TaxTMI 
TaxTMI 
2008 (7) TMI 621
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....other words, according to them, if the activities are mixed, the claim cannot be allowed. 2.The authorities below ought to have seen that the activities of the appellant in running orphanages and Educational Institutions are primarily for charitable purposes. The beneficiaries are from all sections of the societies irrespective of religion, community, caste, etc. 3.The income derived from the property as well as voluntary contributions are applied for charitable purposes in India. Hence, the appellant is entitled to exemption under section 11(1)(a) of the Income-tax Act. 4.The officers below failed to note that the construction and maintenance of a prayer hall for public is a charitable purpose. Even assuming that the maintenance of a prayer hall is a religious activity, it is still a charitable purpose because it is comprehensive to include religious activity also. The definition of charitable purpose is wide enough to include such activities also. 5.The exemption under section 11 is granted to a trust which is for charitable or religious purposes i.e., a Trust within the meaning of section 11(1)(a) can be either a Charitable Trust or a Religious Trust or a Trust havin....
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.... institutions are educational institutions wherein members of the other community are also being admitted. Imparting of education to other community members is also altruism. It is true that the assessee is giving alms to the poor also in the course of its activities. But considering the fact that the assessee is doing partly religious and partly charitable activity the exemption under section 11(1)(a) will not be available to the assessee by virtue of the decision of the Hon'able High Court of Jammu & Kashmir reported in 248 ITR 587 in Ghulam Mohidin Trust v. CIT, which is similar to facts and circumstances of this case. In the instant case the Honourable High Court has held that if the Society is doing partly religious and partly charitable activity then they will loose the benefit of exemption under section 11(1)(a). During the course of examination of the case the following facts came to my knowledge, i.e., (1) The Associations activities are mainly confined to running of schools. (2) The Association is having two mosques under its control (Mosque at CICS valued at 4,89,319.15, Mosque at CIRS valued at 3,38,834.78 and Mosque at CSH valued at 3,72.217) which were constructed ....
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....ons which are different from that which is apparent. As against this the AR argued that the word OR should be read as AND with a conjunctive meaning. He has also cited the decision is Mazagaon Dock Ltd. v. CIT AIR 1958 (SC) 861. Other similar decisions have been cited as in the case of 84 ITR 502 etc. 21.First of all it has to be stated that in normal interpretation of statute, words have to be interpreted strictly as is clear from the wording and no meaning should be read in- (1) Cape Brandy Syndicate v. IRC 1921 1 KB 64. (2) A. V. Fernades v. State of Kerala AIR 1957 (SC) 657 and (3) CWT v. Kripa Sankar Dayasankar 81 ITR 763 (SC). 22.However, it has also to be conceded in the context of the decisions cited by the AR, that where the meanings are not clear or would lead to absurd conclusions then an interpretation of the words has to be resorted to in order to arrive at its real meaning. If such a situation existed then it would be fair enough to arrive at a meaning of AND in respect of the word OR. Therefore, we have to see whether the word OR as it exists in the section is capable of rendering a reasonable meaning or would lead to an unreasonable meaning or an absu....
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....ly religious trust. In this view of the matter the interpretation taken by the appellant lacks merit." Now the assessee has challenged the order of the CIT(A) before us. 6. Now we give here the grounds and facts in respect of appeal being ITA No. 641/Coch./2006. In this case also the assessee has filed the concise grounds, which are as under:- "1.The orders of the authorities below to the extent objected to hereunder are against law and facts of the case. 2.The officers erred in denying exemption under section 11 (1)(a) of the Act merely on the ground that the appellant is engaged in religious and charitable activities. In other words according to them if the activities are mixed the claim cannot be allowed. 3.The authorities below ought to have seen that the activities of the appellant in running orphanages, educational institutions are primarily charitable purposes. The beneficiaries are from all sections of the societies irrespective of religion, community, caste, etc. 4.The income derived from the property as well as voluntary contributions are applied for charitable purposes in India. Hence, the appellant is entitled to exemption under section 11(1)(a) of the....
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.... registered under the Societies Registration Act. The assessee filed return of income declaring Nil income for the assessment year 2003-04. Assessee's case was selected for scrutiny and assessment was completed under section 143(3) of the Act. In this case also the Assessing Officer was of the opinion that the assessee is not eligible to claim the exemption under section 11 of the Act. As per the aims and objects (motives) of the Society, the assessee society is a religious and charitable one. The Assessing Officer was of the opinion that the assessee society, is a religious society but also was doing the charitable activities as well. In short, the assessee society is doing partly religious and partly charitable activities and hence assessee society was not eligible to claim the exemption under section 11(1)(a) of the Act. The Assessing Officer also placed his reliance on the decision of the Hon'ble High Court of Jammu & Kashmir in the case of Ghulam Mohidin Trust v. CIT [2001] 248 ITR 587 and finally came to the conclusion that as per the decision of the Hon'ble High Court of Jammu & Kashmir, in which the identical issue was decided by their Lordships, if the assessee is mi....
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....ulam Mohidin Trust v. CIT. From the above findings of the Income-tax Officer, Ward 1(2), Kozhikode, it has become clear that the Samastha Kerala Sunni Yuvajana Samgham is a religious society doing charitable activity as well. The General secretary Sri A. P. Aboobaker Musliar during course of discussion has categorically stated that society is doing partly religious and partly charitable activities. Exemption under section 11(1)(a ) is applicable only to institutions which are engaged in wholly religious or wholly charitable activities. The Memorandum of Association is lucid regarding charitable and religious nature of the objects of the Society. As per section 11(1)(b) of the Income-tax Act, 1961, exemption will be available to such trust/Society which are created before 1-4-1962. In the instant case, the society is created only on 28-6-1982. The assessee has utilised 85 per cent of the income towards the object of the society and the balance 15 per cent is accumulated as per the final accounts submitted. The facts and circumstances of the decision reported in 248 ITR 587 in the case of Ghulam Mohidin Trust v. CIT delivered by the Honourable High Court of Jammu & Kashmir, is sim....
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....itable activities, Assessing Officer has given some of the examples in respect of the amounts paid for the ground construction of a mosque as well as extension work of the mosque building. The Assessing Officer has also mentioned that the assessee has paid an amount towards the expenses of the Madrassa and assessee has acquired some of the assets, which are exclusively used for religious purpose. 9. The assessee challenged the assessment made by the Assessing Officer before the CIT(A). But in this case also, after referring to the plethora of decisions as well as interpreting section 11(1)(a) of the Act, on the same line as in the another appeal, the learned CIT(A) came to the conclusion that the assessee is not entitled for exemption under section 11(1)(a) of the Act. We may make it clear here that the reasons given by the learned CIT(A) are word to word identical to that of the reasons given in the case of ITA No. 729/Coch./2006 except reshuffling of the paragraphs. So, we do not consider necessary to reproduce the reasons given by the CIT(A) in this case. Now the assessee is also before us challenging order of the CIT(A). 10. We have heard rival submissions of learned Seni....
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....he two activities are mixed up, the assessee cannot claim the exemption under section 11(1)(a). The sole basis for denying the exemption in toto is that the assessee is running mosque in the premises of the charitable institutions using the income of the trust. The learned counsel also referred to the observations of the Assessing Officer in the assessment order itself to establish the genuine characteristic and charitable content of the institution. At page 5 of the assessment order Assessing Officer says that the trust is constituted not for the benefit of a backward community alone but for the benefit of entire public as per the Memorandum of Article and that the assessee is conducting charitable institutions like Calicut Orphanage and Calicut Higher Secondary School for the handicapped. There are various charitable institutions under the auspices of the trust. Most of the institutions are educational institutions wherein members of the other community are also being admitted. Imparting of education to other community members is also altruism and it is true that the assessee is giving alms to the poor in the course of its activities, etc. etc. and education is imparted to the me....
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....a v. CIT [1947] 15 ITR 32, held that the trust for supply of fodder to cattle and animals was not only good religious, trust but also a good charitable trust. The phrase 'advancement of any other object of general public utility' has wider import and the construction of mosque and amount spent for its maintenance, which was a public utility, cannot be termed as a non-charitable purpose. It was held by the judicial authorities since the inception of Income-tax Law that the word 'charity' must be construed liberally so as to achieve the laudable purpose behind it. The learned counsel argued that the expenditure on maintenance of mosque did not affect the dominant and multifarious charitable activities of the assessee and even if it is presumed that maintaining of a mosque is not a charitable activity, the same is merely ancillary or incidental to the primary and dominant purpose of the trust. The running of educational institutions by the assessee trust is a charitable activity within the meaning of section 2(15) of the Act. 11.3 The learned counsel argued that assuming but not conceding that the religious activities of assessee are mingled with charitable activities, even then th....
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....religious purposes from the sphere of charitable purposes by enacting "in this section, 'charitable purpose' does not include any purpose the whole or substantially the whole of which is of a religious nature." The exclusion of religious purposes by the said Explanation from the ambit of charitable purposes is only for the purpose of section 80G as the Explanation specifically starts with the words "in this section". Therefore, the intention of the Legislature is clear that religious purposes are included in charitable purpose for the purpose of all other sections in the Act, including section 11(1)(a). 11.5 The learned counsel further argued that the Assessing Officer has not applied the judgment of Hon'ble Jammu & Kashmir High Court in the case of Ghulam Mohidin Trust (supra), in the right perspective and is distinguishable on facts. In that case the primary and dominant object of the Trust was to promote science and technology and Muslim theology among Muslim intelligentsia. Therefore, the Hon'ble J&K High Court held that the trust is a religious trust created exclusively for the benefit of the members of a particular religious community and hence the trust falls within the a....
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....trust in a truncated manner. The instrument should have been read as a whole in order to understand its aim and object. For the above proposition, he relied on the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Mahendra Mohta Sewa Nidhi [1985] 152 ITR 516, wherein it was held that in order to determine the true import of a document it should be read as a whole. The Assessing Officer has given a finding in the pre-assessment notice dated 22-2-2006 that the 'Trust is constituted for the entire cross-section of the society as is seen from the Memorandum' and there is absolutely no reason to contradict the stand taken by himself. The CIT invoked his powers under section 12A of the Act and collected all information/conducted inquiries in order to satisfy himself about the genuineness of the activities of the trust as contemplated under section 12AA(1)(a) and after satisfying himself about the objects of the trust/genuineness of the activities, registration was granted and Assessing Officer has no jurisdiction to ignore the same and he is bound by the said order. It is argued that the Certificate under section 80G was issued by the CIT after considering the r....
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....not be denied for incidental or ancillary work. That was the reason also to define the word 'charitable purpose' in a comprehensive manner in section 2(15) of the Act. The conclusion of the Assessing Officer and the CIT(A) that if the word 'or' in the section were to be read as 'and' as appearing in section 11(1)(a) then it would render section 11(1)(b) meaningless is also not correct. Section 11(1)(b) has no overlapping effect at all. The learned counsel submitted that the Assessing Officer as well as the CIT(A) failed to appreciate the relevant aspects and have considered only irrelevant aspects. The assessment order passed by the Assessing Officer and upheld by the CIT(A) is illegal, perverse and is liable to be set aside. 12. The learned senior counsel, Shri P. Balachandran, in the case of Markazu Ssaquafathi Ssunniya (ITA No. 641/Coch./2006), argued that the assessee is a society registered under the Societies Registration Act, 1861 on 31-5-1982. It is a public charitable and religious trust registered under section 12A of the Act. The CIT granted registration under section 12A of the Act to the assessee after satisfying himself regarding genuineness of the Trust and after ....
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....has spent any amount for a non-charitable/non-religious activity. The dominant purpose of the Trust is charitable in nature. The amount spent for construction and maintenance of a prayer hall is incidental to the main charitable object. 12.3 It is argued by the learned counsel that the words used in section 11 of the Act, viz., "wholly for charitable or religious purposes" show that the income would be exempted if all the objects of the trust are of religious or charitable in nature. In other words, if a trust has separate objects which are of religious or charitable in nature the income of trust would be exempt, if there is a non-religious or non-charitable object and there is discretion to the trustees for applying the funds to any of the objects, including the object which is non-religious/charitable in nature the income would not be exempt. In support of the above, the learned counsel relied on the decision of the Hon'ble Supreme Court in the case of Yogiraj Charity Trust (supra). 12.4 The learned counsel further argued that the expression "in part" under section 11(1)(b) does not refer to an aliquot part. If, say a portion of the property is held in Trust; wholly for rel....
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....ken in the case of Social Service Center (supra) by the Hon'ble Andhra Pradesh High Court in A.A. Bibijiwala Trust (supra) and Barkate Saifiyah Society's case (supra) by the Hon'ble Gujarat High Court and in Ahmedabad Rana Caste Association's case (supra) which is affirmed by the Hon'ble Supreme Court. The learned counsel submitted that the Assessing Officer as well as the CIT(A) erred in relying on the judgment of the Hon'ble Jammu & Kashmir High Court in the case of Ghulam Mohidin Trust (supra), where the facts were entirely different. In that case the primary and dominant object was "Promotion of Science and Technology and Muslim Theology among Muslim Intelligentsia and financial assistance and loans to the members of Muslim community alone. It was a case of religious trust created only for the benefit of a particular religious community. Moreover, in said case absolute discretion was given to the trustees for applying income of the trust property and by virtue of said discretion income could have been applied to non-religious or non-charitable purpose. So also the decision in the case of Shanti Verma Jain (supra) was one relating to a private religious trust as the whole object....
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....tter dated 27-3-2006, there should not be cloud of doubt that in addition to the charitable object, it is carrying on religious activities also. The aim of the assessee is to perform the administration in pursuance to the principles and aims of "Samasta Kerala Sunni Yuvajana Sangham State Committee" and to look after and protect all the institutions acting under the Sangham. It is argued that the Sangham's State Committee is religious institution though some of the charitable activities are carried out. The assessee incurred the expenditure on the religious activities, i.e., on the construction of the Mosque in the premises, expenditure on running the Madrassa, acquiring the assets such as Hifful Quaram College building, Masjid Urine Block building, Korangad Secondary Madrassa building, etc. and these assets are exclusively, used for the religious purpose. 13.1 The learned DR further argued that the claim of the assessee is that all its activities are of general public utility and hence charitable is not at all correct. The Mosque is a prayer hall, which can be used not only by Muslims but not by all members of the public. Its activities like running of schools, Madrassas, orpha....
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....)(a) which is not the intention of the Legislature. 13.4 The learned DR submitted that the assessee contends that the society is registered under section 12A of the Act by CIT and that the CIT has not so far cancelled the registration. Hence the assessee according to it, is eligible for exemption and Assessing Officer is not empowered to consider the eligibility of exemption interpreting section 11(1)(a) of the Income-tax Act. The learned DR submitted that though registration under section 12A of the Act is a precedent condition for granting exemption under section 11, the registration remained as empty formality up to 1-4-1997. Up to 1-4-1997 there was no prescribed procedure for granting registration under section 12A. It is only with effect from 1-4-1997 procedure for registration under section 12AA has been introduced in the Act. Even after that there was no express provision to cancel registration. The power to deny exemption vested with the Assessing Officer on examining the activities of the trust each year. It is only with effect from 1-10-2004 the power to cancel registration under section 12A was introduced in the Act. 13.5 The learned DR submitted that the assessee....
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....en the objectives are either wholly charitable or wholly religious and not partly charitable and religious. (9)Interpretation of clauses of section 11(1)( a) as claimed by the assessee will result in denial of exemption to wholly charitable and wholly religious trusts. 14. In respect of another assessee, i.e., Calicut Islamic Cultural Society (ITA No. 729/Coch./2006), the learned DR argued that there is no dispute that the assessee has been granted registration under section 12A of the Act on 28-10-1977. The principal aims and objects of the society is providing the educational, social, economic and moral advancement of people in all possible ways and especially for the rehabilitation of the socially handicapped and economically poor sections of the society, but as per rule 4(a) of the byelaws the assessee-society has to discharge all the functions as per the tenets envisaged by Holy Quran and Sunnah that is as per religious principles. It is further argued that after examining the objects of the society as well as examining the books of account, the Assessing Officer rightly came to the conclusion that the assessee is a partly charitable and partly religious institution and ....
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....oth these cases for denying the claim of the assessees under section 11(1)(a) of the Act. 16. Now we take up the reasons given by the Assessing Officer in the case of Calicut Islamic Cultural Society (ITA No. 729/Coch./2006) : (i)The activity of the society is partly religious and partly charitable. (ii)The object of the assessee is partly charitable and partly religious because on the verification of books of account it was noted by the Assessing Officer that assessee spent amount on conducting the mosque and also assessee was conducting charitable institutions like Calicut orphanage and Calicut Higher Secondary School for the handicapped. (iii)There were many charitable institutions run by the assessee trust. (iv)If the assessee is partly engaged in the activity which is a religious and partly charitable, then in view of the decision of the Hon'ble High Court of Jammu & Kashmir in the case of Ghulam Mohidin Trust (supra) assessee cannot be given the benefit of exemption under section 11(1)(a) of the Act. 17. Now we refer to in a summary way the reasons for denying the exemption to another assessee, i.e., Markazu Ssaquafathi Ssunniya (ITA No. 641/Coch./2006). The....
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....apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;" 20. We may refer here the observations of Lord Denning LJ (quote) : "The English language is not an instrument of mathematical precision. Our literature would be much poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A Judge believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the Judges trouble if the Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it when a defect appears, a Judge cannot simply fold his hands and blame the draftsmen. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which give rise to it and of the mischief which it was passed to remedy, and t....
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....here are innumerable examples where there will be very thin line of demarcation between the purposes to identify which are the charitable purposes or which are the religious purposes. In both these appeals, it is not the case of the Department either that any of the bars provided under section 13 of the Act are applicable to both these assessees as per the interpretation given by the Assessing Officer as well by the CIT(A). As per the provisions of section 11(1)(a) of the Act, it requires that there should be nexus between the property held under the trust wholly for charitable or religious purposes and the income under consideration. The interpretation given by the Assessing Officer as well as by the CIT(A) is that the purpose should be wholly charitable or wholly religious. We are afraid, whether such inter- pretation can be accepted. In our opinion, said interpretation given by both the authorities is only academic. When the Legislature has categorically defined the purposes like religious and charitable and if the assessee is engaged as per their objects in mixed activities, which are partly charitable and partly religious, it cannot be said that section 11(1)(a) of the Act doe....
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.... the private religious trusts. In the case of Yogiraj Charity Trust (supra), the Hon'ble Supreme Court has held that primary or dominant purpose of the trust or institution is to be seen. The identical view has been taken in the case of Andhra Chamber of Commerce (supra) by the Hon'ble Supreme Court that if the primary purpose is advancement of objects of general public utility, it will remain charitable even if an incidental entry into the political domain. In sum and substance, the dominant and primary objects are decisive to decide the nature or character of the institution. 25.1 In the case of Ghulam Mohidin Trust (supra), by Reference two questions of law were referred for the esteemed opinion of the Hon'ble High Court. Both the questions are as under:- "1.Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right that the trust was not entitled to claim exemption from tax under section 11 of the Income-tax Act for the income derived from the property held under the trust ? 2.Whether, on the facts and in the circumstances of the case, the objects of the trust providing for promotion of science and technology and Muslim theology among ....
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....of the instrument of trust that the Muslims of the State and some other sections of the population had lagged behind in this particular branch of learning and it was to improve that situation that power was conferred on the trustees to grant financial assistance by way of ex gratia grants, etc., to scholars to enable them to prosecute their further studies. This assistance too, as indicated above, is intended to promote science and technology and Muslim theology among the Muslim intelligentsia, which is the main and dominant object of the trust. In such a situation, section 13(1)(b) of the Act is attracted and the assessee-trust is not entitled to exemption in respect of its income under section 11 of the Act. Clause (a) of section 13(1) of the Act will also be attracted in this case because the income has been derived by the assessee from property held under trust, which does not enure for the benefit of the public. Moreover, even if we hold that the object is not only promotion of Muslim theology amongst the Muslim intelligentsia, but also promotion of science and technology among them, the income of the trust would not be exempt under section 11 of the Act because the law is ....