Ramachand Motichand Shah Educational & Cultural Trust, Bijapur V. CIT, Belgaum

ITA 924/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1488 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-09-2015
• Assessment Year: misc
• Appeal Filed On: 11-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMASUBRAMANIYAN
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.924 /BANG/2014 (ASST. YEAR ) RAMACHAND MOTICHAND SHAH EDUCATIONAL & CULTURAL TRUST, SUNITA NIVAS, BIJAPUR ROAD, INDI BIJAPUR-586 209. . APPELLANT VS. THE COMMISSIONER OF INCOME-TAX, BELGAUM. . RESPONDENT APPELLANT BY : SHRI RAMASUBRAMANIYAN, CA RESPONDENT BY : SHRI SARAVANAN, JCIT DATE OF HEARING : 15-09-2015 DATE OF PRONOUNCEMENT : 09-10-2015 O R D E R PER SHRI VIJAYPAL RAO, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX DATED 30 TH MAY 2014 PASSED U/S 80G OF ITA NO.924/B/14 2 THE INCOME-TAX ACT WHEREBY THE APPLICATION OF THE A SSESSEE FOR GRANT OF RECOGNITION U/S 80G WAS REJECTED. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: I) THAT THE ORDER OF THE LEARNED CIT, IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT, IS BA D AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. II) THAT THE LEARNED CIT ERRED IN LAW AND ON FACTS IN NOT GRANTING THE APPROVAL U/S 80G OF THE ACT. III) THAT THE LEARNED CIT ERRED IN LAW AND ON FACTS IN HOLDING THAT THE OBJECTS SPECIFIED IN CLAUSE 13 OF THE TRUST DEED IS RELIGIOUS IN NATURE. IV) THAT THE LEARNED ERRED IN LAW AND ON FACTS IN HOLDING THAT THE OBJECTS SPECIFIED IN CLAUSE 13 IS A RELIGIOUS OBJECT IN A PROCEEDING U/S 80G OF THE ACT EVEN THOUGH WHILE GRANTING RECOGNITION U/S 12AA OF THE ACT IT HAS BEEN HELD THAT THE OBJECTS ARE CHARITABLE IN NATURE. V) WITHOUT PREJUDICE TO THE GROUNDS NO.2 TO 4, THE LEARNED ERRED IN LAW AND ON FACTS IN NOT GRANTING THE APPROVAL U/S 80G OF THE ACT EVEN THOUGH THE APPELLANT HAD NOT APPLIED ANY INCOME TOWARDS THE OBJECT MENTIONED IN CLAUSE 13 AND THE LEARNED CIT, BELGAUM OUGHT TO HAVE HELD THAT S.80G(5B) ITA NO.924/B/14 3 IS ATTRACTED AND THE APPELLANT IS ENTITLED TO APPROVAL. 3. IN THIS CASE, THE ASSESSEE TRUST HAS FILED AN AP PLICATION FOR GRANT OF RECOGNITION U/S 80G OF INCOME-TAX ACT ON 21/11/2 013 IN FROM NO. 10G. THE ASSESSEE TRUST HAS BEEN FORMED ON 20 TH JAN, 2011 AND ALSO GRANTED REGISTRATION U/S 12AA OF THE INCOME-TAX ACT VIDE ORDER DATED 10/2/2012 FOR TWO YEAR W.E.F 2012-13. WHILE CONSID ERING THE APPLICATION FOR GRANT OF REGISTRATION U/S 80G COMMI SSIONER NOTED THAT AS PER CLAUSE-13 OF THE OBJECTS OF THE TRUST WHICH IS FOR THE RELIGIOUS PURPOSE. HE HAS MADE A REFERENCE TO CALUSE 13 OF T HE OBJECTS THAT IT PRESCRIBED THE OBJECT OF THE INSTITUTION OF RELIGI OUS NATURE. ACCORDINGLY, THE COMMISSIONER HAS DENIED THE GRANT OF RECOGNITION U/S 80G BY FOLLOWING THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF UPPER GANGES SUGAR MILLS LTD. VS. CIT, 227 ITR 578. 4. BEFORE US THE LEARNED AR OF THE ASSESSEE SUBMITT ED THAT THE APPLICATION OF THE ASSESSEE WAS REJECTED BY THE COM MISSIONER ON THE GROUND THAT AS PER CLASUE-13 OF THE TRUST DEED WHIC H CONTAINS THE OBJECTS OF THE ASSESSEE TRUST, THE COMMISSIONER FOU ND THAT THE OBJECTIVE OF THE TRUST IS FOR THE PROMOTION OF JAIN RELIGION AND, ITA NO.924/B/14 4 THEREFORE, THE ASSESSEES OBJECT IS NOT CHARITABLE BUT IT IN THE NATURE OF NON CHARITABLE AND IN THE NATURE OF RELIGION. THE LEARNED AR SUBMITTED THAT THE ASSESSEE TRUST IS AN EDUCATIONAL TRUST REGISTERED AS A PUBLIC CHARITABLE TRUST U/S 12A OF THE INCOME-TAX A CT. THUS, THE DEPARTMENT HAS ACCEPTED THE ASSESSEE TRUST AS PUBL IC CHARITABLE TRUST WHILE GRANTING REGISTRATION U/S 12A. EVEN OTHERWIS E THE CLAUSE -13 OF THE OBJECTS OF THE ASSESSEE TRUST CANNOT BE SAID TO BE RELIGIOUS IN NATURE WHEN THE MAIN OBJECT OF THE TRUST IS TO PROMOTE, PR OPAGATE AND PROVIDE OPPORTUNITIES, INSTITUTIONS, CENTERS FOR TH E STUDY OF RESEARCH IN LANGUAGES WITH PARTICULAR EMPHASIS ON SANSKRIT AND PRAKRUT. THE STUDY OF JAIN AGAMA AND JAIN SIDAHANT AND INDIAN P HILOSOPHY, CANNOT BE SAID TO BE IN RELIGIOUS NATURE WHEN THE M AIN OBJECT OF THE ASSESSEE TRUST IS TO PROMOTE THE SCIENCE AND LITERA TURE AND TO ENCOURAGE THE STUDY OF RESEARCH IN ALL FORMS OF ANCIENT INDIA N SYSTEM OF THOUGHT PHILOSOPHIES, AYURVEDIC MEDICINE, YOGA ETC. IN S UPPORT OF HIS CONTENTION HE HAS RELIED UPON THE JUDGMENT OF HONB LE SUPREME COURT IN THE CASE OF CIT VS. DAWOODI BOHRA JAMAT, 364 IT R 31 AND SUBMITTED THAT THE HONBLE SUPREME COURT HAS OBSERV ED THAT THE OBJECT OF THE ASSESSEE WERE COLLECTIVELY INCLUSIVE OF BOTH CHARITABLE AND RELIGIOUS PURPOSE AND NOT ONLY RELIGIOUS PURPOS E. THEREFORE, WHEN IT WAS FOUND THAT OBJECTS OF THE ASSESSEE WAS TO PR OVIDE ASSISTANCE TO ITA NO.924/B/14 5 NEEDY AND POOR FOR RELIGIOUS ACTIVITY WOULD NOT DIVEST THE TRUST OF ITS ALTRUIST CHARACTER. THE HONBLE SUPREME COUR T AFTER TAKING INTO CONSIDERATION THAT THE OBJECT OF THE TRUST EXPLAIN THE CHARACTER OF RELIGIOUS AND CHARITABLE PURPOSE AND THE ACTIVITY H ELD THAT SEC. 11 OF THE ACT BE ALLOWED TO SUCH TRUST WITH COMPOSITE OBJ ECT TO CLAIM EXEMPTION AS A RELIGIOUS AND CHARITABLE TRUST SU BJECT TO THE PROVISION OF SEC. 13 OF THE ACT. 5. THE LEARNED AR HAS RELIED UPON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF MISHRILAL GOAR DHANLAL BATRA CHARITABLE TRUST VS. CIT, 307 ITR 221 AND SUBMITTED THAT AS PER THE AMENDED PROVISION OF SEC. 80G WHEN THE ACTUAL EXPEN DITURE INCURRED FOR RELIGIOUS PURPOSE IS NOT MORE THAN 5% OF THE TO TAL INCOME THEN THE REGISTRATION OF THE TRUST U/S 80G CANNOT BE REFUSED ON THAT GROUND. THE LEARNED AR HAS SUBMITTED THAT THE DECISION REL IED UPON BY THE CIT RENDERED PRIOR TO THE AMENDMENT BROUGHT VARIOUS PROVISION OF SEC. 80G BY AMENDING SEC. 5B WHEREBY THE EXPENDITU RE UPTO 5% OF THE TOTAL INCOME IS PERMITTED FOR RELIGIOUS NATURE. THUS, THE LEARNED AR HAS SUBMITTED THAT THE COMMISSIONER HAS COMMITTE D AN ERROR FOR REJECTING REGISTRATION U/S 80G WHEN THE ASSESSEE HA S NOT INCURRED ANY EXPENDITURE FOR RELIGIOUS PURPOSE TILL THE YEAR UND ER CONSIDERATION. HE ITA NO.924/B/14 6 HAS REFERRED THE RELEVANT DETAILS FROM THE ACCOUNTS OF THE ASSESSEE AND SUBMITTED THAT NONE OF THE EXPENDITURE INCURRED BY THE ASSESSEE TILL DATE IS IN RESPECT OF RELIGIOUS PURPOSE. ACCORDING LY THE LEARNED AR HAS PLEASED THAT THE REGISTRATION U/S 80G MAY BE GR ANTED. 6. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF RAJESH BALIA AND DAWOODI BORA JAMAT (SUPRA) ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE, AS THE SAID DECISION IN RESPECT OF CLAIM OF EXEMPTION U/S 11 AS WELL AS U/S 12A OF THE INCOME-TAX ACT AND NOT IN RESPECT OF REGISTRATION U/S 80G. HE HAS FURTHER SUBMITTED THA T AS PER THE PROVISION OF SEC. 80G, IT IS THE REQUIREMENT OF THE EXPLANATION 3 THAT THERE IS ONLY ONE PURPOSE WITHIN THE INSTITUTION OR FUNDS OVERALL CHARITABLE PURPOSE WHICH IS WHOLLY OR SUBSTANTIALLY FOR THE PURPOSE OF CHARITABLE AND THERE IS NO SCOPE OF ANY RELIGIOUS N ATURE. HE HAS RELIED UPON THE IMPUGNED ORDER OF THE COMMISSIONER AS WELL AS DECISION OF HONBLE HIGH COURT IN THE CASE OF INTERNATIONAL SUF I CENTER VS. DIT(EXEMPTIONS) DATED 25.1.2011 IN ITA NO.436 OF 20 10. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL ON RECORD. WHILE REJECTING THE APPLICATION OF THE ASSESSEE, THE ITA NO.924/B/14 7 COMMISSIONER HAS GIVEN MUCH EMPHASIS ON THE CLAUSE 13 OF OBJECTS WHICH READ AS UNDER: TO PROMOTE, PROPAGATE AND PROVIDE OPPORTUNITIES, INSTITUTIONS, CENTERS FOR THE STUDY OF AND RESEARCH INTO LANGUAGES, WITH PARTICULAR EMPHASIS O N SANSKRIT, AND PRAKRUT TO ENCOURAGE THE STUDY JAIN A GAMA AND JAIN SIDDHANT AND INDIAN PHILOSOPHY, SIMILAR TRADITIONAL, SPIRITUAL, SCIENCE AND LITERATURE, TO ENCOURAGE STUDY OF AND RESEARCH INTO ALL FORMS OF ANCIENT IND IAN SYSTEMS OF THOUGHT, PHILOSOPHIES, AYURVEDIC MEDICIN E, YOGA INTENDED TO ENSURE SPIRITUAL ADVANCEMENT AND PROPAGATE A COMMITMENT TO VALUES IN LIFE. 8. THUS, IT IS CLEAR FROM THE OBJECTS CLAUSE OF TH E ASSESSEE TRUST OUT OF THE 22 CLAUSE AND 7 SUB CLAUSES, THE COMMISSIONE R HAS PICKED UP ONLY ONE CLAUSE OF THE TRUST TO HOLD THAT OBJECTS O F THE TRUST ARE RELIGIOUS IN NATURE. AS PER EXPLANATION 3 TO SEC. 80G, THE CHARITABLE PURPOSE DOES NOT INCLUDE ANY PURPOSE WHOLLY OR SUB STANTIALLY THE WHOLE OF WHICH IS OF RELIGIOUS NATURE. THEREFORE, IF THE PURPOSE OF A TRUST WHOLLY OR SUBSTANTIALLY WHOLE OF WHICH OF A R ELIGIOUS NATURE THEN IT IS EXCLUDED FROM THE TERM CHARITABLE PURPOSE. W E FIND THAT OUT OF ITA NO.924/B/14 8 THE 22 CLAUSES AND 7 SUB CLAUSES ONLY UNDER CLAUSE 13 THERE IS A MENTION OF PARTICULAR STUDY FOR ENCOURAGING JAIN A GAMA AND JAIN SIDDHANTH AND INDIAN PHILOSOPHY. FOR THE PURPOSE O F CONSIDERING THE CHARITABLE PURPOSE OF THE TRUST, THE SELECTED WORD S OF OBJECT CLAUSE OF CHARITABLE TRUST CANNOT BE PICKED AND CHOSEN, BUT THE ENTIRE OBJECTS OF THE TRUST HAS TO BE CONSIDERED HOLISTICALLY. WHEN ALL OTHER OBJECTS ARE FOUND AS CHARITABLE PURPOSE THEN MERELY BECAUSE A R EFERENCE UNDER ONE CLAUSE TO ENCOURAGE THE STUDY OF JAIN AGAMA AND JAIN SIDHNTH AND INDIAN PHILOSOPHY WOULD NOT CONSTITUTE OR CHANGE TH E CHARACTER OF THE PURPOSE AND OBJECT OF THE TRUST FROM CHARITABLE TO RELIGIOUS EVEN AS PER THE EXPLANATION 3 OF SEC. 80G. WE FURTHER NOTE THAT VIDE FINANCE ACT 1999 W.E.F 1/4/2000, SUB-SEC. 5B HAS BEEN INSERTED IN THE PROVISION WHICH READS AS UNDER:- NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE(II) OF SUB-SECTION(5) AND EXPLANATION 3, AN INSTITUTION OR FUND WHICH INCURS EXPENDITURE, DURIN G ANY PREVIOUS YEAR, WHICH IS OF A RELIGIOUS NATURE F OR AN AMOUNT NOT EXCEEDING FIVE PERCENT OF ITS TOTAL INCO ME IN THAT PREVIOUS YEAR SHALL BE DEEMED TO BE AN INSTITU TION OR FUND TO WHICH THE PROVISIONS OF THIS SEC. APPLY. ITA NO.924/B/14 9 9. THUS, IT HAS BEEN PROVIDED THAT THE INSTITUTION OR FUND WHICH INCURS EXPENDITURE DURING THE PREVIOUS YEAR WHICH IS OF RELIGIOUS NATURE FOR AN AMOUNT NOT EXCEEDING 5% OF THE TOTAL INCOME SHALL BE DEEMED TO BE AN INSTITUTION OR FUND TO WHICH PROVIS ION OF SEC. 80G APPLIED. THUS, IT IS CLEAR THAT THE LEGISLATURE HA S PERMITTED THE EXPENDITURE TO THE EXTENT OF 5% OF THE TOTAL INCOME FOR THE PURPOSE OF ANY RELIGIOUS NATURE UNDER THE PROVISION OF SEC. 80 G. 10. THE LEARNED AR HAS REFERRED TO THE BALANCE SHEE T OF THE ASSESSEE TRUST FOR VARIOUS ASSESSMENT YEARS FROM WHERE WE FI ND THAT NONE OF THE EXPENDITURE SO FAR INCURRED BY THE ASSESSEE CAN BE SAID TO BE OF A RELIGIOUS NATURE AND, THEREFORE, THE ASSESSEE FULFI LLED THE CONDITIONS AS PROVIDED U/S 80G OF THE INCOME-TAX ACT. THE HONBL E SUPREME COURT IN THE CASE OF DAWOODI BOHRA JAMT (SUPRA) HAS ALSO CONFIRMED AND RECOGNIZED THE DUALITY OF THE PURPOSE OF RELIGIOUS AS WELL AS CHARITABLE NATURE. THE PROVISION OF SEC. 80G ALSO RECOGNIZES THE DUALITY OF PURPOSE WITH A RIDER THAT FOR THE PURPOSE IT SHOULD NOT BE WHOLLY OR SUBSTANTIALLY THE WHOLE OF WHICH IS RELIGIOUS IN NA TURE. IN THE CASE IN HAND THE REFERENCE OF THE PROMOTION OF STUDY OF JAI N AGAMA AND JAIN SIDDHNTA BY ITSELF WOULD NOT RENDER THE WHOLE OF T HE OBJECT OF THE TRUST AS RELIGIOUS IN NATURE. A SIMILAR VIEW HAS B EEN TAKEN BY THE ITA NO.924/B/14 10 HONBLE RJASTHAN HIGH COURT IN THE CASE OF MISRILAL GORDHANLAL BATRA CHARITABLE TRUST (SUPRA) AS UNDER :- ON THIS PREMISE LEARNED COUNSEL FOR THE PETITIONER FURTHER URGES THAT IN VIEW OF THIS PROVISION, EVERY YEAR THE COMMISSIONER HAS TO CONSIDER THE RATIO BETWEEN THE TOTAL INCOME OF THE TRUST AND THE EXPENDITURE ACTUALLY INCURRED FOR RELIGIOUS PRUPOSES AND ONLY IF THE SUBSTANTIVE PART OF THE INCOME, THAT IS TO SAY MORE THAN 5 PER CENT OF TOTAL INCOME IS INCURRED FOR RELIGIOUS PRUPOSES THE REGISTRATION OF TRUST/FUND U/S 80G CAN BE REFUSED O N THAT GROUND. WITH THIS PREMISE, IT IS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE PETITIONER THAT THE PETITIO NER SHALL BE SATISFIED IF THE WRIT PETITION IS DISPOSED OF WITH THE DIRECTION TO THE COMMISSIONER TO CONSIDER THE CASE OF THE PETITIONER TRUST FOR RENEWAL OF ITS REGISTRATION WITH EFFECT FROM THE INSERTION OF SUB SEC. (5B) UNINFLUENCED BY THE IMPUGNED ORDER OF REJECTING THE RENEWAL FOR THE ASSESSMENT YEARS 1995 - 2000. IN OTHER WORDS, THE PETITIONERS APPLICATION FOR RENEWAL WITH EFFECT FROM APRIL 1, 2000, SHOULD BE CONSIDERED KEEPING IN VIEW OF SUB-SEC. (5B) OF SEC. 80G. ITA NO.924/B/14 11 12. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEES OBJECTS CANNOT BE DESCRIBE D AS WHOLLY OR SUBSTANTIALLY THE WHOLE AN RELIGIOUS IN NATURE AND THEREFORE THE JUDGMENT RELIED UPON BY THE LEARNED DR WILL NOT HEL P THE CASE OF THE REVENUE. 13. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF COMMISSIONER AND DIRECT THE COMMISSIONER TO GRANT THE RECOGNITIO N U/S 80G OF THE ACT BY CONSIDERING THE FACT THAT THE ASSESSEE HAS ALREADY BEEN GRANTED THE REGISTRATION U/S 12A AND PICKING UP A P ARTICULAR REFERENCE IN ONE OF THE CLAUSES OF THE OBJECT WOULD NOT CONST ITUTE THE ENTIRE AND WHOLE OF THE OBJECTS OF THE ASSESSEE TRUST AS RELIG IOUS IN NATURE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH OCT, 2015. SD/- SD/- (JASON P BOAZ) (VIJAYPAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : /10/2015 ITA NO.924/B/14 12 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.