ADDL DIT (E)-II, MUMBAI V. ASHA HANDICRAFTS ASSOCIATION, MUMBAI

ITA 5310/MUM/2009

• Counselvise Citation: 531019914 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHI NAIK
• Assessee Lawyers: RAJA B SINGH
• Keywords: Charitable institution
• Section: 11; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL, ( JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.5310/MUM/2009 ASSESSMENT YEAR : 2006-07 ITA NO.5776/MUM/2010 ASSESSMENT YEAR : 2007-08 THE DY. DIRECTOR OF INCOME TAX ROOM NO.507, PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI-12. ..( APPELLANT ) VS. M/S. ASHA HANDICRAFTS ASSOCIATION 28, SUREN ROAD ANDHERI (E) MUMBAI-400 093. ..( RESPONDENT ) P.A. NO. (AAATA 0206 A) APPELLANT BY : SHRI PARTHASARTHI NAIK RESPONDENT BY : SHRI RA JA B. SINGH DATE OF HEARING : 24.10.2011 DATE OF PRONOUNCEMENT : 31 ST OCTOBER, 2011 O R D E R PER RAJENDRA SINGH (AM). THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS DATED 15.6.2009 AND 31.3.2010 OF CIT(A) FOR THE ASSESSM ENT YEAR 2006-07. THE DISPUTE RAISED IN THESE APPEALS RELATES TO THE ALLOWABILITY OF EXEMPTION UNDER SECTION 11 OF THE INCO ME TAX ACT. AS THE DISPUTE RAISED IN BOTH THE APPEALS IS IDENTICAL, THE SE ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE O F CONVENIENCE. ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSE E DURING THE ASSESSMENT PROCEEDINGS CLAIMED THAT IT WAS A CHARITABLE INSTITUTION, ENGAGED IN GROWTH AND DEVELOPMENT OF COT TAGE INDUSTRIES AND TO PROVIDE MARKETING FACILITIES FOR NEEDY CRAFTSMEN , DIFFUSE THE KNOWLEDGE OF THE GOSPEL OF LORD JESUS CHRIST AND TO SHOW HIS LOVE BY WORD AND DEED AND ACTIVITIES OF CHARITABLE NATURE TO B RING RELIEF TO ANY IN NEED. THE ASSESSEE WAS REGISTERED AS A CHARITABLE INST ITUTION UNDER SECTION 12A OF THE INCOME TAX ACT UNDER REGISTRATION NO. DLI(C)(I-520). THE OBJECTIVES OF THE ASSESSEE TRUST AS MENTIONED IN THE ASSE SSMENT ORDER ARE AS UNDER:- I) TO DIFFUSE THE KNOWLEDGE OF THE GOSPEL OF THE LORD JESUS CHRIST AND TO SHOW HIS LOVE BY WORD AND DEED. II) TO HELP IN TECHNICAL TRAINING OF CRAFTSMEN TO INCRE ASE THEIR EFFICIENCY AND PRODUCTIVITY IRRESPECTIVE OF CASE AND CREED. III)TO HELP ENCOURAGE THE GROWTH AND DEVELOPMENT OF COTTAGE INDUSTRIES AND TO PROVIDE THE MARKETING FACILITIES FOR THE NEEDY CRAFTSMEN. IV) TO ENGAGE IN THE ACTIVITIES OF A CHARITABLE NATU RE TO BRING RELIEF TO ANY IN NEED. V) TO ENGAGE IN ANY OTHER ACTIVITIES FOR THE PROMOTION O F THE ABOVE OBJECTS. VI) TO APPLY THE ENTIRE INCOME AND /OR PROFITS OF THE SOCIE TY IN PROMOTING ITS OBJECTS AND/OR FOR THE PROMOTION AND DEV ELOPMENT OF INSTITUTIONS AND ASSOCIATION WITH SIMILAR OBJECTS. 2.1 THE AO OBSERVED THAT WHEREAS THE OBJECT NO.1 WAS RE LIGIOUS, THE OTHER OBJECTS WERE CHARITABLE IN NATURE. THE OBJECTS WE RE THUS NOT ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 3 WHOLLY RELIGIOUS OR WHOLLY CHARITABLE BUT WERE MIXED. THE AO THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY EXEMPT ION UNDER SECTION 11 SHOULD NOT BE DISALLOWED. THE ASSESSEE EXPLAINE D THAT DIFFUSING THE KNOWLEDGE OF GOSPEL OF THE LORD JESUS CH RIST OR EXPRESSING LOVE OF JESUS CHRIST DID NOT RELATE TO ANY P ARTICULAR RELIGIOUS ORGANIZATION INCLUDING CHURCH. IT WAS EXTENDE D TO PERSONS OF ALL RELIGIONS AND COMMUNITIES. IN PURSUANCE OF OBJECTS, THE ASSESSEE WAS INVOLVED IN CONDUCTING SCHOOLS, RUNNING MEDICAL CENTRE S AND CONTRIBUTING TO THE RELIEF OF THE POOR. THE ASSESSEE AL SO SUBMITTED THAT JUDGMENT OF HONBLE HIGH COURT OF JAMMU AND KASHMIR IN THE CASE OF GHULAM MOHIDIN TRUST VS. CIT (248 ITR 587) REFERRED T O BY THE AO WAS NOT ON THE PROPOSITION THAT EXEMPTION UNDER SECTION 11 COULD NOT BE ALLOWED IN CASE OF MIXED OBJECTS OR IN CASE OF RELIGIOUS T RUSTS. IN THAT CASE, EXEMPTION HAD BEEN DISALLOWED ON THE GROUND THAT THE TRUST HAD BEEN ESTABLISHED FOR THE BENEFIT OF A PARTICULAR RELI GIOUS COMMUNITY. IT WAS CONFINED ONLY TO MUSLIMS. ON THE OTHER HAND, THE ASSESSEE TRUST WAS A CHARITABLE TRUST FOR THE BENEFIT OF THE PUBLIC IR RESPECTIVE OF CASTE OR CREED. THE AO HOWEVER WAS NOT SATISFIED BY THE EXPL ANATION GIVEN. HE REFERRED TO THE PROVISIONS OF SECTION 13(1)(B) AS PER WHICH IN CASE TRUST WAS ESTABLISHED AFTER COMMENCEMENT OF THE ACT, EXEMP TION IS NOT AVAILABLE IF THE TRUST IS CREATED OR ESTABLISHED FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY. THE AO ALSO HELD THAT IN CASE OF MIXED ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 4 OBJECTS I.E. PARTLY CHARITABLE AND PARTLY RELIGIOUS, E XEMPTION UNDER SECTION 11 WAS NOT ALLOWABLE IN VIEW OF THE JUDGMENT O F GHULAM MOHIDIN TRUST VS. CIT (248 ITR 587). AO NOTED THAT T HE ASSESSEE HAD SPENT SUMS OF RS.14,63,525/- AND RS.12,08,131/- OUT OF T OTAL EXPENDITURE OF RS.49,91,807/- AND RS.38,76,406/- IN T HE RESPECTIVE TWO YEARS TOWARDS PROPAGATION OF CHRISTIANITY I.E. GO SPEL EFFORTS AND THEREFORE IT WAS HIT BY THE PROVISIONS OF SECTION 13(1 )(B). THE AO THEREFORE DISALLOWED THE CLAIM OF EXEMPTION. 2.2 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT ONE OF THE OBJECTS I.E. DIFFUSING KNOWLED GE OF THE GOSPEL OF JESUS CHRIST DENOTES ENCOURAGING PEOPLE TO SHOW THEIR LOVE TO FELLOW HUMAN BEINGS BY GOOD AND CHARITABLE DEEDS AND, THEREFO RE, IT MEANT INVOLVING IN CHARITABLE ACTIVITIES. IT WAS BECAUSE OF T HIS OBJECT THAT THE TRUST WAS INVOLVED IN CONDUCTING SCHOOLS, RUNNING MEDICAL CENTRES AND CONTRIBUTING TO RELIEF OF THE POOR. THE DETAILS OF E XPENDITURE UNDER THE HEAD GOSPEL EFFORTS ALSO SUPPORTED THE SAID PROPOSITIO N. THE DETAILS IN CASE OF ASSESSMENT YEAR 2006-07 OF THE EXPENDITURE O F RS.14,63,525/- WERE GIVEN AS UNDER:- MEDICAL CENTRE PROJECT, SAHARANPUR RS.76,513/- E-ACADEMY PROJECT, AGRA RS.60,060/- WOMENS AWARENESS PROJECT, JAIPUR RS.37,985/- TUTION PROJECT, JAIPUR RS.30,610/- CHILD DEVELOPMENT PROJECT, MORADABAD RS.11,887/- ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 5 T.B. PROJECT, MORADABAD RS.15,239/- SCHOOL PROJECT, JAIPUR RS.16,820/- SCHOOL PROJECT, MORADABAD RS.21,662/- SCHOOL PROJECT, LALAITPUR RS.4,780/- AID TO POOR RS.3,100/- RETREAT EXPENSES, MORADABAD RS.48,821/- REMUNERATION TO STAFF RS.7,29,818/- CONTRIBUTION TO PROVIDENT FUND RS.33,382/- REIMBURSEMENT OF EXPENSES OF STAFF ON CONVEYANCE, TRAVEL, POSTAGE, TELEPHONE, STATIONERY ETC. RS.2,72,848/- RS.14,63,525/- 2.3 IT WAS FURTHER SUBMITTED THAT THE TRUST HAD NOT B EEN CREATED FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY WH ICH WAS CLEAR FROM THE FACT THAT BENEFICIARIES OF GOSPEL EFFORTS WERE PEO PLE FROM DIFFERENT RELIGIONS, CASTE AND CREED. AN AFFIDAVIT TO THAT EFFECT WAS FILED BY THE CHIEF EXECUTIVE OFFICER OF THE TRUST. IT WAS AL SO SUBMITTED THAT THE BENEFITS OF SECTION 11 WERE AVAILABLE IN CASES OF TR UST WHICH WERE PARTLY RELIGIOUS AND PARTLY CHARITABLE. RELIANCE WAS P LACED FOR THE SAID PROPOSITION ON THE CASE OF POCKET TESTAMENT LEAGUE(INDIA ) (19 SOT 150). IT WAS ALSO POINTED OUT THAT PROVISIONS OF SECTI ON 13(1)(6) WERE APPLICABLE ONLY IN CASES OF TRUST WHICH WERE CREATED PUREL Y FOR CHARITABLE PURPOSES WHICH WAS NOT SO IN THE PRESENT CASE. CIT(A) WAS SATISFIED BY THE EXPLANATION GIVEN AND AGREED THAT TH E PROVISIONS OF SECTION 11 WERE APPLICABLE IN CASE OF TRUST HAVING MIXED OBJECTS. IT WAS ALSO OBSERVED BY HIM THAT THERE WAS NOTHING ON RECOR D TO SHOW THAT THE TRUST HAD BEEN CREATED FOR THE BENEFIT OF A PARTICULAR RELIGIOUS ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 6 COMMUNITY OR CASTE. THE CIT(A) POINTED OUT THAT THE JU DGMENT OF HONBLE HIGH COURT OF JAMMU AND KASHMIR IN CASE OF GHULA M MOHIDIN TRUST VS. CIT (248 ITR 587) (SUPRA), WAS NOT APPLICABLE AS IN THAT CASE TRUST HAD BEEN CREATED FOR THE BENEFIT OF A PARTICULAR COMMUNITY. THE CIT(A) ACCORDINGLY SET ASIDE THE ORDERS OF AO FOR BOTH T HE YEARS AND HELD THAT THE ASSESSEE TRUST WAS ENTITLED FOR EXEMPTION UNDER SECTION 11. 3. BEFORE US THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS SUBMITTED T HAT THE TRUST HAD NOT BEEN CREATED FOR THE BENEFIT OF A PARTICULAR RELI GIOUS COMMUNITY. FURTHER THE EXEMPTION UNDER SECTION 11 WAS AVAILABLE E VEN IN CASE OF THE TRUST WITH MIXED OBJECTIVES I.E. PARTLY RELIGIOUS AND PARTLY CHARITABLE. RELIANCE FOR THE SAID PROPOSITION WAS PLACE D ON THE THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF SOCIETY O F PRESENTATION SISTERS VS. INCOME TAX OFFICER (121 ITD 422). IT WAS POI NTED OUT THAT PROVISIONS OF SECTION 13(1)(B) APPLY ONLY IN CASE OF CHAR ITABLE TRUST CREATED FOR THE BENEFIT OF A PARTICULAR RELIGIOUS COMMU NITY WHICH WAS NOT APPLICABLE IN CASE OF THE ASSESSEE. IT WAS ACCORDINGLY U RGED THAT THE ORDER OF CIT(A) SHOULD BE UPHELD. THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A). ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 7 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWA BILITY OF EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT. THE RE IS NO DISPUTE THAT THE TRUST IS REGISTERED UNDER SECTION 12A OF THE I.T. ACT. THE OBJECTS OF THE TRUST HAVE BEEN REPRODUCED IN PARA - 2 EARLIER. THE OBJECT NO.1 IS REGARDING DIFFUSING THE KNOWLEDGE OF G OSPEL OF LORD JESUS CHRIST AND TO SHOW HIS LOVE BY DEED WHICH HAD BEE N INTERPRETED BY THE AO TO MEAN THAT THE ASSESSEE TRUST HAD BEEN CREATE D FOR THE BENEFIT OF A PARTICULAR RELIGIOUS COMMUNITY. THERE IS NO DISPUTE ABOUT FIVE OTHER OBJECTS BEING CHARITABLE IN NATURE. THE A SSESSEE HAD INCURRED CERTAIN EXPENDITURE IN BOTH THE YEARS UNDER T HE HEAD GOSPEL EFFORTS. THE DETAILS OF EXPENDITURE INCURRED UNDER DIFFERENT HEADS FOR TWO YEARS ARE AS UNDER :- HEAD OF EXPENDITURE ASSESSMENT YEAR 2006-07 ASSESSMENT YEAR 2007-08 RESOURCE CENTRE RS.25,89,154/- RS.23,61,872/- GOSPEL EFFORTS RS.14,63,525/- RS.12,08,131/- RELIEF WORK RS.9,39,128/- RS.3,06,403/- TOTAL RS.49,91,807/- RS.38,76,406/- 4.1 THE ASSESSEE HAS SUBMITTED THAT DIFFUSING KNOWLEDGE OF THE GOSPEL OF JESUS CHRIST DENOTES ENCOURAGING PEOPLE TO SHOW THEIR LOVE TO FELLOW HUMAN BEINGS BY GOOD AND CHARITABLE DEEDS. THE DETAILS OF EXPENDITURE UNDER GOSPEL EFFORTS HAVE BEEN REPRODUCE D IN PARA -2.2 EARLIER WHICH SHOWS THAT THE EXPENDITURE HAD BEEN INCUR RED ON ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 8 CONDUCTING SCHOOLS, RUNNING MEDICAL CENTRES AND PROVIDING RELIEF TO POOR. CIT(A) HAS GIVEN A CLEAR FINDING THAT THE AO HAD PLACED NO MATERIAL ON RECORD TO SHOW THAT THE TRUST HAD BEEN CREA TED FOR THE BENEFIT OF A PARTICULAR RELIGIOUS COMMUNITY. NO SUCH MAT ERIAL HAS BEEN PLACED BEFORE US ALSO. PROVISIONS OF SECTION 11 ARE APPLICA BLE EVEN IN CASES WHERE TRUST HAS MIXED OBJECTIVES. I.E. PARTLY RELIG IOUS AND PARTLY CHARITABLE. THIS VIEW IS SUPPORTED BY THIRD MEMBER DECI SION OF THE TRIBUNAL IN THE CASE OF SOCIETY OF PRESENTATION SISTERS VS. INCOME TAX OFFICER (121 ITD 422) (SUPRA). THE PROVISIONS OF SECTION 13(1)(B) ON WHICH THE AO HAS PLACED RELIANCE ARE APPLICABLE TO THE TRUSTS WHICH ARE PURELY CHARITABLE AND CREATED FOR A PARTICULAR COMMUNIT Y. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE HIGH COURT OF GUJ ARAT IN THE CASE OF BARKATE SAIFIYAH SOCIETY (213 ITR 492). THE A SSESSEE TRUST IS PARTLY RELIGIOUS AND PARTLY CHARITABLE AND IT HAS NOT BEEN CREATED FOR THE BENEFIT OF A PARTICULAR RELIGIOUS COMMUNITY AND TH EREFORE IT IS NOT HIT BY THE PROVISIONS OF SECTION 13(1)(B). THE AO HAS PL ACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF JAMMU AND K ASHMIR IN CASE OF GHULAM MOHIDIN TRUST VS. CIT (248 ITR 587) (SUPRA), BUT THE SAID JUDGMENT IS ALSO DISTINGUISHABLE AS IN THAT CASE THE TRU ST HAD BEEN EXCLUSIVELY CREATED FOR A PARTICULAR RELIGIOUS COMMUNITY I.E. THE MUSLIM COMMUNITY. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUM STANCES, WE ITA NO.5310 & 5776/M/10 A.Y:06-07& 07-08 9 SEE NO INFIRMITY IN THE ORDER OF CIT(A) ALLOWING THE CLAIM OF EXEMPTION. THE ORDERS OF CIT(A) FOR BOTH THE YEARS ARE ACCORDINGLY UPHELD. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.10.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.