which determines the eligibility for registration under section 12A of the Act. The DIT(E) relied on the decision of Hon'ble Madhya Pradesh High Court in the case of D.S.D.B. Trust v. CIT(MP) (2008) 302 ITR 321, wherein, at page 324 of the said decision, the Hon'ble Court observed as under:
'in our considered view, since 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 onlv when such a purpose is shown that registra~ion can be granted'.
8. The DIT(E) noted that having regard to the specific provisions contained in section 11(1)(a) and section 12A of the Act, and relying on the above decision of the 5 ITA No. 1133/Hyd/2013 Sri Kodandarama Trust ============================= Hon'ble M.P High Court and also keeping in view the ratio of decision of Hon'ble Supreme Court in State of Kerala v.
M.P. Shanti Varma Jain(1998) 231 ITR 787(SC) and CIT v. Palghat Shadi Mahal Trust (2002) 254 ITR 212 (SC) and of the Hon'ble Jammu & Kashmir High Court in Ghulam Mohiddin Trust Vs. cn [2001] 248 ITR 587, the above trust, which is having both religious and charitable objects cannot be allowed registration u/s.12AA of tile Act. In this context, it is also pertinent to keep in mind the following observations made by the Hon'ble Jammu & Kashmir High Court at page No.S93-S94 of the said decision in Ghulam Mohiddin Trust Vs. CIT (supra):
" ...... because the law is well-settled that if there are several objects 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 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. "
9. Further, the DIT(E) noticed that the assessee trust has not commenced any activity so far. Vide query no.2 of the said questionnaire, it was asked to furnish a note on precise activities undertaken with details thereof and evidence for the same. However, in response to the same, under point no.2 of the reply dt 22.05.2013 furnished by the Ld. Authorised Representative, it was submitted that the activities of the trust are intended to start after grant of approval from the Director. Further, under point no.3 of the said reply, in response to query regarding furnishing of the books of accounts, it was submitted that, as the trust has not started any activity, 6 ITA No. 1133/Hyd/2013 Sri Kodandarama Trust ============================= therefore, no amount is spent, except an amount of Rs.100/- charged by the bank. It was further stated that no books of accounts maintained. From such admission made in that reply, thus, it clearly shows that the assessee trust has not commenced any activity so far. Under this circumstance i.e, in absence of any activity by the assessee trust, it cannot be granted registration u/s 12AA of the Act.
10. In view of the above observations, the DIT(E) rejected the application filed by the assessee in Form No. 10A for registration u/s 12AA of the Act.
11. Aggrieved, the assessee is in appeal before us raising 7 grounds of appeal contending the action of the DIT(E) in rejecting the application filed by the assessee for grant of registration u/s 12AA of the Act.
12. We have heard the arguments of both the parties and perused the record. We have gone through the objects of the trust mentioned at para 3 (supra). We find that the assessee is carrying on the religious objects along with charitable activities, but, the main objects of the assessee is religious in nature. We are of the view that to obtain registration u/s 12AA of the Act, the assessee's objects mainly should be charitable in nature. In our opinion, requirement of the provision to grant registration u/s. 12AA is that the society's object clause should not contain any non charitable activities and there is no restriction in carrying on religious objects along with charitable objects. The assessee has liberty to carry on religious activities along with charitable activities. In similar circumstances, the courts held that the assessee can carry on charitable activities along with religious activities:
7 ITA No. 1133/Hyd/2013Sri Kodandarama Trust =============================
1) CIT v. Jaipur Charitable Trust (81 ITR 1) (Del).
2) Zenith Tin Works Charitable Trust v. ITO (102 ITR
119) (Bom).
3) CIT v. Ahmedabad Rana Caste Association (88 IATR
354) (Guj.)
4) CIT v. Chandra Charitable Trust (294 AITR 896) (Guj).
5) Addl. CIT v. AA Bibijiwala Trust (100 ITR 516) (Guj).
6) ACIT v. Barkate Saifiyah Society (213 ITR 492) (Guj).
7) Gulam Moihiuddin Trust v. CIT (248 IATR 587) (J&K).
8) Calicut Islamic Cultural Society v. ACIT (28 SOT
148).
13. Further, the objects of the assessee cannot be said descriptive and the objects mentioned in the Trust Deed are in accordance with the provisions of section 2(15) of the Act and there is no allegation by the DIT(E) that the objects mentioned therein are not charitable nature and it cannot be said that the objects mentioned in clauses 1 and 2 cannot be said that they are of non-charitable in nature. Being so, in our opinion, this reasons advanced by the DIT(E) are not proper to deny the registration u/s. 12AA of the Act. For this purpose, we place reliance on the judgement of Allahabad High Court in the case of Fifth Generation Education Society vs. CIT (185 ITR 634) wherein it was held that "The order impugned does not say that the objects of the society are not charitable in nature; it merely says that they are general in nature. Just because they are general, they do not cease to be charitable. The Commissioner has also observed that no activity has been carried on by the society. It is also not the requirement of section 12A of the Act. Nor has section 80G any relevance at this stage. The impugned order cannot, therefore, be sustained and it is quashed."
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14. Further, recently the Hyderabad Bench of the Tribunal in the case of Rehoboth Mission v. DIT(E) in ITA No. 352/Hyd/2010 order dated 26.5.2010 held 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-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 AITR 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 9 ITA No. 1133/Hyd/2013 Sri Kodandarama Trust ============================= 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."
15. As regards the observation of the DIT(E) that assessee has not commenced any activities at the time of applying for registration, in this context we refer to the findings of the coordinate bench of ITAT, Hyderabad in the case of Society of Sisters of St. Anne, Phirangipuram Vs. DIT(E) in ITA No. 345/Hyd/2012, dated 27/09/2012, wherein it was held that the assessee need not commence the activities before seeking registration. Therefore, the said reason pointed out by the DIT(E) does not disentitle the assessee in seeking registration u/s 12AA of the Act.
16. In view of the above observations, we direct the assessee to cause necessary amendment to the trust deed with reference to the object clause to the satisfaction of the DIT(E). Accordingly, we remit the issue to the file of the DIT(E) for considering the issue afresh and once the necessary amendment is made to the Trust Deed, as per the provisions of section 12AA of the Act, the DIT(E) is directed to grant the registration u/s 12AA of the Act, on receipt of the amended Trust Deed. Needless to say that opportunity of being heard to the assessee is to be given.
10 ITA No. 1133/Hyd/2013Sri Kodandarama Trust =============================
17. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 13 th November, 2013
Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 13 th November, 2013 kv Copy forwarded to:
1. Sri Kodandarama Trust, C/o Mohd. Afzal, Advocate, 11-
5-465, Flat No. 402, Sherson's Residency, Criminal Court Road, Red Hills, Hyderabad - 500 004.
2. The Director of Income-tax (Exemptions), 3 rd Floor, Aayakar Bhavan, Hyderabad.
3. The DDIT(E)-I, Hyderabad.
4. The DR - ITAT, Hyderabad