• Nov
  • 06
  • 2009

Allowability of exemption to partly charitable and partly religious trust

CASE LAW DETAILS

Decided by: ITAT, COCHIN BENCH (THIRD MEMBER), In The case of: The Society of Presentation Sisters v. ITO, Appeal No.: ITA No. 457/Coch/2007, Decided on: September 22, 2009

RELEVANT PARAGRAPH

19.     It is clear from plethora of authorities where after considering provisions of section 1l(l)(a) that so for as 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 1961 Act. Even where decision was on consideration of 1922 Act, there is no material difference as is demonstrated in the above discussion. Their Lordship of Supreme Court have held, as noted earlier, that charitable and religious purpose 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 u/s 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. Above view is totally contrary to well established and settled law in India, as laid down by their Lordship of Supreme Court.

20. Although there is no distinction between religious or charitable institution as for as section ll(l)(a) is concerned, such distinction is recognised u/s 13which is an exception to section 11 and 12 of the Act. Cases which are covered under clauses (a), (b), (c) and (d) of Section 13 would not be entitled toexemption u/s 11 or 12 of the Income-tax Act. Clause (a) of above section relates to income from property under a trust for private religious purposes which does not enure for the benefit of the public. Clause (b) deal with cases of charitable institution created or established after the commencement of the Act. It isrequired to be seen whether such charitable trust or institution is established for the benefit of a particular religious community or caste. If it is so established, then provisions of section 11 will not be attracted. But for application of above clause, it is to be shown that income of the trust ensures and used or applied directly or indirectly for the benefit of the persons referred to in sub-section (3). Clauses (c) and (d) are applicable to both type of trusts i,e. trust for charitable or religious purposes, unlike in clauses (a) and (b) which were applicable to private religious trust or to charitable trust The Legislature has specifically used in clause (c) the words “trust for charitable or religious purposes”. Clauses (c) and (d) would be applicable to trust which is either for charitable purposes or for religious purposes or partly charitable and partly religious. In other words, if such trust is established only for the benefit of a particular religious community or caste, then the provision of section 11 would not be applicable. But the position would be different and in case of a trust or institution for religious purposes, wherein certain activities termed as charitable activities are also carried for the benefit of a religious community or caste, clause (b) would have no application in such a case.

21. In these cases, the revenue authorities did not make out any case u/s 13(l)(b) or any other clause of the section. There is no finding that trusts inquestion are charitable institutions created or established for the benefit of any particular religious community or caste. As already submitted, provision ofclause (b) of section 13(1) is applicable only to a charitable institution and not to any institution which is created both for charitable and religious purposes. There is no elaboration as to how any particular religious community or caste is to be benefited from the trust in question. No violation of provision of section 13 of the Act has been stated or established. The finding or basis for denial of exemption u/s ll(l)(a) is that trusts are partly religious and partly charitable,whereas exemption is permissible to wholly charitable or wholly religious trusts. Such basis is not legally tenable.

22. In the case of The Society of Presentation Sisters, the Assessing Officer noted expenses under the following four heads:

1.                Chapel running expenses

2.               Chapel articles

3.               Religious books, and

4.               Religious functions

According to the AO above objects were religious. After considering objects of the trust, he observed that objects (a) to (h) are charitable. Out of these, object (g) is noted as under:

“(g) To effect hospitals, infirmaries, dispensaries, chapels, convents, bungalows, schools, hospitals, orphanages, homes for the aged.”

According to the A.O, erection of chapels and convents were religious in nature.

Accordingly purpose of the trust was held to be partly religious and partly charitable and exemption denied to the assessee. It is difficult to appreciate oragree with aforesaid conclusion. How erection of chapels and convents can be treated purely religious in nature and not charitable. No relevant facts have been brought on record to make out a case justifying denial of exemption u/s 1 l(l)(a). There is no finding that chapels and convents are to serve a particular community and the purpose would be hit by provisions of section 13(l)(b). Besides as already recorded religious purpose can be a charitable purpose and vice versa in India. Therefore, exemption could not be denied to a trust which is partly charitable and partly religious, in the light of above discussion.

23.   In the other case of Wayanad Muslim Orphanage Committee, the Assessing Officer concluded that maintenance of Mosque and Madrassas were religious activities which contravene provisions of section 11(l)(a). The purposes of the trust were held to be partly charitable and partly religious. Therefore, exemption was denied to the assessee.


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