Income Tax Appellate Tribunal - Hyderabad
Shiva Shakthi Shiridi Sai Anugraha ... vs Assessee on 3 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 1232/Hyd/2014
Shiva Shakthi Shiridi Sai Dy. Director of Income-tax
Anugraha Mahapeetam, (Exemptions), Hyderabad.
Hyderabad
PAN - AALTS 6316G
(Appellant) (Respondent)
Assessee by Shri C.P. Ramaswami
Revenue by Shri D. Sudhakar Rao
Date of hearing 11-11-2014
Date of pronouncement 03-12-2014
O RDE R
PER SAKTIJIT DEY, J.M.:
This appeal by the assessee is directed against order dated 29/04/14 passed by the DIT(E), Hyderabad, rejecting assessee's application for grant of registration u/s 12A of the Act.
2. Briefly the facts are, appellant claiming itself to be a charitable trust was created vide registered deed dated 17/05/12. It filed application seeking registration u/s 12A of the Act before ld. DIT(E) in the prescribed manner on 15/06/12. Ld. DIT(E), however, refused to grant registration to appellant trust on the ground that it has not commenced its activities. Being aggrieved of the order passed by ld. DIT(E), assessee approached the ITAT by filing an appeal registered as ITA No. 198/Hyd/2013. The coordinate bench of this Tribunal while disposing of the appeal vide order dated 24/05/13 remitted the matter back to the file of ld. DIT(E) with the following directions:
2 ITA No. 1232/Hyd/20 14Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am "9. In the case before us, the Trust approached the DIT(E) for registration within two months of its creation/formation, and therefore, two objects of the trust for which it was formed will have to be examined by the authority. The registration authority should consider the genuineness of the aims and objects of the applicant society seeking registration u/s 12AA of the Act with a charitable objective. At this stage, commencement of the charitable activity cannot be the criteria, since the trust is yet to commence its activities. In spite of that, the assessee trust in the present case, did furnish the list of donors and also details of the application of the funds till the date of the enquiry by the DIT(E). In these circumstances, we are of the opinion that impugned order is not sustainable and it deserves to be set aside. Therefore, we set aside the same. Appeal of the assessee is consequently allowed, with a direction to the DIT(E) to examine the aims and objects of the assessee trust and grant registration u/s 12AA of the Act, since he has not examined the objects, which prima-facie indicate that they are charitable in nature. However, the issue is restored to the file of the DIT(E) to examine the objects and then grant registration by passing fresh order in accordance with law. Needless to say, assessee shall be given reasonable opportunity to put forth its case with reference to the application of registration. We direct accordingly."
3. In pursuance to the directions of ITAT, ld. DIT(E) revived the proceeding afresh. As mentioned by ld. DIT(E) on going through the objects of the trust deed, he found that out of the 40 object clauses, objects at S. Nos. xvii, xxv, xxvii, xxviii, xxxiii, xxxiv & xl are of religious nature. He, therefore, was of the view that as assessee is having both charitable and religious objects, whereas as per section 11(1)(a) for availing exemption a trust or institution can either be 'charitable' or 'religious' it cannot be granted registration. Accordingly, he issued a show cause notice to assessee to explain why the trust should be granted registration as it is having mixed objects. In response to the show cause notice, assessee filed a detailed reply clarifying its position by stating that object clauses referred to by ld. DIT(E), are only ancillary or incidental to the main objects which is charitable. Even otherwise also, they cannot be considered to be for the benefit of any particular religious community, caste or creed. It was submitted, the activities provided in the clauses 3 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am referred to is taken up as incidental and ancillary to attainment of the main objects and are for benefit of all communities in general and not for exclusive benefit of any community or religion. It was submitted that spirituality is the inner self of every human being, the relief and education embraces both outer i.e. physical as well as the inner spirit of the human beings. It was submitted that promotion of research in the subjects of ancient spirituality i.e. for the complete exposition of inner humanity and the complete humanness is not an object of religious nature. It was submitted that object clauses objected to by ld. DIT(E) cannot be said to be for the benefit of a particular religion or community, but, the same are for the benefit of the whole of the mankind. It was submitted that sanathana dharma is a way of cherished life. The morals of epics like Ramayana, Mahabharata and the teachings of the prophet or Jesus, Mahaveera, Gautham Buddha etc. all speak of the same. A synthetic teaching of these tenets of life addresses the concept of universal enhancement of values of human life and not just benefit only a particular religion or community. Even the veda pravachanam cannot be treated as religious activity. It was submitted that every teaching that modulates physical, emotional and spiritual behavior of the human being shall have some basis, but the problem comes only when the privilege as in the case of traditional caste system is extended to a particular group or community. It was submitted that the term 'veda' itself means knowledge and not religion, therefore setting up vedic pathasalas is not a religious activity. It was submitted that producing devotional movies, TV Serials relating to vedic scriptures etc., and propagation of tenets of various religious teachings and the teachings of various gurus is not for the benefit of a particular religion or community but for the moral education of the people of all sections in the society. It was submitted by appellant trust that Hon'ble Supreme Court in case of CIT, Ujjain Vs. Dawoodi Bohara Jamat, Civil Appeal No. 2492 of 2014 arising out of SLP© No. 9004 of 2010, held that a charitable and religious trust which does not benefit any specific religious or community , can claim 4 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am exemption u/s 11. Therefore, a trust having mixed objects of both charitable and religion nature is eligible for benefit of section 11, hence, cannot be denied registration u/s 12A.
4. Ld. DIT(E) after considering the submissions of assessee, however, did not find merit in the same. Relying upon certain decisions ld. DIT(E), ultimately, concluded that as assessee is having mixed objects i.e. both charitable and religious, it cannot be granted registration u/s 12A of the Act.
5. The learned AR reiterating the submissions made before ld. DIT(E) submitted that appellant trust cannot be said to be for the benefit of particular religion, community or creed, hence, the objects mentioned in the trust deed, cannot be interpreted in a manner to say that they are for the benefit of a particular religion or community. It was submitted that the teachings of veda and Upanishads or teachings of yoga are not confined to a particular religion or community. Ld. AR submitted that neither section 12A nor section 11 prohibit a charitable trust or institution from having mixed objects i.e. both charitable and religious, therefore, ld. DIT(E) is not justified in denying registration to appellant trust. In support of such contention, learned AR relied on the following decisions:
1. Kasyapa Veda Research Foundation Vs. CIT, 11 ITR 468 (Trib.) (Cochin)
2. Vanita Vishram Trust Vs. Chief Commissioner Of Income Tax & Anr. 327 Itr 121
3. Addl. DIT(E) Vs. Islamic Research Foundation, 21 ITR (Trib.) 588 (Mumbai)
4. The Society of Presentation Sisters and Others Vs. ITO, 318 ITR (AT) 287
6. The learned DR, on the other hand, supporting the order of ld. DIT(E) submitted that as assessee is having mixed objects, it cannot be granted registration u/s 12A of the Act, as it has not established 5 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am either only for charitable purpose or for religious purpose as provided u/s 11(1)(a) of the Act.
7. We have considered the submissions of the parties and perused the impugned order of ld. DIT(E) as well as other materials on record. We have also carefully applied our mind to the decisions relied upon by the parties. At the outset, it will be pertinent to mention here that on the earlier occasion, ld. DIT(E) had rejected assessee's application solely for the reason that assessee has not commenced its activities. Ld. DIT(E) never raised any issue with regard to mixed objects of the appellant trust. In fact, perusal of the order passed by the Tribunal would show that while setting aside the order of ld. DIT(E) Tribunal has clearly mentioned that prima-facie objects of the appellant trust were of charitable nature. However, in the proceeding initiated afresh, ld. DIT(E) has found a new reason to deny registration to assessee by stating that as per section 11(1)(a) of the Act, a Trust or institution should have been established either for religious or charitable purpose and it cannot have mixed objects. Ld. DIT(E) again refused registration on the ground that assessee is having mixed objects i.e. both religious and charitable.
8. Be that as it may, before proceeding to decide the validity of such reasoning of ld. DIT(E), it needs to be mentioned, as per section 12AA, ld. CIT has to satisfy himself about the object of the trust and genuineness of the activities of the trust or institution. On going through the impugned order of ld. DIT(E), it is absolutely clear, he accepts the fact that objects of the trust are charitable in nature. Specific objection of ld. DIT(E) is, in addition to charitable objects the trust is also having religious objects which violates the provision contained u/s 11(1)(a). The object clauses, which ld. DIT(E) considers to be of religious nature are as under:
"xvil. To construct, takeover, maintain and manage community halls, meditation centers, spiritual centers, places of worship and prayer 6 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am halls of any religion and public in general.
xxv. To undertake or to extend assistance for the research of subjects related to spirituality and related ancient books of any religion.
xxvii. Education in particular, Cultural and Spiritual concerning the Supreme values of life as spoken ,to by the Vedas and Upanishads, Quran and Bible and other scriptures viz. Truth, Non-violence, austerity, universal brotherhood or friendship, Security and Safety, fearlessness, love, peace, compassion, character and dedication, with the sole object of transforming the people at large for the welfare of all the living beings especially human beings.
xxviii. To propagate, preach and teach the intricacies and the true consequences of sanathana Dharma with the object of securing charturveidha purushardha viz., Dherme, Ardha, Kama, Moksha which are really essential requisites for the removal of evil and renewal of good to the persons and devotees who visit the Tapovanam and participate in the activities of the truth which is really for the benefit and welfare of the General Public of a section thereof.
xxxiii. For propagation and imparting of Vedic knowledge and other valuable scriptures in Sanskrit, Telugu and English.
xxxiv. To provide fees, books, equipments, free ships, and/or scholarships to deserving students. And to establish educational institutions such as Veda Pathashala etc. xl. To produce, develop, direct animation films, short films, documentaries, social/devotional movies, TV serials relating to the vedic scriptures, yoga and preaching of various gurus of various religions for enhancing human values."
9. However, careful analysis of the aforesaid clauses, makes it clear that neither they are for the benefit of a particular religion or community nor they are confined to particular class of people or people of a particular caste or creed. On the contrary, these object clauses certainly gives an impression that it is for the benefit of general public. As can be seen from clause xxvii, it speaks of teachings in Vedas and Upanishads, Quran and Bible and other scriptures for spreading the message of truth, non-violence, austerity, universal brotherhood or friendship, security and safety, fearlessness, love, peace, compassion, character and dedication with the sole object of transforming the people. Therefore, it cannot be treated to 7 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am be for the benefit of a particular religion or community. Similarly, propagating, intricacies and true consequences of sanathana dharma is also for the benefit of general public and cannot be confined to a particular religion or community. Producing/developing films or programmes on vedic scriptures, yoga and preaching of various gurus of various religions is also for uplifting the moral standards of general public and enhancing human values irrespective of religion, community, caste and creed. Similarly construction/maintenance/ management of community halls, meditation centers, spiritual centers, places of worship and prayer halls is not confined to any particular religion or community, but for the benefit of general public.
10. Thus, on careful reading of the object clauses in general and specifically clauses on which ld. DIT(E) has raised concern stating that they are for the benefit of a particular religious community, the impression one gets is there is nothing in these clauses which can lead one to believe that they are for the benefit of a particular religious community, hence, coming within the mischief of section 13(1)(a) or 13(1)(b) of the Act. On the contrary, these clauses, if at all they can be called to be of religious nature, are for the benefit of general public, hence, can be considered to be in the nature of any other object of general public utility as engrained in the definition of 'charitable purpose' u/s 2(15) of the Act. Law is well settled that ' any other object of general public utility' is of the widest connotation as the word 'general' in said expression signifies a whole class. Hence, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individual would be a charitable purpose. The expression 'any other object of general public utility' would prima facie include all objects which promote the well being of the general public. It cannot be said that a purpose would cease to be charitable even when public welfare is intended to be served. Considered in the aforesaid perspective, there cannot be any doubt that the main object of the appellant trust 8 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am is charitable in nature as it is for the benefit of general public. Even, ld. DIT(E) also accepts this position, though he observes that some of the object clauses are of religious nature. The Hon'ble supreme court in case of Addl. CIT Vs. Surat Art Silk Cloth Manufacturerss Association, [1980] 121 ITR 1 (SC) and a number of other decisions held that if the primary purpose and predominant object of a trust are to promote welfare of the general public, the purpose would be charitable purpose. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the trust or institution from being a charitable trust.
11. Even assuming that appellant trust has mixed objects i.e. both charitable and religious, let us examine whether for this reason alone it becomes ineligible for availing exemptions u/s 11 and being registered u/s 12AA of the Act. Ld. DIT(E) in his order has observed that appellant trust is having both charitable and religious objects, further the religious objects are for the benefit of particular religion. After perusing the objects we are inclined to hold that they cannot be considered to be for the benefit of a particular religious community, rather, in our view, the object clauses specifically referred to by ld. DIT(E) are for the benefit of the general public and not confined to any particular religious class or community. Reverting back to the issue whether having objects of both charitable and religious nature disentitles from availing exemption u/s 11. Let us examine the said provision which reads as under:
"11. (1) [(a) 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;"9 ITA No. 1232/Hyd/20 14
Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am According to ld. DIT(E) the words 'charitable or religious' appearing in the aforesaid provision would mean, a trust or institution can either have charitable or religious objects and not both. In our view, such a narrow interpretation cannot be given to section 11(1)(a) of the Act. Section 11(1)(a) of the Act makes no distinction between religious or charitable institution so far as grant of exemption is concerned, save and except the conditions imposed u/s 13 of the Act. The word 'or' between charitable and religious as used in section 11(1)(a) is not disjunctive but conjunctive in nature, therefore, it is necessary to read that income derived from property held under trust wholly for charitable or religious purposes or both are exempt. The Hon'ble Supreme Court in case of CIT Vs. M/s Dawoodi Boharh Jamat, Civil Appeal No. 2492 of 2014 observed, in certain cases activities of the trust may contain elements of both religious and charitable and thus, both the purposes may be overlapping. More so, when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community or also public at large. Feeding animals or cow may be a religious activity for a particular community but may be charitable for others. Similarly, feeding poor people or giving water to thirsty may be religious for some but charitable for others. Analysing the objects of the trust by keeping the aforesaid principles in view, hon'ble Apex Court finally held as under:
"41.Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 of the Act shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of Section 13. The activities of the trust under such objects would therefore be entitled to exemption accordingly.
42.We would now proceed to examine the objects under the provisions of Section 13(1)(b) of the Act. It becomes amply clear from the language employed in the provisions that Section 13 is in the nature of an exemption from applicability of Sections 11 or 12 and the examination of its applicability would only arise at the stage of claim under Sections 11 or 12. Thus, 10 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am where the income of a trust is eligible for exemption under section 11, the eligibility for claiming exemption ought to be tested on the touchstone of the provisions of section 13. In the instant case, it being established that the respondent-trust is a public charitable and religious trust eligible for claiming exemption under Section 11, it becomes relevant to test it on the anvil of Section 13.
43.Thus, the second issue which arises for our consideration and decision is, whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under Section 11 of the Act in view of provisions of Section 13(1)(b) of the Act.
44.In the instant case, the Tribunal has found on facts after analysing the objects of the trust that the respondent trust is a public religious trust and its objects are solely religious in nature and being of the opinion that Section 13(1)(b) is solely meant for charitable trust for particular community, negated the possibility of applicability of Section 13(1)(b) of the Act at the outset. The High Court has also confirmed the aforesaid view in appeal and observed that Section 13(1)(b) would only be applicable in case of income of the trust for charitable purpose established for benefit of a particular religious community. In our considered view, the said view may not be the correct interpretation of the provision.
45.From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste.
46.Such trusts with composite objects would not be expelled out of the purview of Section 13(1)(b) per se. The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say, it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large. (Sole Trustee, Loka Shikshana Trust v. CIT, (1975) 101 ITR 234 (SC)). The section of community sought to be benefited must be either sufficiently defined or 11 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am identifiable by a common quality of a public or impersonal nature. (CIT v. Andhra Chamber of Commerce, 55 ITR 722).
47.This Court in CIT v. Palghat Shadi Mahal Trust, (2002) 9 SCC 685 the muslim residents of Kerala constituted a trust "for the purpose of constructing and establishing at Palghat-a-Shadi Mahal and other institutions for the educational, social and economic advancement of the Muslims and for religious and charitable objects recognised by Muslim law ..." and later clarified that the proceeds would be utilized for the benefit for public at large and upon this basis, the trust made a claim for exemption from tax under Section 11. This Court held that the resolution clarifying the object would not validly amend the object of the trust-deed and since the object confined the benefit to only muslim community, it would be covered by the restriction under Section 13(1)(b) of the Act even though it functioned for public benefit. Thus, therein the object sufficiently defined or expressly stated beneficiary class and restricted the activities of the trust to a specific community.
48.Further, in State of Kerala v. M.P. Shanti Verma Jain, (1998) 5 SCC 63 this Court has held that propagation of religion and restriction of benefits of activities of trust in its objects to the said community would render the trust as ineligible for claiming exemption under similar provisions of Kerala Agricultural Income Tax Act, 1950. The Court observed as follows:
"...The Deed of Trust and the rules run into more than thirty pages out of which six pages of the Trust Deed narrate the philosophy of Jain Dharma. The objects of the Trust clearly show that the Trust is meant for propagation of Jain religion and rendering help to the followers of Jain religion. Even medical aid and similar facilities are to be rendered to persons devoted to Jain religion and to non- Jains if suffering from ailments but the medical aid could be given to them only if any member of the families managing the Trust, shows sympathy and is interested in their treatment. The Tribunal, in our opinion, was right in its conclusion that the dominant purpose of the Trust in the present case was propagation of Jain religion and to serve its followers and any part of agricultural income of the Trust spent in the State of Kerala also could not be treated as allowable item of the expenses."
49.In the present case, the objects of the respondent-trust based on religious tenets under Quran according to religious faith of Islam. We have already noticed that the perusal of the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a 12 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am particular religious community. The objects, as explained in the preceding paragraphs, do not channel the benefits to any community if not the Dawoodi Bohra Community and thus, would not fall under the provisions of Section 13(1)(b) of the Act.
50.In that view of the matter, we are of the considered opinion that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that Section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under Section 11 of the Act."
12. In case of The Society of Presentation Sisters and others Vs. ITO, 318 ITR(AT)287, the Hon'ble Third Member while concurring with the view expressed by Hon'ble Accountant Member, held as under:
"It is clear from plethora of authorities where after considering the provisions of section 11(1)(a) that so far as the aforesaid provision is concerned, no distinction is made between charitable and religious purposes. A charitable institution can have religious purposes; whereas a religious institution may be partly charitable. Most of the decisions were given under the 1961 Act. Even where the decision was on consideration of 1922 Act, there is no material difference as is demonstrated in the above discussion. Their Lordships of the Supreme Court have held, as noted earlier, that charitable and religious purposes overlaps in India. Even otherwise relief and help to the poor, medical help to the needy, looking after of deity and temples (mosque, church included) are no doubt religious purposes but these are also considered as charitable in India. Therefore, the view taken in the two cases before me that exemption under section 11(1)(a) cannot be allowed to a charitable trust as it is also carrying some purposes which are termed as 'religious' is totally unwarranted. The above view is totally contrary to the well established an settled law in India, as laid down by their Lordships of the Supreme Court.
The other reason given by the learned Judicial Member is that two trusts in question are partly charitable or religious trusts established after April 1, 1962. Therefore, on account of language of the statute in section 11, there is prohibition from income derived from property held for charitable or religious purposes. According to him, income under both charitable and religious purposes cannot be combined together and the assessee has to choose either of the charitable activities or religious activities, but not both. I had to state that in my humble opinion, there is no statutory provision to support 13 ITA No. 1232/Hyd/20 14 Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am proposition of law, stated by the learned Judicial Member. The learned Judicial Member, like the revenue authorities, misconstrued the legal implication of the word 'or' in section 11(1)(a).
13. The principle of law emerging from the aforesaid decisions are a trust/institution having charitable and religious objects will be eligible for exemption u/s 11 unless hit by restrictions imposed u/s 13(1)(a) or 13(1)(b) of the Act. As in the present case, ld. DIT(E) has not brought any material on record to show that provisions of section 13(1)(a) or 13(1)(b) applies to the assessee, denial of registration u/s 12AA for alleged violation of section 11(1)(a), in our view, is not justified. Moreover, applicability of section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by ld. DIT(E) while exercising power u/s 12AA of the Act. In aforesaid view of the matter, we are inclined to set aside the impugned order of ld. DIT(E) and direct him to grant registration to the appellant trust u/s 12AA of the Act.
14. In the result, appeal of assessee is allowed.
Pronounced in the open court on 03/12/2014.
Sd/- Sd/-
(B. RAMAKOTAIAH) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated:3 rd December, 2014
Kv
14
ITA No. 1232/Hyd/20 14
Shiva Shakthi Shiridi Sai Anugra ha Mah apteet am
Copy to:-
1) Shiva Shakthi Shiridi Sai Anugraha Mahapeetam, Flat No. B-201, H.No. 1-1-563/B/S1, Surabhi Apartments, Near Golconda X Roads Post Office, New Bakaram, Hyderabad - 500 020
2). DDIT(E), 3 r d Floor Annexe, Aayakar Bhavan, Basheerbagh, Hyderabad - 500 004.
3) DIT(E), Hyderabad
4)The Departmental Representative, I.T.A.T., Hyderabad.