TaxTMI 
TaxTMI 
2008 (3) TMI 367
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....he appeals except some variation in the amount of expenditure. Therefore, the decision in the case of I. T. A. No. 615/Ind/07 was requested to be followed in the remaining appeals. 3. We have heard the learned representatives of the parties and have gone through the material available on record. 4. Considering the submissions of the parties and the common issues involved in all the appeals and that the parties mainly argued in I. T. A. No. 615/Ind/07 we propose to decide this appeal as under. 5. The facts of the case are that the assessee-trust filed an application for registration under Section 12A/12AA of the Act before the learned Commissioner of Income-tax, Ujjain. The objects of the trust (English translation by the assessee) as per the trust deed are as under: (a) To arrange for Nyaz and Majlis (lunch and dinner) on religious occasion of birth anniversary and Urs Mubarak of Awliya e Quiram (SA) and Saints of Dawoodji Bohra community. (b) To arrange for lunch and dinner on religious occasions and auspicious days of Dawoodi Bohra community. (c) For the betterment of Dawoodi Bohra community to give and take Qardati Hasana according to Farma of....
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....ot refused as there was no clause that the receipts of the trust will be used only for objects of the trust and on dissolution of the trust, what will happen to the properties of the trust. 8. The assessee-trust vide letters dated August 13, 2007 and August 27, 2007 filed written submissions before the Commissioner of Income-tax which were summarised by the learned Commissioner of Income-tax as under: (i) All the objects of the trust are religious in nature. (ii) As per the decision of the hon'ble High Court in the case of CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj) the provisions of Section 13(1)(b) is not applicable if the trust is both religious and charitable. The provisions of Section 13(1)(b) are only applicable in cases where the trust is purely charitable in nature. (iii) Reliance has been placed on the decision in the case of Dawoodi Bohra Jamat, Kawant by the hon'ble Income-tax Appellate Tribunal, Ahmedabad in I. T. A. No. 2610/Ahd/2005. It has been submitted that in this case the hon'ble Income-tax Appellate Tribunal has held that the registration is allowable to this trust. (iv) Reliance has been placed on ....
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....tivity, the said activities may be for a charitable purposes to some. Hence, in many cases both the purposes may be overlapping. The purposes may have both the elements charity as well as religious" (e) Therefore, the reliance placed on the judgment in the case of Advocate-General of Bombay v. Yusuf Ali Ebrahim AIR 1921 Bom 338 is not correct. (f) In the case of Kalika Mata Seva Mandal Trust while rejecting the application under Section 80G(5), it has been held that the expenses for celebrating navaratri and dance performance given for celebrating it is religious in nature. (vi) The najwa paid to representative of his Holiness Dai-al-Mut-laq, donation to Shia Dawoodi Bohra Jamat, Jobat and travelling expenses are as per the objects of the trust-deed which are religious in nature. The najwa (offerings) given to representative of his holiness Dai-al-Mutlaq is in accordance with the directions of Quran. This is according to the age old traditional religious practice and custom and, therefore, cannot be covered under the provisions of Section 13(1)(c) of the Income-tax Act. The donation made to Shia Dawoodi Bohra Jamat, Jobat is a donation to another wakf whi....
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....Shadi Mahal Trust [2002] 254 ITR 212 (SC); and (iii) State of Kerala v. M. P. Shanti Verma Jain [1998] 231 ITR 787 (SC). 12. The learned Commissioner of Income-tax considering the above facts and the decisions quoted above observed that a trust having the object of establishing institutions for educational, social, economic advancement of Muslims and for religious and charitable objects recognised by Muslims attracts the provisions of Section 13(1)(b) of the Income-tax Act. Since trust is created for a particular religious community hence Section 13(1)(b) is applicable. The learned Commissioner of Income-tax also observed that even if the trust is created whose objects are both charitable and religious in nature for a particular religious community, the provisions of Section 13(1)(b) of the Act are applicable and also if it is established for a particular religious community, it cannot be said that the trust has been created for public at large. The contention of the assessee was rejected that even if the objects of the trust are both religious and charitable, the provisions of Section 13(1)(b) are not applicable. The contention of the assessee that the trust is created....
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....Bohras, true path, shown by the Prophet is the one indicated and shown by their living guide Dai-al Mutlaq of time. Dai-ul-Mutlaq is the living and visible guide for Dawoodi Bohras. Learned Counsel for the assessee in his written submissions referred to page 11 onwards and submitted that all the objects of the assessee trust are taken from Holy Quran and as such the same are religious in nature. He submitted that the words used in the objects are clearly religious. Learned Counsel for the assessee also demonstrated that to arrange for Nyaz and Majlis (lunch and dinner) on the religious occasion of birth anniversary and Urs Mubarak of Awliya-e-Qiram (SA) and Saints of Dawoodi Bohra community are referred in pages of Holy Quran written by A. Yusuf Ali and M. M. Pickthall and referred to the pages of Holy Quran in support of his contention. Similarly, for other objects of the assessee-society, learned Counsel for the assessee referred to pages of Quran written by the aforesaid author and submitted that all the objects of the assessee are taken from Holy Quran and as such the same are solely religious in nature with regard to Dawoodi Bohra community. Therefore, the findings of the Comm....
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.... worship is an integral part of religion. Forms and observances of religion may extend to matters of food and dress. Religion means a system of belief or doctrine which are regarded by those who profess that religion as conducive to their spiritual well being. Learned Counsel for the assessee submitted that public religious trusts are created for particular religion only and as such the learned Commissioner of Income-tax was not justified in rejecting the registration application of the trust on that reason. Learned Counsel for the assessee submitted that since all the objects of the assessee-trust referred to religion or coming from the Holy Quran therefore, the assessee is a public religious trust and as such the findings of the learned Commissioner of Income-tax are incorrect treating it to be charitable in nature for a particular community. 16. On the other hand, the learned Departmental representative relied upon the order of the Commissioner of Income-tax and submitted that the objects of the assessee-trust are charitable in nature and as such created for the direct or indirect benefit of a particular religious community, i.e., Dawoodi Bohra community. Therefore, the Commi....
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....vities. Learned Counsel for the assessee also explained that the words "Shariat-e-Mohammadiyah" means the path shown by Prophet Mohammed. Therefore, the objects of Shariat-e-Mohammadiyah are identical with those of "Dawat-e-Hadiyah". For Dawoodi Bohras, true path shown by the Prophet is the one indicated and shown by their living guide Dai-al-Mutlaq of the time who is the living and visible guide for Dawoodi Bohras. It is an undisputed fact that for the people believing in Islam, writings in Quran are words of Allah for them. The directions given in the Holy Quran are considered by the people of Islamic faith as orders from Allah and the people of Islamic faith obey such orders as holy and religious. Learned Counsel for the assessee has been able to demonstrate that all the objects of the assessee-trust, as noted above, came out from the writings in Quran and as such these are the orders for them while observing Islamic faith. The learned Departmental representative referred to the registration granted to the assessee-trust under the M. P. Public Trusts Act and referred to the objects of the trust mentioned therein which are not from the objects of the trust as mentioned in the app....
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....by persons in management out of the offerings made. All these properties were treated as properties of the roza and the income thereof was utilised for the maintenance of the roza and the mosque and observance of festive occasions. The surplus income was not utilised for the personal benefit of the Murids, but for the years 1942-43 to 1956-57 a part of the surplus was utilised for running madrassas and a library and giving food to pilgrims attending the roza and the mosque on festive occasions. Some of the Murids who had contributed to the cost of the construction of certain rooms in the roza were entitled to reside in those rooms when they came there. The Murids were also entitled to the dates from certain date trees in the premises of the roza. The roza and the mosque were recognised as a wakf in the revenue records. The minutes of a meeting of the Murids held on October 15, 1888, indicated that until then the general body of the Murids managed the properties. Resolutions were passed at that meeting appointing a managing committee and laying down certain rules for the management and administration of the properties. The committee had been claiming that the wakf was not public but....
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....f the present case because the objects of the asses-see-trust were purely religious in nature. We have already observed above that all the objects of the assessee were religious in nature because the same are supported by the writings in Holy Quran and as such the asses-see-trust following the directions from the Holy Quran on the religious occasions, religious education and religious activities for Dawoodi Bohra community, had been, organising various activities in pursuance with the objects of the trust and as such the decision cited by the Commissioner of Income-tax is clearly distinguishable on facts. 20. On consideration of the rival submissions and the material on record, we are of the view that the objects of the assessee-trust are solely religious in nature and as such the finding of the learned Commissioner of Income-tax in the impugned order that the objects of the assessee are charitable in nature is not justified. The findings of the learned Commissioner of Income-tax to this extent are set aside. 21. Learned counsel for the assessee further submitted that since the assessee trust is a public religious trust, the provisions of Section 13(1)(b) of the Act are not a....
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....d that the trial balance as on March 31, 2007 was filed because inquiry with regard to the registration was in progress at the time of passing the impugned order on September 7, 2007. However, prior to it, audit report for the earlier year was filed. Learned Counsel for the assessee further submitted that the case laws relied upon by the Commissioner of Income-tax in rejecting the application of the assessee are clearly distinguishable because the same are not applicable to the registration matter under Section 12A/12AA of the Act. Learned Counsel for the assessee further submitted that Amil is a priest and salary is given to him who did all the religious activities and rites of the assessee and the Commissioner of Income-tax has not pointed out if any unreasonable payment is made to him. Learned Counsel for the assessee further submitted that all the payments are made for religious purposes and have been properly accounted for and as per Section 13(2)(c) the trust or the institution could pay the reasonable amount for the services offered by the persons referred to in Clause (c) of Section 13(2) of the Act and in this case the learned Commissioner of Income-tax has not made out an....
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....cation for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of Sections 11 and 12 shall apply in relation to the income of such trust or institution,: (i) from the date of the creation of the trust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons ; (ii) from the first day of the financial year in which the application is made, if the Commissioner is not so satisfied ; Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007 ; (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under Section 12AA ; (b) where the total income of the trust or institution as computed under this Act without giving effect ....
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....cation was received under Clause (a) or Clause (aa) of Sub-section (1) of Section 12A. (3) Where a trust or an institution has been granted registration under Clause (b) of Sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 27. Section 13(1)(b) and (c) of the Income-tax Act provides: 13(1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- ... (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste ; ....
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....ention is to benefit a section of the public as distinguished from a specified individual. Relying on this decision of the hon'ble Supreme Court in the case of Ahmedabad Rana Caste Association [1971] 82 ITR 704, the hon'ble Allahabad High Court in the case of Surji Devi Kunji Lal Jaipuria Charitable Trust (No. 1) [1990] 186 ITR 728 has held that trust created for giving medical aid, social welfare and upliftment of poor members of the vaish community is, therefore, for religious and charitable purposes. To the similar effect is another decision of the hon'ble Allahabad High Court in the case of CIT v. Pt. Ram Shanker Misra Trust [1996] 222 ITR 252 wherein it was held that expenditure incurred by a trust for the benefit of one community is an expenditure incurred on a public charitable object. The proposition propounded by the hon'ble Supreme Court as well as by the hon'ble Allahabad High Court in the aforesaid judgments clearly shows that the objects of the assessee-trust as indicated in object clause Nos. 3(1) and 3(2) of its trust deed were of charitable nature and since the powers of the Commissioner of Income-tax/DIT (Exemption) conferred under Section 12AA ....
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....ons contained in Section 13(1) (b) since the definition of the term "charitable purpose" given in Section 2(15) continues to remain the same. The provisions of Section 13(1) are thus not directly relevant in this regard. On the other hand, the said section begins with the words "Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person . . . ." which clearly envisages operation of Section 11 or Section 12 before the provisions of Section 13 can be applied or invoked in a given case. It also shows that the said provisions can be applied or invoked only at the time of computation of total income of the previous year of the person who is claiming exemption under Section 11 or Section 12. Both these situations contemplated in Section 13 can arise only and only if registration under Section 12A is granted to the said person. If the same is not granted and the person is refused the registration under Section 12A, he would not be entitled to claim any benefit available under Section 11 or 12 and there will be no occasion to the Assessing Officer to invoke or apply Section 13 in his case. This position would not on....
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....ppeal of the assessee is allowed. 29. The Income-tax Appellate Tribunal, Chennai Bench "C" Third Member in the case of People Education and Economic Development Society (Feeds) v. ITO [2008] 296 ITR (AT) 36 : 104 TTJ (Chennai) (TM) 467 held: Enquiry into the objects of institution cannot be made under Section 12A. At the stage of filing an application for registration under Section 12A, the Commissioner of Income-tax is not supposed to examine the application of income aspect. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not a sine qua non to examine the application aspect of income.-New Life in Christ Evangelistic Association v. CIT [2000] 246 ITR 532 (Mad) and Asst. CIT v. Peare Lal Sharma Memorial Trust Society [2001] 70 TTJ (Delhi) 197 : [2001] 77 ITD 50 relied on. 30. The hon'ble High Court of Madhya Pradesh in the case of Sarafa Association v. CIT [2007] 294 ITR 262 held that the Commissioner was required to examine the deed as a ....
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....y not be exempted, the Tribunal held that whether part of the income was exempt or not was irrelevant for registration of the institution for which the Commissioner has to satisfy himself about the object of the institution and genuineness of the activities of the institution and not about the nature of the income. The Tribunal concluded that the object of the assessee was to maintain and develop ports in the State of Gujarat which was an object of general public utility and directed the Commissioner to register the assessee under Section 12A with effect from April 1, 2002. On appeal: Held, dismissing the appeal, that the Tribunal after detailed discussion held that under the requirement of Section 12A the assessee was a charitable institution and was entitled to the benefit of Section 12A with effect from April 1, 2002. There was no infirmity in the order of the Tribunal. 32. The hon'ble High Court of Bombay in the case of CIT v. Agricultural Produce and Market Committee [2007] 291 ITR 419 held (headnote of 291 ITR): The dominant object of market committees is to regulate procurement and supply of agricultural and other produce and to meet the expenses req....
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....n 11(1)(a) is still available. 34. Considering the above provisions and the decisions referred to above, it is clear that the learned Commissioner of Income-tax has to satisfy himself about the objects of the trust and genuineness of the activities of the trust at the time of consideration of registration application. Refusal to grant registration to the trust on the ground of violation of Section 13(1)(b) or 13(1)(c) was not justified. In this view of the matter, the grant of registration is a stepping stone. 35. The learned Departmental representative however relied upon the following decisions: 1. CIT v. Shri Maheshwari Agrawal Marwari Panchayat [1982] 136 ITR 556 (MP) in which the assessee was registered under Section 12A of the Income-tax Act and the Income-tax Officer at the assessment stage held that the assessee could not claim exemption in view of Section 13(1)(b) of the Act. In this case ultimately it was held that the Tribunal was correct in law in holding that the assessee is entitled to the benefit of exemption under Section 11 of the Income-tax Act for its entire income. 2. The decision of the hon'ble High Court of Madhya Pradesh in the cas....
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....Commissioner of Income-tax also referred to the decision in the case of Gulam Moinuddin Trust in which the assessee claimed exemption of income under Section 11 which was rejected by the Income-tax Officer on the ground that it was not charitable-trust and was hit by Section 13(1) (b) of the Act. In the case of State of Kerala v. M. P. Shanti Verma Jain [1998] 231 ITR 787 (SC), the Assessing Officer assessed the income of the trust and denied exemption to the assessee at the assessment stage. In the case of CIT v. Palghat Shadi Mahal Trust [2002] 254 ITR 212 (SC) in which the assessee claimed exemption under Section 11 of the Income-tax Act which was denied by the Assessing Officer and the Tribunal came to the conclusion that the trust was entitled to exemption by virtue of the provisions of the second Explanation to Section 13 of the Income-tax Act. The High Court upheld the finding. The hon'ble Supreme Court held that the trust attracts the provisions of Section 13(1)(b) and as such not entitled to exemption under Section 11 of the Income-tax Act. Learned Counsel for the assessee is therefore, justified in contending that the issue of registration under Section 12A/12AA was n....
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....e Act. Never the less, this was not the requirement to be considered at the assessment stage as is held in several authorities referred to above. 39. We may also note that though the learned Commissioner of Income-tax called for the explanation of the assessee on the issue of non-mentioning of the clause that the receipts of the trust will be used for the objects of the trust and on dissolution of the trust, what will happen to the properties of the trust, yet did not give any finding on these issues. We may note that as per Section 11 of the Income-tax Act, 1961, the income of the trust would not form part of the total income when the same was applied to its objects and purpose. Similarly, as per Section 14 of the M.P. Public Trusts Act, the previous sanction of the Registrar is required in case of sales etc. of property belonging to a public trust. As per Section 27(2)(d) of the same Act, the court can provide scheme of management of the trust property. Likewise, the safeguard is provided by empowering the Assessing Officer in this regard in the second proviso to Section 11(3A) of the Income-tax Act. These are the sufficient safeguards provided under the Income-tax Act as well....