Indian Kanoon - Search engine for Indian Law

and "relief to poor", i.e., even if the activities carried out in furtherance of M /s . M u n i w ar A b a d C h a r i t a b l e T r us t above said objectives may result in carrying on certain commercial activities, yet it would not be hit by the provisos to sec. 2(15) of the Act. We notice that the AO has taken the view that since the activities carried on by the assessee are commercial in nature, it would not fall under the category of "relief to poor". In our view, the approach of the AO was not correct. One has to determine the object of the charitable trust first, i.e., whether it would fall under the category of advancement of education, medical relief, relief to poor or any other object for advancement of general public utility. Thereafter, one has to examine the nature of activities carried on by the charitable trust as to whether the same is in the nature of commercial activities or not. Then one has to examine the applicability of the provisos to the charitable trust.

8. We have carefully considered the rival submissions in the light of material placed before us. Copy of trust deed as has been mentioned earlier is filed in the paper book from pages 20 to 53 of the paper book.

The objects are stated in clause (3) from sub-clause (a) to (z). From sub- clause (a) to (f) the object is stated to be providing accommodation to the homeless and or poor or low income group individuals and the housing facilities and assistance to them and to pay rent etc. for the needy persons. This also includes help and assistance to the association involved in similar activities. From sub-clause (g) to (k), the objects are regarding education and from sub-clause (l) to (m) the object is providing medical facilities. In sub-clause (n) the charitable object is stated to provide help to the aged persons and in remaining clauses the object stated is providing services of general utility to the needy persons. In short all the objects stated in the trust deed relates mainly to three activities; (i) to provide housing facilities to poor and need persons; (ii) to provide education and(iii) to provide medical facilities. The assessee trust has been recognized by the Commissioner as charitable institution and such status of the assessee is subsisting. Therefore, there cannot be any doubt that the objects stated by the assessee in the trust deed are in the nature of charitable activity. It is also not the allegation of the AO that the assessee trust is not carrying out charitable activities. The AO has only denied the benefit of accumulation of unspent income as provided in section 11(2). The objects for which the accumulation has been sought in the year under consideration have already been reproduced in para-5 of this order. The objects for which the accumulation was permitted by ITO in respect of immediate preceding assessment year i.e. for A.Y 2008-09 are also reproduced in para-5.4 of this order. The objects of accumulation for A.Y 2006-07 and 2007-08 are reproduced in paras 5.2 & 5.3 respectively. If the objects of accumulation of unspent income for assessment year under consideration are compared with the objects of accumulation of unspent income which have been accepted by the AO in A.Y 2008-09, then it will be observed that all the objects are same except M /s . M u n i w ar A b a d C h a r i t a b l e T r us t addition of object stated in sub-clause (c), which is the object to undertake or carry out major repairs and renovations of the houses/ buildings rendered into dilapidated and vulnerable condition due to natural calamities or otherwise which are in the occupation of the families of individuals of the economically weaker sections of the society who are not in a position to bear the cost involved with a view to make such houses/buildings, safe and secure and sustainable for their habitation. The said object is in accordance with the main object of the trust which requires to provide housing facility to weaker sections of the society. So additional object placed during the year under consideration cannot be said to be not falling within the main object of the assessee trust. Sub- clause (a) to (d) of the objects stated in the resolution are for the purpose of providing accommodation facilities to the weaker sections of the society and families of middle income group. Sub-clause (e) providing for purchase of office premises of the trust. Sub-clause (f) is for providing education facilities and clause (g) for providing health facilities. Thus all the objects stated in the resolution for the purpose of accumulation are within the main objects of the assessee trust and they are in the nature of charitable activity. The objection of the revenue is that the objects stated in the resolution passed for accumulation of unspent income are general in nature. They are not definite and concrete. As against this it is the case of assessee that considering the nature of charitable activities carried on by the assessee, it will be necessary to accumulate huge funds as the project of providing accommodation to needy persons will require huge investment depending upon locality and the size of the project, therefore, accumulation of large funds is required to fulfill the objects. For the purpose of fulfilling these objects assessee is accumulating unspent income from year to year. According to the provisions of the Act such accumulation has been permitted to be for a period of 10 years and where the project of the assessee involves huge investment and activity then it will take long time to take its shape and this position. Such situation has been recognized in the decision of ITAT in the case of Sir Shobha Singh Public Charitable Trust vs. ADIT (supra). In that case the assessee had stated six different objects for accumulation of unspent income out of 19 objects mentioned in the trust deed and it was the case of revenue that the objects for which accumulation has been sought are general in nature and were multiple objects. In that case also heavy reliance was also placed by the revenue on the decision of Hon'ble Calcutta High Court in the case of Trustees of Singhania Charitable Trust (supra). Considering those submissions, the observations of Third Member are as under:

"22. I have examined the rival contentions and have also perused minutely the orders passed by the learned Members constituting the Division Bench. Both the learned Members have set out at length the facts of the case as also the scheme of the Act vis-a-vis the point under consideration. There is definitely a distinction between the two relevant provisions of the Act--one allowing accumulation upto M /s . M u n i w ar A b a d C h a r i t a b l e T r us t 25 per cent of the income where the objects do not have to be specific and the other allowing accumulation upto 75 per cent of the income and the period of accumulation being as long as 10 years but setting out specific objects. In the present case, the assessee while applying for accumulation in Form No. 10 mentioned six objects out of 19 and a minute perusal of these shows with reference to p 7 of the order of the learned A.M. that the first three broadly pertained to education since they mention about setting up of schools, colleges, libraries, reading rooms and hostels for boys and girls studying in school and colleges, etc. The next three objects i.e. 4, 5 and 6 are in the field of medical education and medical aid since these pertain to the setting up of health centres, nursing homes, maternity centres as also construction of Dharamshalas or Sarais in or around hospitals in Delhi or New Delhi to accommodate poor patients and their attendants. The setting out of six objects in the application for accumulation indicates due application of mind on the part of the trustees since they decided to confine themselves to two important aspects of charitable activities i.e. education and medical aid whereas in the trust deed there were 19 objects, some quite unconnected with the two categories in which the six objects can be categorized. In the judgment of the Calcutta High Court (supra) heavily relied upon by the Revenue all the objects of the trust were mentioned in the application in Form No. 10 and their Lordships considering this aspect of the matter took the view that there was no preciseness or definiteness or specifics about the objects and these were general and vague. Their Lordships, however, did not rule out the plurality of the purposes for which accumulation was intended. In the present case, the learned A.M. has rightly held after considering the provisions of law, facts of the case, the decisions cited, and lastly the judgment of the Hon'ble Calcutta High Court itself in the case of Singhania Charitable Trust (supra) that the assessee was entitled to accumulate the funds as provided under s. 11(2) of the Act since the application in Form No. 10 did mention specific objects/purposes for which the accumulation had been requested for. The learned counsel for the appellant, in my opinion, has rightly contended that it is not possible to specify the type of educational institution or medical institution which would be set up during the period of 10 years following and the assessee would be quite justified in making up its mind during the said long period and deciding at whatever stage it was feasible or practicable to work out the modalities vis-a-vis the type of institution which it wanted to set up and the nature of charitable activities which it wanted to engage itself in. It has been noted by both the learned Members of the Division Bench and on which there is no difference that the concession was provided by the Act:

M /s . M u n i w ar A b a d C h a r i t a b l e T r us t "Perhaps to meet the contingency where the fulfillment of a project requires heavy outlay and calls for accumulation of funds as observed in the case of Singhania Charitable Trust

23. I would like to add further to this that a charitable institution which wants to accumulate its income for a long period of 10 years to carry out the charitable objects as set out in the trust deed does require time to think, time to plan and time to gamer its resources, etc. to fulfill those objects for which it has sought accumulation of funds and the legislature in its wisdom has allowed a long period of 10 years and I, therefore, really cannot appreciate the arguments of the learned Departmental Representative on behalf of the Revenue that even when the application for accumulation is filed the applicant trust must mention the type of institution medical or educational which it will set up as also the type of education or medical treatment which it will impart. This, in my opinion, was never the intention of the law-makers when the provision in the form of a concession was introduced whereby a charitable institution need not pay any tax on its income earned for a good period of 10 years provided it carried out charitable activities with a view to fulfilling the specific objects mentioned in the application seeking accumulation.