TaxTMI 
TaxTMI 
2022 (9) TMI 330
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner of Income - tax (Appeals) - 3, Rajkot erred in upholding action of the assessing officer in disallowing deduction of Rs. 15,51,780/- claimed as application of income on objects of the Trust u/s 11 of the Act and thereby treating the same as income of the appellant. 3. As transpires from the orders of the authorities below,the denial of exemption was for the reason that the assessee trust was found to be created for the benefit of a particular religious community or caste, i.e Kadva Patidar, trigerring Section 13(1)(b) of the Act, which denies exemption u/s. 11 of the Act to such Trusts. Accordingly assesee's claim of deduction of Rs. 15,51,780/- as expenses incurred for charitable purposes u/s. 11 of the Act, was denied by the AO and upheld by the Ld.CIT(A). 3.1 Contentions by the Ld.Counsel for the assessee against the denial of exemption were made in writing, dated 22-12-2020, and which were reiterated vide oral submissions made during the course of hearing before us. Briefly put the arguments against invocation of section 13(1)(b) of the Act for denial of exemption were to the following effect: 1. The assessee trust being created for all people of the societ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Thus, it is patent on plain reading of the objects clause of the Trust that it is not 'created or established' for the benefit of any particular religious community or caste. Its objects also encompass charitable objects for general public (people of the society). Thus, it cannot be said that the trust is 'created or established' for the benefit of any particular religious community or caste. On this ground itself, sec. 13(1)(b) becomes inapplicable. 2. When the objects are not confined to any particular religious community or caste, but are meant for all, provisions of sec. 13(1)(b) are not attracted. In support, reliance is placed on several decisions which pertain to several different 'communities or castes' Please refer to, Gujarat High Court in Bayath Kutchi Dasha Oswal Jain Mahajan Trust (2016) 96 CCH 0375 Page 111-113. (more caselaw compilation page nos. 15-16, 24-26, 45, 48-49 on this very point. 3. When apart from objects relating to Jainism, other goals are also set out in trust deed, then the trust would become a charitable trust and sec. 13(1)(b) would not be applicable (Chandra Charitable Trust 294 ITR 086 (GUJ.)). (Case Law Compilation Page nos. 114....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to Leuvas only. The CIT(Appeals) has sought to draw a distinction between the two which is unreal, illogical and without basis. IV. CORPUS DONATIONS RECEIVED ARE CAPITAL RECEIPTS HENCE NOT INCOME: 9. Appellant-trust received donations of Rs. 12,68,271/- during the year towards Building Construction Fund, which amount has been utilised in same year for building construction (as reflected in audited Balance sheet filed) (Page 1-6 annexed herewith). Being on capital account and for capital asset and forming part of corpus of trust, such receipts have been held to be capital receipts not being income at all under the Act and hence cannot be considered as part of total income, more so if benefit of sec. 11 is to be denied. If this amount is excluded, the disallowance of expenditure made by the AO shall have no relevance and cannot result into positive income at all. 10. Corpus donations are capital receipts, irrespective of whether a trust enjoys benefit of sec. 11 and 12 or not. Case Law Citation Case Law Compilation Page No. Hamdard National Foundation India (2020) 82 ITR (Trib) 164 Delhi 127-133 Prakash Education Society & Anr. (201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th are considered as different castes. In my opinion the understanding arrived at while considering the category of leuva patel cannot be extended to the Kadva Patel community. There is nothing to suggest that this community does not constitute a caste in its general socio-political context. Thus, I find no fault in the ITO's action of treating the object of the appellant trust as towards benefit for the caste Kadva Patel. The first ground is therefore dismissed." 7. We have heard both the parties. The controversy to be resolved is whether the assessee trust is a trust for the benefit of particular religious community or caste, so as to be hit by the provisions of section 13(1)(b) of the Act denying claim of exemption u/s 11 of the Act. That the assessee trust is registered u/s to 12A of the Act is an undisputed fact. 8. For adjudicating the issue it is imperative to interpret and apply the law on the issue in the context of the facts of the case before us. 9. For interpreting section 13(1)(b) of the Act, which has been invoked ,and its scope, it is relevant to reproduce the section , 13. (1) Nothing contained in section 11 or section 12 shall operate so as to exc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmunity implies a community which owes its origins to a religion;it is a community /group of people who practice the same religion. 13. Caste on the other hand has been defined in Wikepedia to mean "a form of social stratification characterised by endogamy, hereditary transmission of a style of life which often includes an occupation, ritual status in a hierarchy, and customary social interaction and exclusion based on cultural notions of purity and pollution." The Merriam Websters Dictionary defines it as " one of the hereditary social classes in Hinduism that restrict the occupation of their members and their association with the members of other castes" The Brittanica Distionary defines it as [count] : one of the classes into which the Hindu people of India were traditionally divided 2 : a division of society based upon differences of wealth, rank, or occupation 14. Basically caste is a division of society based on occupation, wealth etc, with each such strata having its well defined customs and rituals and practicing endogamy ,which is prohibiting interaction with other castes. It is thus a rigid stratification of soci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xamined in detail by the ITAT, Ahmedabad B Bench in the case of Leuva Patel Nutan Kelwani Mandal vs. ITO reported in (1985) 12 ITD 0276 and it was categorically held that these communities owe their origin to the fact that they were agriculturist and not to any particular religion and therefore cannot be treated as a religious community for invoking section 13(1)(b) of the Act. In the said case the ITO had examined the President of the Leuva Patel Nutan Kelwani Mandal to determine whether they belonged to a particular religious community or caste. The entire statement of the President is reproduced in the order of the ITAT as under: "I, the undersigned, Dr. C. R. Baldha, the President of Shri Leuva Patel Nutan ared before the ITO, Ward-I, Rajkoy, in response to Notice under s. 131 of the IT Act, state on oath that I shall give true replies to the questions asked to me: Q. No. 1. Has constitution of Leuva Patel Nutan Kelwani manda, Rajkot, been framed ? When and what are its aims ? A. No. 1. Its constitution has been framed. That "Mendal" as come into existence in 1936. Its Public Trust Registration No. is R/1897 dt. 1st March, 1966. Its aim is the develop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons namely Lava and Kush. They took over the rule. Lava established a city namely Lavapur, now known as Lahore in Punjab district. Similarly, Kush established Kushavati, now known as Patna. They made a plan for the development of the city and the profession of class of farmers living in those cities. Such farmers residing in those cities were known as Leuva and Kadva. As per another Legend the persons engaged in agriculture in those olden days, were known as 'Kurmi' now popularly known as 'Kanabi'. The Kanabis residing in Gujarat are of two main division, know as Leuva Kanbi and Kadva Kanbi. In present days these two types of Knabis do not maintain themselves only on agriculture but are also engaged in other activities, i.e., industries, profession, vacation etc. The 'Kurmis' had love and affection for the native place i.e., several areas of Punjab district and in order to have remembrance for the native areas the 'kurmis' who have migrated from Leva section of Punjab are known as 'Leuva Kurmi', and from kadya section of Punjab are known as 'Kadva Kurmi'. 3.Historically Kanbi Patels i.e Leuva Patel and Kadva Patels had t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and Hon'ble Gujarat High Court is quite apt. For all these reasons, we hold that the provisions of s. 13(1)(b) of the Act are not applicable to the assessee-trust and that the assessee-trust was entitled to exemption under s. 11 of the Act. The ITO is, therefore, directed to modify the assessment accordingly. 20. Whether it constitutes a caste, in our view, the answer is in the affirmative. There can be no doubt that the Kedva Patels are a caste. Owing their origins to agriculturists, this community clearly represents social stratification with defined occupation, lifestyle and customs, though the same over period of time may have faded. But their cultural characteristics are still defined and have an inherited social lifestyle. The AO, in the case of Leuva Patel Nutan (supra), while tracing the historical background of Leuvas, stated that Leuvas and Kedva Patels were agriculturists originating from different sections of Punjab who had migrated to Gujarat and are closed communities having no relations with each other in marriage and dinner. It is but obvious that Kedva Patel is undoubtedly a caste. Even the AO in the case of Leuva Patel Nutan (supra) states so in para 8 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat however does not mean that if a trust is a composite one, that is one for both religious and charitable purposes, then it would not be covered by clause (b). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose which is established for the benefit of any particular religious community or caste. 46. Such trusts with composite objects would not be expelled out of the purview of Section 13(1)(b) per se. The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say, it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large. (Sole Trustee, Loka Shikshana Trust v. CIT, (1975) 101 ITR 234 (SC)). The section of community sought to be benefited must be either sufficiently defined or identifiable by a common quality of a public or impersonal nature." 23. Thus, in the present case also the provisions of section 13(1)(b) will apply, the trust being of charitable character....