Bhuvaneshwari Kali Thakuranir Seva Samity Vs. CIT (ITAT Kolkata)
The ld. CIT(E), in his order u/s 80G(5B) of the Act, held that the assessee spent more than 5% of its income towards religious purposes. The religious expenditure in question is towards puja expenses and honarium paid to priests. In our view the judgement in the case of Umaid Charitable Trust (supra), does not come to the rescue of the assessee, because in that case a single charitable contribution was made to another trust, which carries out renovation of Lord Vishnu Temple. Such single contribution was not considered as a religious activity. In the case on hand, worship of Godess Kali Mata and expenditure incurred towards the same is definitely incurred for a particular religious purpose. The arguments of the assessee, that any person of any religion can perform the Puja to Goddess Kali and hence the expenditure in question is not restricted to a particular religion is not correct. The expenditure is of religious nature. Just because the expenditure is by persons of all categories, castes and creeds, does not cease to make the expenditure of religious nature. The requirement of the Section 80G(5)(iii) of the Act are not the basis on which approval u!s 80G of the Act, was denied and hence the arguments advanced based on this Section has no merit.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is an appeal by the Assessee directed against the order dated 22.12.2016 of the ld. CIT, Exemptions (ld. CIT(E)), Kolkata relating to A.Y.2016-17, wherein the ld. CIT(E) has passed an order rejecting grant of the approval u/s 80G of the Income-tax Act, 1961 (here nafter referred to as the „Act‟).
2. The assessee is a society registered with the Registrar of Firms, Societies & Non-Trading Corporation, West Bengal. It applied for approval u/s 80G of the Act, to the CIT(E), Kolkata. The ld. CIT(E), vide his order dt. 16/12/2016 rejected the case of the assessee by holding as follows:-
“ By spending more than 5% of its total income for religious purposes, the applicant has not complied with the provisions of Section 80G(5B) of the Income-tax Act, 1961.
Because of the reason mentioned above, the application for approval u/s 80G is REJECTED. This is also held that, the application Society is not approved for exemption to donations u/s 80G of the Income-tax Act, 1961 ”
3. The ld. Counsel for the assessee, Shri G. Banerjee made elaborate submission. He also made written submissions which are extracted for ready reference:-
“The application for approval u/s, 80G(5)(vi) has been disallowed by the ld. CIT(Exemption) by order dated 16.12.2016 which is contested in this appeal. The application of the assessee falls under 80G(2)(i )’ and is covered by S.80G(5) as to its validation. Sub section (5) of s. 80G stipulates the conditions for grant of approval of an institution or fund as prescribed in Rule 11AA. As per 11AA(4), the approval should be granted on satisfaction of conditions u/s. 80G(5)(i) to (v). One of the condition in Sub clause (iii) is that the inst./fund is not expressed to be for the benefit of any particular religious community (or caste. As per the MOA of the assessee (pgs. 7 of PB) the object clauses 3(a) to 3(1) contains purposes of performance of seva puja (charitable offerings), give lessons and instructions of Puran, Geeta(holy books), maintain, construct, repair, add or alter the Mandir (temple) & land of Sri Sri Kalimata, These objects are not for any particular religious community or caste. There is nothing in the object clause to indicate that the puja or worshipping right belongs to only Hindus or Brahmins. Any person practicing any other faith, religion or caste is not precluded to enter the temple or to offer puja or to worship and pay respect to the deity namely Bhuvaneswari Kali Thakuranir, offer pranamis etc. Thus, it is argued that the object clause of the assessee does not contain any expression to be for the benefit of any particular religions community or case. Reliance on 307 ITR 226 (Raj) Umaid Charitable Trust V UOI. Further, in the impugned order, nothing has been shown to disentitle the application for approval of assessee by not fulfilling any one or more conditions of s. 80G(5) (i) to (v) as prescribed in Rule 1 1AA (5) to reject the application. “It is essentially a charitable organization with the avowed object of serving the humanity irrespective of any caste, creed or religion which would also be borne out from the objects contained in the memorandum of association. Secondly, sub clause (5B) of S. 80G is an enabling clause by which it is provided that an entity, otherwise entitled to the benefit of s. 80G, shall not loose the benefit merely because a small percent of its total income (5%) is spent for religious nature. This enabling clause can not be used for refusing grant of registration to assessee. The ass essee also submits that the two items of disbursement, namely priest honorarium and puja expenses, considered as outgoings for religious purposes are not for any religious purpose, either for a particular religion or otherwise. These expenses are incurred for offering worship of any person who visits the temple and offers pranam i/donation. The charitable offerings or performing of customary practices are not religion but practice of one’s own consciousness. Moreover, the limit of sub section (5B) is to be applied on a year to year basis during assessment of the entity and can not be applied at the time when the Institution/fund is seeking registration (Reliance on Abacus Foundation V CIT(E) ITA 02/03/Kol)2016). Further, the limit prescribed by sub section (B) is 5%of total income of assessee whereas the ld CIT(E) has compared the same as a percentage of gross receipts and not total income. In case total income of the assessee is considered. (Rs. 3058 for F. Y. 2015-16 – PB Pg. 2), then no part of this total income has been spent or applied for any purpose and, have been accumulated to next year. Thus, it is claimed that the assessee is sufficiently entitled to the grant of registration u/s. 80G. The assessee has not spent anything out of his total income and the entire total income is accumulated for application in succeeding year. The Ld. Commissioner refused to grant registration on the basis of sub clause (5B) of section 80G on the basis that more than 5% of its income was spent on religious activity but ignored the fact that income does not mean gross receipt. Income of any business is worked out after deducting expenses reasonably incurred. It was in any event a case of an initial registration which should not have been refused.”
Thirdly, the word charitable purpose has been explained in Expl. 3 as excluding purposes, the whole or substantially the whole of which is of a religious nature. Religious nature, having not been defined anywhere in the Act, its ordinary meaning is to be interpreted. Sub section (5) also contains that for application of conditions of s. 80G, the institution must be established for a charitable purpose. Sub clause (ii) of Subsection (5) again states that the instrument under which the inst./fund is constituted, does not contain rules for transfer or application of whole or part of its income or assets for purposes other than charitable. Now, all these clauses are aiming to rule out religious inst./fund from availing benefits of s. 80G. The assessee claims that they are not religious inst./fund, either for any particular community or caste. In case it is held that all activities of worship, tantamount to religious activities, then the use of word “particular religious community or caste” made in sub clause (iii) of subsection (5) becomes otiose and inoperative. There would have been no need to differentiate between a particular religious community or caste and other religious activity. Religion in its expression resembles a particular sect, community, caste or body of people and one religion can not be conceived as applicable to or practiced by the whole of humanity as such. [Religion: Monastic condition, order, practice of sacred rite, one of the prevalent systems of faith and worship.] Thus the word religion essentially means and embraces a particular faith, discipline or practice. There is nothing known as a religion followed by the entire humanity in this world. Religion in its interpretation can not thus be divorced from a particular religion so as to apply to all mankind universally. Reliance also placed on 251 ITR 849 (AP) & quoted 307 ITR 226 quoted at pages 232 & 233 of 307 ITR and also para 14 of page 234 & 235, para 15 & 16 of page. 236, para 19 of page 237 to indicate the distinction of religion with charitable objects.
It is true that the organization is looking after sewa puja of Kali Thakurani. The offerings to the deity after meeting the expenses of sewa puja are accumulated for the purpose of charitable expenses. Ld. Commissioner took exception to the fact that expenses were incurred for sewa puja and in payment of honorarium to the priest but ignored the fact in the absence of sewa puja no one is likely to make any offering or pranami. No sewa puja can be conducted without a priest. The aforesaid expenses were incurred to earn the Surplus to be applied for charitable purposes.”
4. The ld. D/R, Shri G. Mallikarjuna, pointed out that the disallowance was made because the assessee has incurred expenditure in excess of 5% of this total income for religious purposes. He pointed out that the expression for the benefit of particular religious community or caste cannot be brought in or imported or relied upon while interpreting Section 80G(5B) of the Act, which is a separate section having different wording and purpose.
5. After hearing rival contentions, perusing the papers on record, orders of the authorities below as well as case-law cited, we hold as follows:-
5.1. The relevant provisions of the Act and Rules as well as a discussing on the case law on the subject has been brought out by the Hon‟ble Rajasthan High Court in the case of Umaid Charitable Trust vs The Union Of India (Uoi) And Ors. 2008 207 ITR 226 (Raj), which is extracted for ready reference:-
“5. That before considering the various judgments on this aspect of the matter, it would be appropriate to reproduce the relevant provisions of section 80G of the Act to the extent the same are relevant for the controversy involved in the present case.
“80G. Deduction in respect of donations to certain funds, charitable institutions, etc.—(2) The sums referred to in sub-section (1) shall be the following, namely :—
(iv)any other fund or any institution to which this section applies; or
(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :—
(i )where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10 :—
Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if—
(a) the institution or fund maintains separate books of account in respect of such business;
(b) the donations made to the institutions or fund are not used by it, directly or indirectly, for the purposes of such business; and
(c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not use directly or indirectly, for the purposes of such business.
(ii )the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose.
(iii)the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
(iv)the institution or fund maintains regular accounts of its receipts and expenditure;
(v )the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; and
(vi)in relation to donations made after 31 -3-1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf : Provided that any approval shall have effect for such assessment year or years, not exceeding (five) assessment years, as may be specified in the approval.
Where a deduction under this section is claimed and allowed for any assessment year in respect of any sum specified in sub-section (2), the sum in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year.
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.
Explanation 3 – In this section ‘charitable purpose’ does not include any purpose the whole or substantially the whole of which is of a religious nature
6. The learned counsel for the petitioner also relied upon rule 11AA of the Income-tax Rules, 1962 particularly sub-rules (4) to (6) of the said rule 11AA, which are reproduced hereunder :
“11AA. Requirements for approval of an institution or fund under section 80G.—(1) to (3)******
(4) Where the Commissioner is satisied that all the conditions laid down in clauses (i) to (v ) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid.
(5) Where the Commissioner is satisied that one or more of the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing : Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard.
(6) The time-limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the date on which such application was made :
Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded.”
7. Now a scrutiny of relevant case laws on the controversy involved in the present case is considered expedient at this stage. From the side of the assessee-petitioner, following case laws are relied upon which are noticed with relevant extract from the same as below :
8. In Addl. CIT v. Surat Art Silk Cloth Manufacturers’ Association [1980] 121 ITR 1, the Hon ‘ble Apex Court held that where the main or primary objects are distributive, each and every objects must be charitable in order that the trust or institution may be upheld as a valid charity. But if primary and dominant purpose of the trust is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid It was observed that the primary and dominant purpose in the present case was promotion of commerce and trade in art silk etc., was an object of public utility not involving the carrying on of any activity for profit within the meaning of section 2(15); and that the assessee was entitled to exemption.
9. In CIT v. K.H. Kusumgar [1988] 169 ITR 370, the Bombay High Court observed that where the object of a charitable trust was, inter alia, imparting of education and encouragement and promotion of the study and practice of the Shewatamber Jain Murtipujak religion amongst students of ashrams, boarding-houses, gurukuls, vidyalayas, pathshalas and shravikushramas and also amongst all persons without distinction of sex, caste, creed, place or religion, a gift of immovable property made to such charitable trust could not be said to be for a purpose the whole or substantially the whole of which was of a religious nature and the gift would be entitled to exemption under section 5(1)(v) of the Gift Tax Act.
10. In Tirumala Tirupati Devasthanam v. Chief CIT [2001] 251 ITR 849 (AP), the petitioner institution maintained 10 temples and 22 educational institutions, peer home and bala mandir specified in Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987. The petitioner provided free food, free accommodation, free transport to the pilgrims irrespective of caste and religion on the simple declaration of faith in the Lord. The Hon ‘ble High Court, while allowing the writ petition and setting aside the order of the Commissioner of not granting exemption to the petitioner and directing him to consider the application de novo in light of Hon ‘ble Court’s order, held that ‘section 80G of the Income-tax Act, 1861, provides for deduction in respect of donations to certain funds and It applies to donations to any institution or fund established in India for charitable purpose and if it fulfils the following conditions, namely the instrument under which the institution is constituted does not or rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose. Sub-section (5) read with Explanation 3 makes it clear that the Commissioner can refuse to grant recognition under section 80G of the Act only in the event of finding that the claimed charitable purpose includes any purpose the whole or substantially the whole of which is of a religious nature’. It was held that in the present case there was no such finding and hence the Commissioner ought not have refused the claim of petitioner.
11. In Sri Ramakrishna Sewa Ashrama v. CIT [2001] 252 ITR 171 (AP), the petitioner, a registered society, had many objects including those charitable in nature, to diffuse scientific knowledge on Vedanta and the promotion of science, literature and fine arts. One of the objects was preaching ideals of Hinduism. It was granted approval for deduction under section 80G but its subsequent applications for approval were rejected by the Commissioner on the ground that preaching of ideals of Hinduism and other religions amounted to an object of religious nature. The Hon ‘ble High Court, while setting aside the rejection and restoring the matter before Commissioner held that although the aims and objects of the petitioner did not include some purely religious activities, they also included many temporal and secular activities such as to diffuse scientific and technical knowledge on Vedanta and also for promotion of science, literature, fine arts, charitable institutions in educational, technical, social and scientific fields to carry on spiritual and cultural works, study of philosophies of different cultures and civilizations, etc. The rejection of Commissioner did not satisfy the requirements of a reasoned decision or speaking order. The Commissioner had to consider the applications of the petitioner under section 80G and apply his mind to the material placed before him and take a decision by a reasoned order. It was also observed that when the Commissioner grants or refuses to grant approval to an institution under section 80G, he acts as a quasi-judicial statutory authority; the conclusion reached and the findings recorded by him have to be supported by reasons. Past Activities of Applicant to be seen
12. In Kirti Chand Tarawati Charitable Trust v. DIT (Exemption) [1998] 232 ITR 11, the Delhi High Court observed that :
“For the purpose of construing the purpose of the trust, one need not remain necessarily confined to the objects of the trust and set out in the deed of declaration. The real purpose of the establishment of the trust has to be found out and spelled out. ‘Purpose’ means that which one sets before him to accomplish or attend, an intention or aim, object, plan, project; the term is synonymous with the ends sought and an object to attain, an intention, etc. Purpose must obviously be construed as a real purpose and not a purpose as it outwardly appears to be. Any other interpretation would permit a fraud being played on the law permitting exemption from taxation. If the argument of learned counsel for the petitioner were to be accepted then a trust may be established with a purpose as set out in the deed of declaration which appears to be highly charitable but the trust may in fact be engaged in such activities which cannot even remotely be called charitable, and yet the donations made to the trust would enjoy exemption. The authority conferred with the power to grant exemption is not debarred from finding out the real purpose as distinguished from the ostensible purpose and if it may find that the purpose of the trust was other than charitable then nothing debars the authority from denying the approval.
. . . The purpose of the establishmentthe real purpose as distinguished from the ostensible purpose – is germane to the inquiry, which the Commissioner has to hold while granting [or refusal to grant] approval. . . .” (p. 19)
13. In Hiralal Bhagwati v. CIT [2000] 246 ITR 188 , it was observed by the Gujarat High Court that an object beneficial to a section of the public is an object of ‘general public utility’. To serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province. The Hon ‘ble Court further opined that the CIT has to examine the objects of creating the trust as well as an empirical study of the past activities of the appellant has to be done. The CIT has to examine that it is really a charitable trust or institution entitled for registration.
14. In CIT v. Sri Jagannath Jew [1977] 107 ITR 9 , the Hon’ble Supreme Court speaking through Krishna Iyer, J. held as under :
“. . . The law is set out thus by B.K. Mukherjea :
‘The fact that property is ordinarily described as debutter is certainly a piece of evidence in favour of dedication, but not conclusive’. In Binod Behari v. Manmatha [1915] 21 CLJ 42 (Cal.), Cox, J. observed as follows :
‘The fact that the property is called debutter is a doubtless evidence in the plaintiff’s favour but it does not relieve them of the whole burden of proving that the land was dedicated and is inalienable.’
Though inconclusive, it carries weight in the light of what we may call the mission of the disposition which is inspired by devotion to ‘my Thakoor’ and animated by a general religious fulfilment. It must be remembered that the donor was not tied down by bigotry to performance of pujas, important though they were. A more cosmic and liberal view of Hinduism informed his soul and so in his declaration of dedication of Sree Jagannathjee he addressed to the managers many directions of a broadly religious and charitable character. His injunction to feed the poor was Narayana seva for worship of God through service of man in a land where the divinity in daridra Narayana is conceptually common place and, while it is overtly secular, its motive springs from spiritual sources. It is religion to love the poor. Likewise his insistence on the aviary and the menagerie and throwing open both to the people to see and delight is not a mundane mania but has deeper religious roots. Hinduism worships all creation :
(Peace be unto all bipeds and even so to all quadrupeds).
Indeed, the love of sum-human brethren is high religion.
For
‘He prayeth best, who loveth best
All things both great and small
For the dear God who loveth us.
He made and loveth all.’
(Coleridge, in Ancient Mariner)
From the Buddha and Mahavira to St. Francis of Assissi and Gandhiji, compassion for living creatures is a profound religious motivation. The sublime mind of Mullick was obviously in religious sympathy with fellow beings of the lower order when he showed this tenderness to birds and beasts and shared it with the public. The art gallery too had link with religion in its wider connotation although it is plainer to regard it as a gesture of aesthetics and charitable disposition. God is Truth. Truth is beauty, beauty is Truth. A thing of beauty is a joy for ever.
In fact for a highly elevated Indian mind, this conceptual nexus is not far-fetched. The garden and the love of flowers strike a psychic chord at once beautiful and religiously mystical, as any reader of Wordsworth or other great poet in English or Sanskrit will agree. The point is that the multiform dispositions had been united by a spiritual thirst and, if read in their integrality, could be designated religious-cum-charitable. In sum, the primary intendment was to dedicate as debutter and to direct fulfilment of uplifting religious and para-religious purposes, the focus being on worship of Sree Jagannathjee and the fall-out some subsidiary, yet significant, charitable items. The finer note struck by the felt necessities of his soul was divinised and humanised, the central object being Sree Jagannathjee, the Lord of the Universe.” (p. 19)
15. In CIT v. Swastik Textile Trading Co. (F.) Ltd. [1978] 113 ITR 852 , the Gujarat High Court observed that compassion for living creatures, although it motivates all true religion, is also practical spirituality as it has an elevating moral influence, fostering a deep sense of fellow feeling and fraternity. Such acts not only fulfil our cherished human values but they equally promote public goods and welfare and are, therefore, dominantly religio-charitable, it was further held that the Tribunal was right in holding that the donations to the trust could be deducted. The Hon’ble Court, while quiting Sri Jagannath Jew’s case (supra), where the amounts spent for religious and charitable purposes such as feeding of poor were excluded from the total income, observed on page 865, “it is religion to love the poor.”
