Indian Islamic Mission, CHENNAI V. DIT, CHENNAI

ITA 13/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58020 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-02-2012
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N QUADIR HOSEYN; T VASUDEVAN S
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.13 & 14 MDS/2011 (ASSESSMENT YEAR : 2010-11) INDIAN ISLAMIC MISSION, NO.26, (NEW 32) 1 ST FLOOR, VELAYUTHAM STREET, MANNADY, CHENNAI-600 001. PAN:AAAAI3260P VS. THE DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI-600 034. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI N.QUADIR HOSEYN & T.VASUDEVAN, ADVOCATES RESPONDENT BY : SHRI K.E .B.RENGARAJAN, JR. STANDING COUNSEL ALONG WITH SHRI ANIRUDH RAI, CIT DR DATE OF HEARING : 28 TH FEBRUARY, 2012 DATE OF PRONOUNCEMENT : 9 TH MARCH, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THE ABOVE MENTIONED TWO APPEALS, BOTH RELATING TO THE ASSESSMENT YEAR 2010- 11, AGAINST THE COMMON ORDER DATED 29.09.2010 OF THE DI RECTOR OF INCOME TAX(EXEMPTIONS), CHENNAI, WHEREBY APPLICATI ON FOR REGISTRATION UNDER SECTION 12A(A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND APPLIC ATION FOR GRANT ITA NOS.13 & 14 /MDS/2011 2 OF APPROVAL UNDER SECTION 80G OF THE ACT HAS BEEN R EJECTED. SINCE BOTH THESE APPEALS ARE ARISING OUT OF THE COM MON IMPUGNED ORDER, THEY WERE HEARD TOGETHER AND ARE B EING DECIDED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE CASE OF THE ASSESSEE IS THAT IT IS A TRUST R EGISTERED UNDER THE PROVISIONS OF THE INDIAN TRUST ACT. THE TRUST WAS CREATED ON 8.3.2009 UNDER THE NAME INDIAN ISLAMIC MISSION. THE MAIN OBJECTS OF THE TRUST AS SPELT OUT IN THE D EED OF TRUST ARE AS FOLLOWS:- III) OBJECTS: THE TRUST SHALL HAVE AS ITS OBJECTS, MEDICAL, EDUCA TIONAL AND CHARITABLE IN NATURE AND WOULD BE AVAILABLE TO THE GENERAL PUBLIC IRRESPECTIVE OF CASTE, CREED, COLOUR , RELIGION OR SEX. (1) TO GIVE FINANCIAL ASSISTANCE TO THE POOR AND DESERVING STUDENTS FOR PROSECUTING THEIR STUDIES. (2) TO GIVE MEDICAL RELIEF TO THE POOR AND NEEDY PE OPLE FOR THEIR MEDICAL TREATMENT. (3) TO AWARD SCHOLARSHIPS TO POOR BOYS AND GIRLS FR OM THE FUNDS OF THE TRUST. (4) TO CONSTRUCT PRAYER HALLS, COMMUNITY HALLS, LIB RARY AND MAINTAIN THEM. (5) TO DONATE OR SPEND ON OTHER OBJECTS WHICH ARE CHARITABLE IN NATURE OR FOR PUBLIC UTILITY. (6) TO DO ALL OTHER ACTS, DEEDS AND THINGS WHICH AR E INCIDENTAL, ANCILLARY OR CONDUCIVE TO THE FULFILLME NT OF ITA NOS.13 & 14 /MDS/2011 3 ANY OR ALL OF THE ABOVE OBJECTS OR AIMS OF THE TRUS T PROVIDED THAT (A) NONE OF THE ACTIVITIES OF THE TRUST SHALL BE CA RRIED ON WITHIN THE INTENTION OF EARNING PROFITS & (B) NONE OF THE ACTIVITIES SHALL BE CARRIED OUTSIDE INDIA (7) THIS TRUST SHALL BE IRREVOCABLE. THE TRUST MADE AN APPLICATION IN FORM 10A FOR REGIS TRATION AS CHARITABLE TRUST UNDER SECTION 12AA OF THE ACT AND FORM 10G FOR GRANT OF APPROVAL UNDER SECTION 80G(5) OF THE ACT. BOTH THE SAID APPLICATIONS OF THE ASSESSEE WERE REJECTED BY THE DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI ON THE GROUND THAT ONE OF THE OBJECT AS PER OBJECT CLAUSE (III) (4) OF THE DEED OF TRUST IS TO CONSTRUCT PRAYER HALLS. CONSTRUCTI ON OF PRAYER HALLS IS CLEARLY A RELIGIOUS ACTIVITY. RELYING UP ON THE JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT IN CI T VS. UPPER GANGES SUGAR MILLS LTD., (1985) 154 ITR 308 A ND THE JUDGEMENT PASSED BY THE HONBLE SUPREME COURT REPOR TED IN (1997) 227 ITR 578, THE LEARNED DIRECTOR OF INCOME TAX(EXEMPTIONS) REJECTED BOTH THE APPLICATIONS FOR GRANT OF REGISTRATION UNDER SECTION 12AA AND APPROVAL UNDER SECTION 80G OF THE ACT. ITA NOS.13 & 14 /MDS/2011 4 3. AGGRIEVED AGAINST THE ORDER PASSED BY THE LEARNE D DIRECTOR OF INCOME TAX (EXEMPTIONS), THE ASSESSEE H AS PREFERRED TWO SEPARATE APPEALS I.E. ITA NO.13/2011 AGAINST REJECTION OF ASSESSEES APPLICATION FOR REGISTRATIO N UNDER SECTION 12AA OF THE ACT AND ITA NO.14/2011 IMPUGN ING REJECTION OF ASSESSEES APPLICATION FOR APPROVAL UN DER SECTION 80G OF THE ACT. 4. THE LEARNED A.R. FOR THE ASSESSEE HAS SUBMITTED THAT THE DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED I N REJECTING THE REGISTRATION UNDER SECTION 12AA OF T HE ACT ON THE GROUND THAT IN OBJECT NO.4 OF THE TRUST DEED, O NE OF THE OBJECT MENTIONED IS CONSTRUCTION OF PRAYER HALLS WHICH IS RELIGIOUS IN NATURE. IT IS FURTHER CONTENDED THAT T HE DIT(EXEMPTIONS) FAILED TO APPRECIATE THAT EVEN ASSU MING WITHOUT CONCEDING THAT PRAY HALL IS RELIGIOUS IN NA TURE, THE ASSESSEE IS ENTITLED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT FOR THE PURPOSE OF SECTION 11 WHICH IN ITS SWEE P INCLUDES A RELIGIOUS TRUST ALSO AND HENCE DENYING OF REGISTR ATION FOR THE PURPOSE OF EXEMPTION UNDER SECTION 11 IS BAD IN LAW . HE FURTHER SUBMITTED THAT THE WORD PRAYER HALL IS TO BE READ ITA NOS.13 & 14 /MDS/2011 5 ALONG WITH LIBRARY, COMMUNITY HALL AS WELL AS THE A VAILABILITY OF EDUCATIONAL AND MEDICAL FACILITIES WHICH ARE OPEN T O GENERAL PUBLIC IRRESPECTIVE OF CASTE, CREED, RELIGION, RACE OR SEX. HE SUBMITS THAT READING PRAYER HALL ALONE OUT OF THE CONTEXT TO DENY REGISTRATION AND APPROVAL IS UNJUSTIFIED. IN S UPPORT OF HIS SUBMISSIONS, HE RELIED UPON THE ORDER PASSED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL DATED 19.08.2011 IN ITA NO.1446/MDS/2011 IN THE CASE OF M/S.KATIE WILCOX ED UCATION ASSOCIATION VS. CIT. 5. THE LEARNED D.R DOES NOT PRESS WITH REGARD TO R EJECTION OF APPLICATION OF THE ASSESSEE FOR REGISTRATION UND ER SECTION 12AA OF THE ACT. HOWEVER, HE STRONGLY REITERATES TH E GROUNDS ON WHICH THE APPLICATION FOR APPROVAL UNDER SECTION 80G OF THE ACT WAS REJECTED BY THE DIT(EXEMPTIONS). HE SUBMIT TED THAT APPLICATION FOR APPROVAL UNDER SECTION 80G HAS BEEN RIGHTLY REJECTED AS THE ASSESSEE IS UNDERTAKING RELIGIOUS A CTIVITIES. 6. SECTION 12 OF THE ACT READS AS UNDER:- INCOME OF TRUSTS OR INSTITUTIONS FROM CONTRIBUTION S. 12. [(1)] ANY VOLUNTARY CONTRIBUTIONS RECEIVED BY A TR UST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR BY A N INSTITUTION ESTABLISHED WHOLLY FOR SUCH PURPOSES (NOT BEING CON TRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION) SHALL FOR THE PURPOSES OF SEC TION 11 BE DEEMED TO ITA NOS.13 & 14 /MDS/2011 6 BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WH OLLY FOR CHARITABLE OR RELIGIOUS PURPOSES AND THE PROVISIONS OF THAT SECTION AND SECTION 13 SHALL APPLY ACCORDINGLY.] [(2) THE VALUE OF ANY SERVICES, BEING MEDICAL OR E DUCATIONAL SERVICES, MADE AVAILABLE BY ANY CHARITABLE OR RELIG IOUS TRUST RUNNING A HOSPITAL OR MEDICAL INSTITUTION OR AN EDUCATIONAL I NSTITUTION, TO ANY PERSON REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OR C LAUSE (C) OR CLAUSE (CC) OR CLAUSE (D) OF SUB-SECTION (3) OF SECTION 13 , SHALL BE DEEMED TO BE INCOME OF SUCH TRUST OR INSTITUTION DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURP OSES DURING THE PREVIOUS YEAR IN WHICH SUCH SERVICES ARE SO PROVIDE D AND SHALL BE CHARGEABLE TO INCOME-TAX NOTWITHSTANDING THE PROVIS IONS OF SUB- SECTION (1) OF SECTION 11. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSION VALUE SHALL BE THE VALUE OF ANY BENEFIT OR FACILI TY GRANTED OR PROVIDED FREE OF COST OR AT CONCESSIONAL RATE TO ANY PERSON REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OR CLAUSE (C C) OR CLAUSE (D) OF SUB-SECTION (3) OF SECTION 13.] [(3) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 11, ANY AMOUNT OF DONATION RECEIVED BY THE TRUST OR INSTITUTION IN TE RMS OF CLAUSE (D) OF SUB-SECTION (2) OF SECTION 80G 9 [IN RESPECT OF WHICH ACCOUNTS OF INCOME AND EXPENDITURE HAVE NOT BEEN RENDERED TO TH E AUTHORITY PRESCRIBED UNDER CLAUSE (V) OF SUB-SECTION (5C) OF THAT SECTION, IN THE MANNER SPECIFIED IN THAT CLAUSE, OR] WHICH HAS BEEN UTILISED FOR PURPOSES OTHER THAN PROVIDING RELIEF TO THE VICTIMS OF EARTHQUAKE IN GUJARAT OR WHICH REMAINS UNUTILISED IN TERMS OF SUB -SECTION (5C) OF SECTION 80G AND NOT TRANSFERRED TO THE PRIME MINIST ERS NATIONAL RELIEF FUND ON OR BEFORE THE 31ST DAY OF MARCH, [20 04] SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR AND SH ALL ACCORDINGLY BE CHARGED TO TAX.] SECTION 12A PROVIDES FOR CONDITIONS FOR APPLICABILI TY OF SECTIONS 11 AND 12. THE PROVISIONS OF SECTION 80G(5 ) APPLIES TO THE DONATION TO ANY INSTITUTION OR FUND REFERRED IN SUB-CLAUSE (IV) OF CLAUSE (A) OF SUB-SECTION (2) ONLY IF IT IS ESTABLISHED IN ITA NOS.13 & 14 /MDS/2011 7 INDIA FOR A CHARITABLE PURPOSES AND IT FULFILLS THE CONDITIONS MENTIONED THEREIN. THE PROVISIONS OF SECTION 80G G RANTS DEDUCTION TO THOSE PERSONS WHO MAKE DONATIONS TO TH E INSTITUTIONS OR FUNDS WHICH ARE APPROVED UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. 7. AFTER HEARING BOTH THE PARTIES AND GOING THROUGH THE PROVISIONS OF THE ACT, WE DEEM IT APPROPRIATE TO SA Y THAT THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION 12AA OF THE ACT HAS BEEN WRONGLY REJECTED BY THE DI RECTOR OF INCOME TAX (EXEMPTIONS), AS THE PROVISIONS OF SECTI ONS 11 AND 12 OF THE ACT SQUARELY COVER CHARITABLE AS WELL AS RELIGIOUS INSTITUTIONS FOR THE PURPOSE OF GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. MOREOVER, THE LEARN ED D.R. HAS NOT OBJECTED TO THE GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. THUS THE APPEAL OF THE ASSESSEE I. E. ITA NO.13/2011 IS ALLOWED. 8. AS REGARDS THE REJECTION OF APPLICATION FOR APPR OVAL UNDER SECTION 80G OF THE ASSESSEE IS CONCERNED, IT WOULD ITA NOS.13 & 14 /MDS/2011 8 BE RELEVANT TO REFER TO THE PROVISIONS OF SECTION 8 0G(5B). THE SAME ARE REPRODUCED HEREIN BELOW:- (5B) 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.] A PERUSAL OF SUB-SECTION (5B) OF SECTION 80G SHOWS THAT AN INSTITUTION OR FUND WHICH INCURS EXPENDITURE, DURIN G ANY PREVIOUS YEAR, WHICH IS OF A RELIGIOUS NATURE FOR A N AMOUNT NOT EXCEEDING FIVE PER CENT OF ITS TOTAL INCOME IN THAT PREVIOUS YEAR SHALL BE DEEMED TO BE AN INSTITUTION OR FUND T O WHICH THE PROVISIONS OF THIS SECTION APPLY. THE PROVISIONS O F SECTION 80G DOES NOT PUT TOTAL EMBARGO ON THE INSTITUTIONS TO CARRY ON RELIGIOUS ACTIVITIES. HOWEVER, A RESTRICTION OF 5% OF TOTAL INCOME IN PREVIOUS YEAR FOR EXPENDITURE OF RELIGIOU S NATURE HAS BEEN PUT. 9. FURTHER, A PERUSAL OF THE TRUST DEED, WHICH IS PLACED ON RECORD, AT PAGES 20 TO 25 OF THE PAPER BOOK FILED B Y THE ITA NOS.13 & 14 /MDS/2011 9 ASSESSEE SHOWS THAT THE OBJECTS OF THE ASSESSEE TR UST ARE PRIMARILY CHARITABLE IN NATURE. THE LEARNED DIT(EXE MPTIONS) HAS ERRED IN COMING TO THE CONCLUSION THAT CONSTRUC TION OF A PRAYER HALL IS A RELIGIOUS ACTIVITY. THE WORD PRAY ER HALL IS NOT TO BE READ IN ISOLATION OUT OF THE CONTEXT. THE CO NSTRUCTION OF PRAYER HALL APART FROM OTHER FACILITIES VIZ. COMM UNITY HALL, LIBRARY ETC. WILL NOT MAKE IT INELIGIBLE FOR APPR OVAL UNDER SECTION 80G OF THE ACT. THE LEARNED A.R. HAS CATEG ORICALLY STATED THAT PRAYER HALL HAS NOT BEEN CONSTRUCTED SO FAR AND IN THE EXISTING PREMISES MEDICAL AID IS BEING PROVIDED TO ONE AND ALL. 10. IN VIEW OF THE ABOVE, IT CANNOT BE CONSTRUED TH AT THE ASSESSEE IS INVOLVED IN RELIGIOUS ACTIVITY AND IS N OT ELIGIBLE FOR APPROVAL UNDER THE PROVISIONS OF SECTION 80G OF THE ACT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE, T HE JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT IN UPP ER GANGES SUGAR MILLS LTD. (SUPRA) AND THE HONBLE S UPREME COURT REPORTED IN (1997) 227 ITR 578 ARE NOT APPLI CABLE IN THE PRESENT CASE. SUB-SECTION (5B) HAS BEEN SUBSEQU ENTLY INSERTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 1.4.2000 ITA NOS.13 & 14 /MDS/2011 10 WHICH HAS PROVIDED FOR EXPENDITURE OF RELIGIOUS NAT URE SUBJECT TO THE LIMITS AS MENTIONED ABOVE. HOWEVER, WE MAKE IT CLEAR THAT IN CASE THE ASSESSEE INCURS ANY EXPENDITURE WH ICH IS OF A RELIGIOUS NATURE EXCEEDING 5% OF ITS TOTAL INCOME I N THE RELEVANT PREVIOUS YEAR, THE APPROVAL GRANTED IS LIA BLE TO BE CANCELLED FORTHWITH AS PER THE PROVISIONS OF ACT. THUS, ITA NO.14/2011 IS ALLOWED ACCORDINGLY. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2012. SD/- SD/- (ABRAHAM P.GEORGE) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 9 TH MARCH, 2012. SOMU COPY TO: (1) APPELLANT ( 4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.