Income Tax Appellate Tribunal - Chennai
Indian Islamic Mission, Chennai vs Assessee on 28 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA Nos.13 & 14 Mds/2011
(Assessment Year : 2010-11)
Indian Islamic Mission, The Director of Income Tax
No.26, (New 32) 1st floor, (Exemptions),
Velayutham Street, Vs. Chennai-600 034.
Mannady,
Chennai-600 001.
PAN:AAAAI3260P
(Appellant) (Respondent)
Appellant by : S/Shri N.Quadir Hoseyn &
T.Vasudevan, Advocates
Respondent by : Shri K.E.B.Rengarajan,
Jr. Standing Counsel along with
Shri Anirudh Rai, CIT DR
Date of Hearing : 28th February, 2012
Date of Pronouncement : 9th March, 2012
ORDER
PER VIKAS AWASTHY, JUDICIAL MEMBER:
The assessee has filed the above mentioned two appeals, both relating to the assessment year 2010-11, against the common order dated 29.09.2010 of the Director of Income Tax(Exemptions), Chennai, whereby application for registration under section 12A(a) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") and application for grant 2 ITA Nos.13 & 14 /Mds/2011 of approval under section 80G of the Act has been rejected. Since both these appeals are arising out of the common impugned order, they were heard together and are being decided by this consolidated order for the sake of convenience.
2. The case of the assessee is that it is a trust registered under the provisions of the Indian Trust Act. The trust was created on 8.3.2009 under the name Indian Islamic Mission. The main objects of the Trust as spelt out in the Deed of Trust are as follows:-
"iii) Objects:
The Trust shall have as its objects, medical, educational and charitable in nature and would be available to the general public irrespective of caste, creed, colour, religion or sex.
(1) To give financial assistance to the poor and deserving students for prosecuting their studies. (2) To give medical relief to the poor and needy people for their medical treatment.
(3) To award scholarships to poor boys and girls from the funds of the Trust.
(4) To construct prayer halls, community halls, library and maintain them.
(5) To donate or spend on other objects which are charitable in nature or for public utility. (6) To do all other acts, deeds and things which are incidental, ancillary or conducive to the fulfillment of 3 ITA Nos.13 & 14 /Mds/2011 any or all of the above objects or aims of the Trust provided that -
(a) None of the activities of the trust shall be carried on within the intention of earning profits &
(b) None of the activities shall be carried outside India (7) This trust shall be irrevocable."
The Trust made an application in Form 10A for registration as charitable trust under section 12AA of the Act and Form 10G for grant of approval under section 80G(5) of the Act. Both the said applications of the assessee were rejected by the Director of Income Tax (Exemptions), Chennai on the ground that one of the object as per object clause (iii) (4) of the Deed of Trust is to construct "prayer halls". Construction of prayer halls is clearly a religious activity. Relying upon the judgement of the Hon'ble Calcutta High Court in CIT Vs. Upper Ganges Sugar Mills Ltd., (1985) 154 ITR 308 and the judgement passed by the Hon'ble Supreme Court reported in (1997) 227 ITR 578, the learned Director of Income Tax(Exemptions) rejected both the applications for grant of registration under section 12AA and approval under section 80G of the Act.
4 ITA Nos.13 & 14 /Mds/2011
3. Aggrieved against the order passed by the learned Director of Income Tax (Exemptions), the assessee has preferred two separate appeals i.e. ITA No.13/2011 against rejection of assessee's application for registration under section 12AA of the Act and ITA No.14/2011 impugning rejection of assessee's application for approval under section 80G of the Act.
4. The learned A.R. for the assessee has submitted that the Director of Income Tax (Exemptions) has erred in rejecting the registration under section 12AA of the Act on the ground that in Object no.4 of the Trust Deed, one of the object mentioned is construction of "prayer halls" which is religious in nature. It is further contended that the DIT(Exemptions) failed to appreciate that even assuming without conceding that pray hall is religious in nature, the assessee is entitled for registration under section 12AA of the Act for the purpose of section 11 which in its sweep includes a religious trust also and hence denying of registration for the purpose of exemption under section 11 is bad in law. He further submitted that the word "prayer hall" is to be read 5 ITA Nos.13 & 14 /Mds/2011 along with library, community hall as well as the availability of educational and medical facilities which are open to general public irrespective of caste, creed, religion, race or sex. He submits that reading "prayer hall" alone out of the context to deny registration and approval is unjustified. In support of his submissions, he relied upon the order passed by the co-ordinate Bench of this Tribunal dated 19.08.2011 in ITA No.1446/Mds/2011 in the case of M/s.Katie Wilcox Education Association Vs. CIT.
5. The learned D.R does not press with regard to rejection of application of the assessee for registration under section 12AA of the Act. However, he strongly reiterates the grounds on which the application for approval under section 80G of the Act was rejected by the DIT(Exemptions). He submitted that application for approval under section 80G has been rightly rejected as the assessee is undertaking religious activities.
6. Section 12 of the Act reads as under:-
"Income of trusts or institutions from contributions.
12. [(1)] Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to 6 ITA Nos.13 & 14 /Mds/2011 be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly.] [(2) The value of any services, being medical or educational services, made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13, shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income-tax notwithstanding the provisions of sub-
section (1) of section 11.
Explanation.--For the purposes of this sub-section, the expression "value" shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13.] [(3) Notwithstanding anything contained in section 11, any amount of donation received by the trust or institution in terms of clause (d) of sub-section (2) of section 80G 9[in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, [2004] shall be deemed to be the income of the previous year and shall accordingly be charged to tax.] Section 12A provides for conditions for applicability of sections 11 and 12. The provisions of section 80G(5) applies to the donation to any institution or fund referred in sub-clause
(iv) of clause (a) of sub-section (2) only if it is established in 7 ITA Nos.13 & 14 /Mds/2011 India for a "charitable purposes" and it fulfills the conditions mentioned therein. The provisions of section 80G grants deduction to those persons who make donations to the institutions or funds which are approved under the provisions of the Income Tax Act, 1961.
7. After hearing both the parties and going through the provisions of the Act, we deem it appropriate to say that the application of the assessee for registration under section 12AA of the Act has been wrongly rejected by the Director of Income Tax (Exemptions), as the provisions of sections 11 and 12 of the Act squarely cover charitable as well as religious institutions for the purpose of grant of registration under section 12AA of the Act. Moreover, the learned D.R. has not objected to the grant of registration under section 12AA of the Act. Thus the appeal of the assessee i.e. ITA No.13/2011 is allowed.
8. As regards the rejection of application for approval under section 80G of the assessee is concerned, it would 8 ITA Nos.13 & 14 /Mds/2011 be relevant to refer to the provisions of section 80G(5B). The same are reproduced herein below:-
(5B) Notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply.] A perusal of sub-section (5B) of section 80G shows that an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. The provisions of section 80G does not put total embargo on the institutions to carry on religious activities. However, a restriction of 5% of total income in previous year for expenditure of religious nature has been put.
9. Further, a perusal of the Trust Deed, which is placed on record, at pages 20 to 25 of the paper book filed by the 9 ITA Nos.13 & 14 /Mds/2011 assessee shows that the objects of the assessee trust are primarily charitable in nature. The learned DIT(Exemptions) has erred in coming to the conclusion that construction of a prayer hall is a religious activity. The word 'prayer hall 'is not to be read in isolation out of the context. The construction of prayer hall apart from other facilities viz. community hall, library etc. will not make it ineligible for approval under section 80G of the Act. The learned A.R. has categorically stated that prayer hall has not been constructed so far and in the existing premises medical aid is being provided to one and all.
10. In view of the above, it cannot be construed that the assessee is involved in religious activity and is not eligible for approval under the provisions of section 80G of the Act. In view of the facts and circumstances of this case, the judgement of the Hon'ble Calcutta High Court in Upper Ganges Sugar Mills Ltd. (supra) and the Hon'ble Supreme Court reported in (1997) 227 ITR 578 are not applicable in the present case. Sub-section (5B) has been subsequently inserted by the Finance Act, 1999 with effect from 1.4.2000 10 ITA Nos.13 & 14 /Mds/2011 which has provided for expenditure of religious nature subject to the limits as mentioned above. However, we make it clear that in case the assessee incurs any expenditure which is of a religious nature exceeding 5% of its total income in the relevant previous year, the approval granted is liable to be cancelled forthwith as per the provisions of Act. Thus, ITA No.14/2011 is allowed accordingly.
11. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 9th March, 2012.
Sd/- Sd/-
(Abraham P.George) (Vikas Awasthy)
Accountant Member Judicial Member
Chennai,
Dated the 9th March, 2012.
somu
Copy to: (1) Appellant (4) CIT(A)
(2) Respondent (5) D.R.
(3) CIT (6) G.F.