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Case Law Details

Case Name : Calicut Islamic Cultural Society Vs. ACIT (ITAT Cochin)
Appeal Number : Appeal No. ITA Nos. 729 & 641/Coch/2006
Date of Judgement/Order : 31/07/2008
Related Assessment Year :


When the legislature has categorically defined the purposes like religious and charitable and if the assessee- society is engaged as per their objects in mixed activities, which are partly charitable and partly religious, it cannot be said that section 11(1)(a) does not contemplate such situation.

18. In short, it is not the case of the Assessing Officer or the Commissioner (Appeals) that both the assessees are either not fully or partly engaged in the non-religious or the non-charitable activities. In fact, from the assessment order, we find that the Assessing Officer has undisputediy accepted the fact that, more particularly in the case of Calicut Islamic Cultural Society, the assessee is not constituted only for the benefits of the backward community alone but for the benefit of the entire public as such. Moreover, in the institutions run by the assessee, more particularly the educational institutions, the members of the other community are also admitted. The assessee is also giving support to the poor. In the same way, in the case of another assessee, it is not the case of the AO that the activities of the assessee” are not otherwise than religious and charitable activities. It is interpreted that as per the words used in section 11(1)(a) of the Act, for any institution or trust it must have either wholly charitable or wholly religious activities.: The entire controversy is revolving around the interpretation of section 11(1)(a) of the Act.

21. The above observations are quoted in N S Bindra’s Interpretation of Statutes (Ninth Edition, Page No. 15). In short, the English language cannot be treated as instrument of mathematic precision. Now the question is can it be said that it is the intention of the Legislature as per the language used in clause (a) to section 11(1) of the Act that save the provisions of sections 60 to 63 of the Act for claiming the income exempt which is derived from the property held under the trust which must wholly for the charitable or wholly religious purposes. If the institution or trust are engaged into the mixed object which are partly religious and partly charitable or as per the case of the AO as well as the CIT(A) the institution or trust is having the mixed activities of charity as well as religion then the exemption cannot be claimed. The argument of the learned senior counsel is that there is a very thin line of demarcation between the charity and religion. Every religion is having the principles of the charity and many charitable purposes may not have the principles of religion, though the religion is the question of faith. It is to be mentioned here that “charitable purpose” in section 2(15) of the Act making the inclusive definition and trying to make the charitable purpose more elaborate but there is no definition of the “religious purpose” under the Act. No doubt the law recognizes no purpose as charitable unless it is of the public character .In short, it should be for the benefit of the community or the section of the community as held in the case of Ahmedabad Rana Caste Association (supra) by the Hon’ble Supreme Court. As far as religious purpose is concerned means religion’s purpose within the meaning of personal law applicable to the assessee as held by the Hon’ble High Court of Bombay in the case of Kesarbai Dharamsey Kakoo Charitable and Religious Trust vs. CIT, 68 1TR 821 (Bom).

There are innumerable examples where there will be very thin line of demarcation between the purposes to identify which are the charitable* purposes or which are the religious purposes. In both these appeals, it is not the case of the Department either that any of the bars provided under section 13 of the Act are applicable to both these assessees as per the interpretation given by the AO as well by the CIT(A). As per the provisions of section 11(1)(a) of the Act it requires that there should be nexus between the property held under the trust wholly for charitable or religious purposes and the income under consideration. The interpretation given by the AO as well as by the CIT(A) is that the purpose should be wholly charitable or wholly religious. We are afraid, whether such interpretation can be accepted. In our opinion, said interpretation given by both the authorities is only academic. When the Legislature has categorically defined the purposes like religious and charitable and if the assessee is engaged as per their objects in mixed activities, which are partly charitable and partly religious, it cannot be said that section 11(1)(a) of the Act does not contemplate such situation.

22. Another aspect to be considered here in both these cases is that both these assessees have been granted Registration under section 12A of the Act. The argument of the learned DR is that prior to insertion of section 12AA of the Act, no much more investigation was done by the CIT and it was just an empty formality to grant Registration in the old section 12A of the Act .We are unable to accept the said argument for the reason that in section 12A of the Act also the application of the mind by the CIT was involved. During the course of argument it was brought to our notice that though the exemption is refused to both the assessees, Registration granted under section 12A stand as it is.

23. In our opinion, once the Registration is granted to the assessee by the CIT, AO cannot go into probing the objects and the purposes of the trust or institution and that is within the exclusive domain and jurisdiction of the CIT. What AO can do that he can at the most investigate the matter within the four corners of section 13 of the Act. In this case the AO has gone with investigating and probing the basic objects of the trust by entering into shoes of the CIT and such exercise is not permissible.

26 In our opinion, both the authorities have misinterpreted the judgment in the case of Ghulam Mohidin Trust (supra), in that case – it was held-that as per the objects of the trust it was partly charitable and partly religious but as far as the present these two cases are concerned, nowhere it is the case of the AO that in both these cases the objects of the assessee are partly non-charitable or partly non-religious. Further, in that case there was no proper apportionment of the income between the two objects of the trust as it was left to the exclusive discretion of the trustees to spend whatever they like. In short, it was an arbitrary discretion given to the trustees to apply the income for the non-charitable and non-religious purposes. Moreover, in that case it was held that section 13(1)(b) of the Act is attracted as the trust was intended to promote science and technology and Muslim theology among Muslim intelligentsia, which was the main and dominant object of the trust. In the present two cases it is not the case of the AO. In our opinion, the principles laid down by the Hon’ble High Court, of Jammu & Kashmir has no application as far as the facts of the present these two-cases are concerned.

30. For the reasons stated above, we are of the opinion that both these assessees are eligible to claim the exemption under section 11 of the Act. We therefore cancel the order of the CIT(A) and direct the AO to give benefits of section 11 to both these assessees by treating their income as exempt.


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