Income Tax Appellate Tribunal - Delhi
M/S Indian Society Of The Church Jesus ... vs Dcit (E), New Delhi on 10 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: BENCH "A" NEW DELHI
BEFORE SRI R.K.PANDA, ACCOUNTANT MEMBER
AND
SMT. BEENA A PILLAI, JUDICIAL MEMBER
ITA No.1387/Del/2015
A.Y. 2010-11
Dy.CIT (E) vs. Indian Society of The Church Jesus Christ
Circle 2(1) of Latter Saints
New Delhi C 37, Connaught Place
New Delhi 110 001
PAN: AAATT0672R
&
Cross Objection No. 297/Del/2015
(In ITA 1387/Del/15)
Assessment Year 2010-11
Indian Society of The Church Jesus vs. Dy.CIT(E)
Christ of Latter Saints Circle 2(1)
New Delhi New Delhi
AND
ITA No.6628/Del/2015
A.Y. 2011-12
Dy.CIT (E) vs. Indian Society of The Church Jesus Christ
Circle 2(1) of Latter Saints
New Delhi C 37, Connaught Place
New Delhi 110 001
PAN: AAATT0672R
&
Cross Objection No. 81/Del/2016
(In ITA 6628/Del/15)
Assessment Year 2011-12
Indian Society of The Church Jesus vs. Dy.CIT(E)
Christ of Latter Saints Circle 2(1)
New Delhi New Delhi
(Appellant) (Respondent)
Revenue by: Smt. Meeta Singh, CIT, DR
Assessee by: Sh. C.S.Aggarwal, Sr.Adv.
Date of hearing: 05.04.2018
Date of Pronouncement: 10.04.2018
1
ORDER
PER BEENA A PILLAI, JUDICIAL MEMBER
The present Cross Appeals have been filed by Revenue as well as assessee against order dated 22/12/14 and 14/09/15 passed by Ld.CIT(A)-40 for assessment year 2010-11 and 2011-12 on the following grounds of appeal:
Assessment year 2010-11 ITA No. 1387/Del/2015 "1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the benefit of exemption to the assessee given the activities of the assessee are primarily of religious nature and in clear violation of section 3(1)(b) of the I.T.Act.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the expenditure of Rs.13,86,39,904/- to the assessee, which was assessed as the income of assessee.
3. The appellant craves leave to add, alter, amend any ground of appeal raised above at the time of hearing."CO No. 297/Del/2015
1. That the learned Commissioner of Income Tax (Appeals) has erred in not holding that the objects and the activities of Indian Society of the Church of Jesus Christ of Latter -day Saints ("the Society") are for the benefit of the general public at large, and that it has not been created or established for the benefit of any particular religious community or caste.
2. That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that the Hon'ble Tribunal has held in ITA o. 2240 / DEL/2013 for the assessment year 2009-10 that the objects of the Society are both religious and charitable and that its activities are not for the benefit for any particular religious community and caste, but for the benefit of the general public.
3. That the learned Commissioner of Income Tax (Appeals) has erred in not holding that the ADI (E) was not justified in denying deduction of the aggregate 2 expenditure of Rs.11,99,39,107 incurred by the Society for purposes of its objects and activities.
Assessment year 2011-12 ITA No. 6625/Del/2015 "1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the benefit of exemption to the assessee given the activities of the assessee are primarily of religious nature and in clear violation of section 3(1)(b) of the I.T.Act.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the expenditure of Rs.15,88,20,462/- to the assessee, which was assessed as the income of assessee.
3. The appellant craves leave to add, alter, amend any ground of appeal raised above at the time of hearing."
CO No. 81/Del/2016"1. That the learned Commissioner of Income Tax (Appeals) has erred in not holding that the objects and the activities of Indian Society of the Church of Jesus Christ of Latter -day Saints ("the Society") are for the benefit of the general public at large, and that it has not been created or established for the benefit of any particular religious community or caste.
2. That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that the Hon'ble Tribunal has held in ITA o. 2240/ DEL/2013 for the assessment year 2009-10 that the objects of the Society are both religious and charitable and that its activities are not for the benefit for any particular religious community and caste, but for the benefit of the general public.
3. That the learned Commissioner of Income Tax (Appeals) has erred in not holding that the ADI (E) was not justified in denying deduction of the aggregate expenditure of Rs.15,88,20,462/- incurred by the Society for purposes of its objects and activities."3
2. Brief facts of the case are as under:
Assessee was registered in 1982 under the Societies Registration Act and was granted a Certificate of Registration by Ld.CIT, under section 12 A of the Income Tax Act, 1961(for short 'the Act', unless otherwise specified). The assessee was also granted benefit of exemption under section 11 of the Act for all assessment years, preceding to assessment year 2009-10. For years under consideration, society was denied exemption on the ground that it is a charitable organization, and its activities are not for benefit of general public at large, but for the benefit of a particular religious community, and therefore Ld.AO was of the opinion that assessee is not entitled to claim exemption under section 13 (1) (B) of the Act.
3. Aggrieved by order of Ld.AO, assessee preferred appeal before Ld. CIT (A), and order passed by Ld. AO was reversed.
4. Aggrieved by order of Ld.CIT (A), revenue is in appeal before us for both the assessment years. In Cross Objection, assessee supports order of Ld. CIT (A).
5. Ld. DR supported the observations of Ld. AO.
6. Ld. Counsel submitted that Assessing Officer disallowed the claim of assessee for Assessment Year 2009-10 and this issue travelled till this Tribunal. It has been submitted that this Tribunal vide order dated 21/02/14 passed in ITA No. 2240/Del/2013 dealt with this issue as under:
"14. We have heard the rival submissions of both the parties and have gone through the material available on record. The appeal was earlier heard on 21.10.2013 but certain clarifications were required, therefore, it was fixed for clarifications and finally it was heard on 27.1.2014. The first question to be decided by us is as to whether the society was eligible for exemption u/s 11 of Act or not. We find that assessee is a charitable society registered u/s 12AA of the Act and benefit of section 12AA has not been withdrawn. The society has been continuously enjoying exemption u/s 11 of the Act and there is no change in the main objects of the society. The only change is in the Article of Association which cannot be said to be objects of the society as article of association contains the internal procedure and powers and functions of various functionaries of society to achieve the main object of the society. We further observe that the provisions of section 13(1)(b) reads as under:-4
3(1) Nothing contained in section 11 or section 12 shall operate so as to Exclude from the total income of the previous year of the person in receipt thereof:
(a) xxx
(b) In the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof, if the trust or institution is created or established for the benefit of any particular religious community or caste."
15. From the above provisions of clause 13(1)(b), it is apparent that section 13(1)(b) is applicable only in the case of a trust for charitable purposes or charitable institution and there is no mention of word religious in this section. Had the legislature intended to include religious society also in the mischief of section 13(1 )(b) the wording would have been different as in the next clause i.e. 13(1 )(c) which is applicable for religious and charitable societies. 13(1)( c) reads as under:
"In the case of a trust for charitable or religious purposes or charitable or religious institution any income thereof.
Xxxxxxxxxxx xxxxxxxxxxx Therefore, there is a clear distinction of words as contained in clause 13(1 )(b) and 13(1)( c), clause 13(1)( b) applies to societies engaged in charitable purposes whereas clause 13(1)( c) applies to societies engaged in charitable as well as religious activities, "
The case laws relied upon by Ld AR with the proposition that clause 13(1)(b) is applicable only to charitable institution also help the assessee. For example the Hon'ble Gujarat High Court in the case of CIT v. Chandra Charitable Trust reported at 294 ITR 86 held as under:-
"The question that should be the principle adopted and whether Jainism is a life style or religion would loose much of its importance in view of the judgment of this Court in the matter of CIT v. Barkate Saifiyah Society (1995) 213 ITR 492. If Jainism is accepted to be a religion and from- the convents of the trust deed it can be spelt out that not only to propagate Jainism, or help and assist maintenance of the temple, sadhus, sadhvis, shraviks and shravks yet other goals are set in the trust deed, then the trust would become a charitable trust so 5 also a religious trust or it can be addressed as a charitable religious trust and if that be so section 13(1 )(b) would not be applicable,"
17. Moreover we observe that in the A.Y. 2007-08 the issue of exemption u/s 11 along with violation of section 13(1)(b) was examined by the Assessing Officer and after detailed examination the exemption was allowed to the assessee society. We find that during assessment proceedings in assessment year 2007- 08 the issue of violation of provisions of section 13(1)(b) was examined by Assessing Officer as is apparent from page 85 to 104 of paper book where a copy of notice for violation of provisions of section 13( 1 )(b) along with reply of assessee as well as consequent assessment order is placed. In this year, the Assessing Officer has not denied exemption u/s 11 and had accepted the contentions of assessee. We further observe that assessee has been availing this exemption for the last so many years and the judgment of Hon'ble Apex Court in the case of CIT v. Excel Industries Ltd., reported in 358 ITR 295 is squarely applicable to the assessee and therefore after having allowed the , exemption since inception and more particularly after having accepted the contentions of assessee with respect to violation of provisions of section 13(1)(b) in the assessment year 2007-08 year, the revenue is not justified In taking contrary stand when the facts and circumstances remained same. In view of the above, on the basis of consistency also, the stand of revenue is not Justified.
18. As regards reliance laid down by the Assessing Officer on the case law of MP Shanti Verma Jain (supra) and Ghulam Mohidin Trust these are not applicable to the facts and circumstances of the present case. In the case law of MP Shanti Verma Jain, the Hon'ble Supreme Court had held that the objects of assessee trust were meant for. Propagation of the Jain religion and rendering help to the followers of Jain religion. In that case even the medical aid and similar facilities were to be rendered to persons devoted to Jain religion and the medical aid could be given to non Jains only if any member of the families managing the trust showed sympathy and was interested in his treatment. The facts and circumstances of the present case are different as the main objects of the society 6 as contained in Memorandum of Association placed at paper book pages ,14 & 15 do not contain any restriction of this nature.
19. In the other case law of Ghulam Mohidin Trust, the trustees were given uncontrolled discretion to spend the whole of the trust funds for any of the non- charitable purposes of the trust whereas in the present case no such un- controlled discretion to spend for non charitable purposes is available and as per article 10 of MOA the income of the society is to be applied solely towards the promotion of objects of society. The copy of article 10 is placed at paper book page 15. Therefore, keeping in view all the facts and circumstances, we find that the provisions of sec. 13(1 )(b) are not applicable to the assessee. As regards disallowance of expenditure of ~.8,74,33,077/- we find that action of Ld CIT(A) in confirming the action of Assessing Officer is not justified at all as the expenses were incurred for the fulfillment of the objects of the society and moreover for the purpose of disallowing claim u/s 11 the income as understood in the commercial sense has to be considered and not the gross receipts. The case law reported at 201 ITR 564 relates to the Hindustan Welfare Trust v. Director of Income Tax exemption and in that case the Hon'ble Calcutta High Court held-as under:
"The income from property held for trust has to be arrived at in normal commercial manner and there is no scope for complying with the provisions of section 14 of Income Tax Act, 1961. In other words, the real income has to be taken into account for the purpose of considering the exemption. If there be any loss that cannot form part of the real income of trust and necessarily it has to be excluded from consideration.
Similar views were held by the Calcutta High Court in the case law of CIT v., Birla Janhit Trust reported at 208 ITR 372. Therefore, following the above judgments the income of assessee was to be computed in a commercial sense and that can only be calculated after allowing expenses incurred by the assessee. Therefore, the disallowance of expenses is not warranted."7
6. Ld.Counsel submitted that for Assessment Year 2012-13 also decision of this Tribunal is placed in the paper book at pages 36-52, wherein this issue has been settled in favour of assessee by considering objects of Memorandum of Association of Society. Ld. Counsel submitted that this Society was throughout granted exemption since its inception and this Tribunal allowed appeal of assessee for Assessment Year 2009-10 and 2012-13. He submitted that order of this Tribunal for assessment year 2012-13 in ITA No. 2239/Del/2016 has analysed this issue from the perspective of objects of society in Memorandum of Association. He submitted that from various Articles of Memorandum of Association, it is very clear that society has been established for religious purposes but without any restriction to the public at large. He placed reliance upon para 11 of Tribunal's order, which is reproduced hereunder:
"11. Having gone through the decisions relied upon by the ld.AR, we find that the Hon'ble Supreme Court in the case of Dharmaposhaman and Co. vs. CIT (supra) has been pleased to hold that whether a trust is for charitable purposes falls to be determined by reference to all the objects for which the trust has been brought into existence. Again in the case of CIT vs. Dawoodi Bohara Jamat (supra), the Hon'ble Supreme Court has been pleased to hold that the trust having mixed objects which does not benefit any specific religious community is eligible for exemption u/s 11 of the Act. Such trust with composite objects would not be expelled out of the purview of the Sec. 13(1 )(b) of the Act per se. The Section requires it to be established that such charitable purposes is not for the benefit of a particular religious community or caste. The relevant para nos. 38, 39, 40, 49 and 50 of the said decision of Hon'ble Supreme Court in the case of C1T Vs Dawoodi Boharma Jamat (2014) 4 ITR 31 are being reproduced herein:
"38. Unquestionably, objects (c) and (f) which provide for the activities completely religious in nature and restricted to the specific community> of the respondent-trust are objects with religions purpose only. However, in respect to the other objects, in our view the fact that the said objects trace their source to the Holy Quran and resolve to abide by the path 8 of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in color. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. The Privy Council Trustees of The Tribune In re [1939] 71TR 415 has held that in judging whether a certain purpose is of public benefit or not, the Courts must in general apply the standards of customary law and common opinion amongst the community to which the parties interested belong to. Therefore, it is pertinent to analyse whether the customary law aid restrict the charitable disposition of the intended activities in the objects.
5 The provision of food to the public on religious days of the community as per object (a) and (b), the establishment of Madarsa and organizations for dissemination of religious education under object (d) and rendering assistance to the needy and poor for religious activities under object (e) would reflect the essence of charity. The objects (a) and (b) provide arrangement for nyaz and 'majlis (lunch and dinner) on the religious occasion of the birth anniversary' and Urs Mubarak of Awliya-e-Quiram (SA) and the Saints of the Dawoodji Bohra community and for 'arrangement of lunch and dinner on religious occasions and auspicious days of the Dawoodi Bohra community, respectively. Nyaz refers to the food a person makes and offers to others on any particular occasion on the occasion of the death of a saint and Majhlis implies a dace of gathering or meeting. The activity of providing for food on certain specific occasions and other religious and auspicious events of the Dawoodi Bohra community do not restrict the benefit to the members of the community. Neither the religious tenets nor the objects as expressed limit the service of food on the said occasions only to the members of in specific community. Thus, the activity of Nyaz performed by the respondent-trust does not delineate a separate class but extends the benefit of free service of food to public at large irrespective of their religion, caste or sect and thereby nullifies as a charitable purpose which would entail general public utility.
40. Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15) of the 9 Act. The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The House of Lords in Barralet v IR 54 TC 446, has observed that "the study and dissemination of ethical principles and the cultivation of rational religious sentiment" would fall in the category of educational purposes. The Madarsa as a Mohammedan institution of teaching does not confine instruction to only dissipation of religious teachings but also distributes to the holistic education of an individual. Therefore, it cannot be said that the object (d) would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character.
49. In the present case, the objects of the respondent-trust are 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 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(l)(b) of the Act.
50. In that view of the matter, we are of the considered opinion that the respondent-trust is d charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that Section 13(l)(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.
11.1. When we examine the facts of the present case before us, in view of the ratio laid down by the Hon'ble Supreme Court in the above cited two decisions, we come to the conclusion that although the appellant society before us has both charitable and religious purposes, it is not been created or established for the benefit of any particular religious community only and its activities are for the benefit of the public at large. Hereinabove, in the preceding paragraph while discussing the relevant 10 facts of the present case, we have already reproduced the objects of the assessee society as stated in Article 3 of the Memorandum Of Association of it. There is no dispute that the aforesaid objects of the society have remained unchanged since the inception/registration in the year 1982. On page no. 6 of the letter dated 18.02.2015 by the society addressed to the AO, the activities carried on by the society have been set out as under:
i) Daily Meetings on essentials of life.
(ii) Conference and Seminars.
(iii) Health Camps.
(iv) Adult Education Programmes.
(v )Programmes on values of life for Young Adults.
(v i) Programmes on Good Citizenship.
(vii) Programmes on family values and Self Reliance.
(viii) Conduct District and Branch Affairs.
(ix) Teach Community Welfare.
(x) Develop Talent for Cultural Arts.
(xi) Hold Programmes for Vocation Training.
(xii) Developing Leadership Skills. "
11.2. It is clear that the above activities are for the benefit of the public at large and not for the benefit of any particular religious community or caste.
11.3. We also note that neither has the AO nor the Ld.CIT(A) given any basis to hold that the activities of assessee can be considered to be for the benefit of a particular religious community and above all the Central Government had duly notified vide notification no.10215 dt. 25.10.1996 u/s 10(23C)(v) of the Act after being satisfied that the objects and activities of the assessee society are wholly for public, religious and charitable purposes. It is also pertinent to mention over here that assessee society was throughout granted exemption since its inception till Assessment Year 2008-09 and for the first time in the Assessment Year 11 2009-10, the AO held that in view of section 13(1)(b) of the Act, assessee is not eligible for grant of exemption. He held that the assessee is a trust created for charitable purposes but has been established for benefit of a particular religious community.
11.4. Under the above facts and circumstances, we respectfully following the ratio laid down by Hon'ble Supreme Court in the above discussed cases, hold that the authorities below were not justified in holding and upholding the assessee society as not eligible for the claimed exemption u/s 11 of the Act. While setting aside the orders of authorities below in this regard, we direct the AO to grant the claimed exemption to assessee society. The issue raised in the above grounds is thus decided in favour of assessee society and in result grounds are allowed.
6.1. Ld.Counsel submitted that Hon'ble Jurisdictional High Court in assessee's own case in ITA No. 319/2017 vide order dated 07/09/17 has upheld the order of this Tribunal for Assessment Year 2012-13. Hon'ble High Court commenting upon the order of this Tribunal observed as under:
"15. In the present case, the factual determination by the ITAT that (i) the programmes conducted by the Society "are open for public at large without any distinction of caste, creed or religion and the benefits of these programmes held at the meeting house are available to the general public at large and (ii) priests are not managing the affairs of the society, have not been shown by the Revenue to be perverse. It is not the percentage of expenditure on persons not belonging to the religious community that mattered. What was significant was that there were donations made by the Society for the general public utility. This showed that it was not exclusively for the benefit of one particular religious community.
16. The CIT (A) had proceeded on the basis that although the Assessee Society was for both religious and charitable purposes, since it was for the benefit of only one religious community the provision of Section 13 (1) (b) would apply to deny it exemption under Section 11 of the Act. The above conclusion was legally flawed. It was contrary to the decision of the Supreme Court in Dawoodi Bohra Jamal (supra) which held that even where the trust or society has both religious 12 and charitable objects, "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 community and for society at large". In that case it was factually found that the activities of the trust though both charitable and religious are not exclusively meant for a particular religiouscommunity" and, therefore Section 13(1)(b) was not attracted. In the present case too, the factual finding of the ITAT is likewise. It has been found that the activities of the Assessee Society, though both religious and charitable, were not exclusively meant for one particular religious community. It was, therefore, rightly not denied exemption u/s 11 of the Act."
7. We have perused submissions advanced by both sides in the light of records placed before us and orders relied upon by Ld.Counsel passed by this Tribunal, as well as Hon'ble High Court in assessee's own case for Assessment Year 2009-10 and 2012-13. On totality of facts, it is observed that this issue is settled in favour of assessee by order of Hon'ble Delhi High Court.
8. Respectfully following the same, we do not find any infirmity in order passed by Ld.CIT (A), and accordingly the same is upheld.
9. In the result appeal filed by revenue stands dismissed and Cross Objections filed by assessee stands allowed.
Order pronounced in the Open Court on 10.04.2018
Sd/- Sd/-
(R.K.PANDA) (BEENA A PILLAI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dt. 10th April, 2018
*mv
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Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
- TRUE COPY -
By Order,
ASSISTANT REGISTRAR
ITAT Delhi Benches
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S.No. Details Date Initials Designation
1 Draft dictated on Dragon 09.04.2018 Sr. PS/PS
2 Draft placed before author 10.04.2018 Sr. PS/PS
Draft proposed & placed
3 JM/AM
before the Second Member
Draft discussed/approved by
4 AM/AM
Second Member
Approved Draft comes to the
5 Sr. PS/PS
Sr. PS/PS
6 Kept for pronouncement 10.04.2018 Sr. PS/PS
7 File sent to Bench Clerk Sr. PS/PS
Date on which the file goes to
8
Head Clerk
Date on which file goes to
9
A.R.
10 Date of Dispatch of order
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