Trust Created for Benefit of Particular Community or Religious Group cannot be granted registration U/s. 12A

M/s. Sri Visa Vadnagar Vanik Samaj Vs Director of Income Tax (ITAT Hyderabad)

In the present case, the families of ‘SAMAJ’ cannot be considered as section of general public and they are limited to particular group and not for general public. The principles laid down in the above said case for a particular group of police irrespective of their caste, creed or religious beliefs and are in general public employment are considered as public for the purpose of granting registration, whereas in the present case, the Members of the ‘SAMAJ’ has a single personal relationship either to the deity or to the ‘SAMAJ’ as can be seen from the clauses in the Trust Deed. Likewise, the decision of Tax Practitioners Benevolent Fund, A Public Charitable Trust Vs. CIT [266 ITR 561] (Bombay) does not apply.

In the case of CIT Vs. Palghat Shadi Mahal Trust [254 ITR 212] the Hon’ble Supreme Court has held that there was no limitation in the Trust Deed in regard to which Muslims could avail the benefit of the Trust. The benefit was available to Muslims all over the world, none of whom except in Kerala were of backward classes. The Trust was not covered by Section 13(1)(b) and therefore held not entitled to exemption from tax. Similar facts apply in this case also as most of the expenditure is held for the benefit of a particular community or a religious group called ‘SAMAJ families’ and so, we are of the opinion that the Trust is not created for charitable or religious purposes for general public. Accordingly, it is not entitled for registration. In the case of CIT Vs. Surji Devi Kunjilal Jaipuria Charitable Trust [186 ITR 728] (All), a community of a public was held to be for religious or charitable purposes and was entitled for exemption, whereas it was clearly held that the section of the community sought to be benefitted must be sufficiently defined and identifiable by some common quality of a public or impersonal nature, whereas in this case, the community is identified with a religious belief and royalty to a particular deity and that too for families residing in Hyderabad. Even the receipts are from the Members [very few amounts of donation and except the other receipts and the expenditure is also seems to be within the community]. In view of this, we are of the opinion that Ld.DIT(E) has taken a correct decision in rejecting the registration. We find no merit in the grounds raised by assessee and accordingly, the order of DIT(E) is upheld.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

The present appeal is by assessee against the order of the Director of Income Tax (Exemptions), dated 28-08-2014 not granting the registration u/s. 12A of the Income Tax Act [Act].

2. The appeal was dismissed on 18-04-2016 for want of prosecution by assessee and was recalled by the order in M.A. No. 41/Hyd/2016, dt. 05-08-2016.

3. Briefly stated, the institution, Sri Visa Vadnagar Vanik Samaj, has earlier stated to have filed an application on 07-10-1988, seeking registration U/s.12A of the Income Tax Act, 1961 [Act]. It seems the said application has not been accepted/rejected by the Department. For the A.Y.2003-04 the AO has rejected the claim of assessee for exemption u/s.11(2) of the Act and has added an entire amount of Rs. 2,53,146/- to the income of assessee. On appeal filed by assessee against the said addition, the CIT(A) has dismissed such appeal on the ground that assessee was not registered with Registrar of Societies before 2004 and further assessee could not produce any evidence before the AO regarding filing of application in form No. 10A in the year 1988. On appeal filed by assessee against the said order of CIT(A) before the ITAT, the Co-ordinate Bench of ITAT in ITA No. 767/Hyd/2010 dt. 28-06-2010, however, has remitted the matter to the file of the DIT(E) for fresh consideration with the following observation made in para 3 & 4 of the order by stating as under:

“3. We have considered the rival submissions and perused the material available on record. We find that the learned counsel for assessee has filed a copy of the order of the Tribunal in ITA No.1232/Hyd/05 dated 7-9-2007 wherein the bench of this Tribunal, on similar and identical issue, remitted the matter back to the file of the DIT(E) for fresh consideration. Under the circumstances, we are remitting this matter also to the file of the DIT(E) with the direction to consider the issue afresh in accordance with law after providing a reasonable opportunity of being heard to the assessee.

4. In the result, the appeal of the assessee is treated as allowed for statistical purpose.”

3.1. Following the said order of the ITAT, proceedings were initiated afresh for deciding the matter. However, as assessee, during such proceedings, could not make the desired compliance, vide order passed by the DIT(E) in F.No. DIT(E)/HYD/SVVVS/12A/12-13 dated 31-01-2013 refused registration u/s.12A of the Act, while stating that the objects and activities of the above assessee could not be verified, and under that circumstance, it was not possible to grant registration u/s. 12A.

3.2. Aggrieved by the said order of the DIT(E), assessee

has filed further appeal. On such appeal, the Co-ordinate Bench of ITAT vide its order in ITA No.476/Hyd/2013 dt.16-07-2013 have remitted the entire matter to the file of the DIT(E) directing to give one more opportunity to assessee to present its case. The observations made by Co-ordinate Bench of ITAT at para 5 of the said order are as under:

“5. We have heard both the parties and perused the material on record. We have gone through para 3 of the DIT(E) order. In our opinion, it is appropriate to give one more opportunity to the assessee to put forth its case. Accordingly, the entire issue is remitted back to the file of the DIT(E) to give one more opportunity to the assessee to present its case before him.”

4. In the consequential proceedings, the DIT(E) considered the issue and did not grant registration mainly on the reason that (a) the original application in 1988 could have been disposed-off; (b) the Trust is meant for achieving overall prosperity of the members of Samaj; (c) the Trust is for both charitable and religious purposes and; (d) the provisions of registration and case law support either the same should be charitable or religious Trust, the Trust being both, is not eligible for registration.

5. During the proceedings, the Ld. Counsel was asked to furnish the copies of accounts to examine whether any charitable activity for general public was extended by the Trust.

6. Assessee filed the accounts as filed before the Department from AYs. 2008-09 to 2013-14 in Paper Book 1986-1991 and names of persons receiving the educational and medical aid.

7. It was the submission of Ld. Counsel that the Trust is having both charitable and religious projects and is for general public. Relying on the orders of the ITAT in Co-ordinate Bench decision, it was submitted that the Trust is eligible for registration. Ld DR however relied on order of CIT(E).

8. We have considered the rival contentions and perused the papers and case law placed on record. Before considering whether assessee is eligible for registration u/s. 12A, it is to be noted that the provisions of Section 11(1)(a) of the Income Tax Act, 1961, requires that to be a public charitable trust or religious trust, the trust should have been created either wholly for charitable or religious purposes. Section 11(1)(b) makes an exception for mixed trust which are for partly religious and partly for other purposes, if they were created before the commencement of the Income Tax Act, 1961. In the impugned case, Samaj was created by a deed which stated that Samaj was established on Sunday dt. 11-02-1968. Thus, there is no dispute that the trust was created after the commencement of the Act, 1961 and therefore, should have been created either for religious purposes or for charitable purposes. Even though registrations are being granted for mixed trust, considering the objectives which are mostly in charitable in nature for the general public, the aims and objects of Sri Visa Vadnagar Vanik Samaj is not for general public. As can be seen from the aims and objects in para 5 of the Constitution of the Trust originally constituted it was stated that ‘the purpose of establishing the SAMAJ is to achieve alround welfare and unity among SHRI VISA VAD NAGER SAMAJ families residing in Hyderabad.

i. The family deity of the SAMAJ – the Hatkeshwer Mahadev Temple which is existing at the old Sahukari Karwan; the Samaj will manage the affairs of the Temple so that the worship/pooja etcetera in all respects continues forever.

ii. To do all acts in order to achieve overall prosperity of the strive [Members of the Shri Visa Vad Nager Vanik Samaj Families].

iii. To provide for the education of Citizens and to undertake all such activities so as to imbibe in them; irrespective of Caste, Creed the spirit of service and dedication and thereby provide for upliftment of their intellectual cultural, moral physical and alround welfare.

iii. To help, aid, assist and contribute towards educational, medical and provide for compassionate allowance to the needy Members of the community.

iv. To celebrate ‘SEL’ {Feast} of the ‘SHREEJI’.

v. To obtain and acquire such moveable and immovable properties as may be useful for purpose of the SAMAJ and accept unconditional Donations.

Assessee claims that this Trust has submitted for registration u/s. 12A vide application dt. 05-09-1988, the fate of which either the department or assessee is not in a position to explain, except, as the Ld.DIT(E) opines, that application could have been rejected. Had it been accepted, assessee would have certainly have got the benefit of claiming exemption and certainly would have placed it on record.

8.1. Be that as it may, vide the General Body Meeting held on 03-11-2005, the aims and objects are stated to have been amended as under:

A. To purpose of establishing the samaj is to achieve alround welfare & unity among Shri Visa Vad Nagar Samaj families residing in Hyderabad;

B. The family deity of the Samaj the Hatkeshwar Mahadev Temple which is existing at the old sahukari karwan, the samaj will manage the affairs of the Temple so that the worship/pooja etcetera in all respect continues forever;

C. To all all acts in order to achieve overall prosperity of the Strive {Members of the Shri Visa Vad Nagar Vanik Samaj Families};

D. To provide for the education of citizens and to undertake all such activities so as to imbibe in them; irrespective of caste, creed the spirit of service and dedication and thereby provide for upliftment of their intellectual, cultural, moral, physical and alround welfare;

E. To help, aid, assist and contribute towards educational medical and provide for compassionate allowances to the needy Members of the community;

F. To celebrate ‘SEL’ (Feast) of the ‘SHREEJI’;

G. To obtain and acquire such moveable and immoveable properties as may be useful for purpose of SAMAJ and accept unconditional Donations;

8.2. As can be seen from the above, there is difference only re numbering the aims and objects originally formed. The main aim of achieving alround welfare and unity among the families residing in Hyderabad had been renumbered as A) so as to make it only as one of the objects by the revised draft. However, as approved by the Hon’ble Supreme Court in the case of Gangabai Charities Vs. Commissioner of Wealth Tax [250 ITR 666] the General Body cannot modify the trust deed so as to make a variation in the trust objects. In these circumstances, it is to be considered that there is no change in the aims and objects of assessee-trust which is mainly established for the purpose of establishing the ‘SAMAJ’ to achieve all round welfare and unity among Visa Vadnagar Vanik families residing in Hyderabad. This clearly indicates that the trust was created for the purpose of a secluded group of persons who has their loyalty to a particular God i.e., Hatkeshwer Mahadev Temple and not general public.

8.3. It is interesting to note that rules contain apart from various powers, the constitution of committees for Kuldevata Mandir, the rules specify the ‘evaluation of family’ as under:

Evaluation of Family

1. Any Members whose Kitchen is separated his family shall be treated as a separate family.

2. After separation of Kitchen the same shall be informed to the Committee so that invitations etcetera can be given separately.

3. Gist or List of families appears on the last page.

8.4. There are rules for regarding wedding or marriages.

1. Family Heads will invite all members for Betrothal Ceremony.

2. At the time of Betrothal Ceremony Shreeji Bait shall be paid as per the wish of both {Bridegroom and Bride} the parties. They shall sign in the Books of SAMAJ.

3. Both the parties shall pay Rs.101 {Rupees One Hundred and One} each towards SAMAJ FUND and {Rupees One Hundred and One} each towards offering as Hatkeshwar Mandir Bait.

4. Wedding/Marriage Invitations will be given wherein details of Gruha Shanti and Lunch and Dinner timings will be mentioned. In functions other than Weddings videlicet ‘MUNDAN’/’SAPATVASI’ the invitations by Telephone will be sufficient.

5. While performance of wedding or marriage the Bride’s party shall offer Lunch or Dinner.

6. Nani Shakkar {offerings to Bride} can be alone be done as per individual’s desire.

7. Before start of the wedding or marriage function; the Managing Committee shall be invited and permission obtained after payment of SAMAJ Fund.

8. Gruh Shanti shall be performed before sunset.

9. Presentation not more than Rs. 51 {Rupees Fifty One} to be given at the time Grah Shanti by the Members.

10. Any dispute regarding weddings or marriages shall be made in writing to the Managing Committee seven {7} days before the date of the wedding or marriage. The Managing committee will give its rulings within four {4} days.

11. All the Members should be present during wedding or marriage functions.

12. Wedding or Marriage functions shall be performed as per the customs in any event if any person desires to perform wedding/marriage {Ghar Mayle} he or she should pay the Samaj Fund as specified in Clause 7 supra and obtain permission of the Managing Committee.

13. In the event of performing weddings or Marriages other than our community; in that event the Member has to pay an amount Rs. 1,251 {Rupees One Thousand Two Hundred and Fifty-one only} towards SAMAJ FUND.

14. Members should not perform Weddings or Marriages of their Daughters in other Towns; in case it is necessary; permission should be obtained from SAMAJ.

15. Bride’s permission has been banned. Feast timings Lunct at 1 p.m. {13.00 Hours}; Dinner at 8 p.m. {20.00 Hours}. Regarding Dinner Ladies/Women and Children should be given first preference.

8.5. Even though Ld. Counsel drew our attention to the Clause-3 of ‘providing education of citizens and to undertake off such activities so as to imbibe in them irrespective of caste, creed, the spirit of service and dedication’ as for the purpose of general public, as seen from the accounts placed on record, there is no such expenditure to fulfil this object. The educational aid and medical aid being given every year and claimed in the P&L A/c seems to have been limited to the Members of the family of ‘SAMAJ’, no evidence of any charitable nature for general public has been placed on record.

8.6. The copies of the returns placed on record from 2008-09 to 2013-14 do indicate that there is income from ‘Shri Hatkeshwar Mahadev Mandir’ and income for other activities which was claimed exemption to a small extent u/s. 11(a) and claimed below taxable limits. As seen from the P&L A/c also the receipts are towards ‘utensil maintenance’ and ‘interest from bank’ but donations/voluntary contributions are all very small nature. The expenditure includes expenditure towards religious discourse (Rs. 55,000/- for the year ending 31-03-2010 and Rs. 26,850/- for the year ending 31-03-2013) etc. Even though there are Anna Danam expenses and other expenditure as can be seen from the rules, these are meant for family members only in various baitaks which cannot be considered as public charitable in nature. Since the trust is created solely for the purpose of limited members of a particular community or belief and not for the purpose of general public, we are of the opinion that the trust cannot be considered as a trust for public charitable purposes and accordingly, the DIT(E) is correct in rejecting the registration.

8.7. Coming to various case law relied upon, in the case of CIT Vs. Ahmedabad Rana Caste Association [140 ITR 1] (SC) the Hon’ble Supreme Court has accepted the decision of Hon’ble Gujarat High Court, wherein the benefit u/s. 4(3)(i) of 1922 Act was considered and the orders involved years 1960-61, 1961-62 and 1962-63. As already stated earlier, that Trust was created before 1961, therefore the mixed Trust was also entitled for the benefit u/s. 11(1)(b) of the Act. In those circumstances, the Hon’ble Supreme Court has agreed. But in the present case, this Trust was created after 1961. Therefore, the principles laid down in that judgment does not apply. Ld. Counsel relied on the decision of CIT Vs. Andhra Pradesh Police Welfare Society [148 ITR 287] (AP). The facts in the above said case are that the Trust was created for the purpose of police personnel, wherein the Hon’ble High Court has held as under:

“A group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propositus or to several propositus, they are neither the community nor a section of the community for charitable pruposes.

However, the above principle is not applicable in the case of public employment, i.e., employment of Government, since in that case it is the public that it is the employer; qui facit per alium facit per se and so, to the services rendered by the employees in the public employment, the beneficiaries are the public. Section 10(23C) further supports their view”.

8.8. In the present case, the families of ‘SAMAJ’ cannot be considered as section of general public and they are limited to particular group and not for general public. The principles laid down in the above said case for a particular group of police irrespective of their caste, creed or religious beliefs and are in general public employment are considered as public for the purpose of granting registration, whereas in the present case, the Members of the ‘SAMAJ’ has a single personal relationship either to the deity or to the ‘SAMAJ’ as can be seen from the clauses in the Trust Deed. Likewise, the decision of Tax Practitioners Benevolent Fund, A Public Charitable Trust Vs. CIT [266 ITR 561] (Bombay) does not apply.

8.9. In the case of CIT Vs. Palghat Shadi Mahal Trust [254 ITR 212] the Hon’ble Supreme Court has held that there was no limitation in the Trust Deed in regard to which Muslims could avail the benefit of the Trust. The benefit was available to Muslims all over the world, none of whom except in Kerala were of backward classes. The Trust was not covered by Section 13(1)(b) and therefore held not entitled to exemption from tax. Similar facts apply in this case also as most of the expenditure is held for the benefit of a particular community or a religious group called ‘SAMAJ families’ and so, we are of the opinion that the Trust is not created for charitable or religious purposes for general public. Accordingly, it is not entitled for registration. In the case of CIT Vs. Surji Devi Kunjilal Jaipuria Charitable Trust [186 ITR 728] (All), a community of a public was held to be for religious or charitable purposes and was entitled for exemption, whereas it was clearly held that the section of the community sought to be benefitted must be sufficiently defined and identifiable by some common quality of a public or impersonal nature, whereas in this case, the community is identified with a religious belief and royalty to a particular deity and that too for families residing in Hyderabad. Even the receipts are from the Members [very few amounts of donation and except the other receipts and the expenditure is also seems to be within the community]. In view of this, we are of the opinion that Ld.DIT(E) has taken a correct decision in rejecting the registration. We find no merit in the grounds raised by assessee and accordingly, the order of DIT(E) is upheld.

9. In the result, appeal of assessee is dismissed.

Order pronounced in the open court on 28th February, 2018