Case Law Details
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.
The CIT (A) had proceeded on the basis that although the Assesse 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 Jamat (supra) which held that even where the trust or society has both religious 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 communities 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 religious community” 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 under Section 11 of the Act.
Full Text of the ITAT Order is as follows:-
1. This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (‘Act’) is directed against the order dated 7th October 2016 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 2239/Del/2016 for the Assessment Year (‘AY’) 2012-13.2. The question urged by the Revenue is whether it could be said that the Assessee- Society is a charitable society established ‘for the benefit of any particular religious community or caste’ thereby in violation of Section 13 (1) (b) of the Act?
3. It is the case of the Revenue that the Respondent-Society (‘Assessee’) was carrying out activities ‘directed towards the benefit of a particular community’ and therefore, in terms of Section 13 (1) (b) of the Act, it is not entitled to exemption under Section 11 of the Act.
4. The facts are that the Assessee -Society is registered under Section 12A (a) of the Act in terms of a Registration Certificate dated 23rd October 1982. Mr. C.S. Aggarwal, learned Senior counsel for the Assessee- Society, has produced before the Court a copy of the said Registration Certificate which simply states that the application made by the Assessee- Society has been entered in the register maintained in the office of Commissioner of Income Tax, Delhi-VI under Section 12A (a) of the Act.
5. The main object of the Assessee-Society is to undertake the dissemination of useful religious knowledge in conformity with the purposes of the Church of Jesus Christ of Latter-Day Saints, to assist in promulgation of worship in the Indian Union, to establish places of worship in the Indian Union, to promote, sustain and carry out programmes and activities of the Church, which are, among others, educational, charitable, religious, social and cultural etc. A second amendment to the Memorandum of Articles of Association was adopted by the Assessee- Society on 21st September 2002. Clause (h) of Article IV as amended reads thus:
“In order to serve the charitable purposes of The Church of Jesus Christ of Latter day Saints (“the Church”) in providing educational opportunities to its young members who cannot afford to finance their educations, (i) to act as an agent of the Church or an affiliated entity thereof to disburse, collect, and service loans to students who qualify for low interest loans under the Perpetual Education Fund (“PEF”) or International Education Fund (“IEF”) programs of the Church, or (ii) if necessary to administer such programs and conduct all such activities in the name of the Society, subject in all cases to compliance with applicable laws”
6. The factual finding returned by the ITAT by the impugned order dated 7 th October 2016 is that the Assessee was actually carrying out the following activities.
“(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.
(vi) 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.”
7. The further factual finding rendered by the ITAT is 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.”
8. It requires to be noted that no question of law has been urged or ground taken by the Revenue in the present appeal that the above factual findings of the ITAT are perverse and unsupported by the documents placed on record by the Assessee.
9. In the assessment order dated 27th February 2015 for the AY 2012-13, the Assessing Officer (AO) held that the Assessee was incurring expenditure for upkeep of the priests who belonged to a particular community. The AO observed that “their upkeep is no charity.” He then concluded that “the
assessee society has not pursued any activity in the true nature of charity for the general public directly itself.” It was pointed out by the Assessee Society that only after being satisfied that its activities were of religious and charitable nature it was granted registration under Section 12A (a) of the Act and that the said registration continues. However, the AO was of the view that said registration “does not give blanket exemption to any entity.” The AO noted that the expense incurred by the Assessee included donations for general public utility. However, on the ground that it constituted “a very small part of the total expenditure” the AO held that the Assessee was not using its funds for public benefit but rather for the benefit of specified persons under Section 13(3) of the Act. The AO held:
“The claim of the assessee that it is a composite society is not tenable as stated in Para 4. 0 above Article IV (Powers) (H), wherein society has been stated to be charitable in nature. Also, nowhere the MOA of the assessee mentions such term and therefore, this claim of assessee is not tenable and is treated a charitable society working towards the benefit of particular religious community.”
10. The Assessee then went in appeal before the Commissioner of Income Tax (Appeals) [‘CIT(A)’]. The attention of the CIT(A) was drawn to the decision of the Supreme Court in Commissioner of Income Tax v. Dawoodi Bohra Jamat [2014] 364 ITR 31 (SC) which held on facts that the bar under Section 13 (1) (b) of the Act would not be applicable since the activities of the organization in that case served both religious and charitable purposes. The CIT (A) in the present case, however, decided not to apply the ratio of the Dawoodi Bohra Jamat (supra) on the ground that the activities of the Society there was not just for one religion/community whereas that was not the case here. It was observed that “no logical explanation has been provided to explain that the society is not for one religious community alone.” In other words what weighed with the CIT (A) too was that even if the Society’s activities were for both charitable and religious purposes, since it was for the benefit of one religious community alone, Section 13 (1) (b) of the Act would be attracted and it could not be granted exemption under Section 11 of the Act.
11. The ITAT has, in the impugned order, pointed out that neither the AO nor the CIT(A) undertook any factual examination in arriving at the above conclusions. The ITAT noted that the documents filed before the ITAT by the Assessee provided the names and designations of the persons managing and carrying on the activities of the Society. It showed that “priests are not managing the affairs of the society.” Further, the Assessee had in its letter dated 28th February 2015 addressed to the AO listed the activities carried out by it. In particular it stated that the programmes conducted by the Assessee Society “are open for public at large without any distinction of caste from a creed or religion and the benefits of these programmes held at the meeting house are available to the general public at large.”
12. At this stage, the Court would like to refer to the decision in Dawoodi Bohra Jamat (supra) where the Supreme Court observed as under:
“In our considered view, determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact. It is but a question which requires examination of legal effects of the proven facts and documents, that is, the legal implication of the objects of the respondent- trust as contained in the trust deed. It is only the objects of a trust as declared in the trust deed which would govern its right of exemption under section 11 or section 12. It is the analysis of these objects in the backdrop of fiscal jurisprudence which would illuminate the purpose behind creation or establishment of the trust for either religious or charitable or both religious and charitable purpose. Therefore, the High Court has erred in refusing to interfere with the observations of the Tribunal in respect of the character of the trust. ”
13. After analyzing the connotations of the terms ‘charity’, ‘charitable purpose’ and ‘religious purpose’, the Supreme Court analyzed the facts and found that “the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities”. Thereafter, the Supreme Court went on to analyze Section 13 (1) (b) of the Act and observed as under:
“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 purpose. 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.
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 c. CIT (1975) 101 ITR 234 (SC)]. The section of community sought to be benefited must be either sufficiently defined or identifiable by a common quality of a public or impersonal nature [CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722]”
14. After noticing the decision in CIT v. Palghat Shadi Mahal Trust [2002] 254 ITR 212 (SC), the Supreme Court in Dawoodi Bohra Jamat (supra) concluded as under:
“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 paragraph, 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.
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.”
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 Assesse 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 Jamat (supra) which held that even where the trust or society has both religious 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 communities 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 religious community” 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 under Section 11 of the Act.
17. No substantial question of law arises from the impugned order of the ITAT. The appeal is dismissed.
