MSB EDUCATIONAL SOCIETY,KOTA, RAJASTHAN vs. CIT(E) JAIPUR, JAIPUR, RAJASTHAN

There is no law which is required to be complied with for achieving the objects of the assessee trust. Section 17 of the Rajasthan Public Trust Act, 1959 requires that trustees of the trust have to apply for registration of a public trust, however, there is no section in the RPT Act, 1959 which prohibits a trust to carry out its objects if it is not registered under the RPT Act, 1959. It is opined that both the statutes have their own provisions and implications and none of them have overriding effect. Even if, the MSB Educational Society assessee trust is not registered with the RPT Act, 1959 and the concerned officials under the RPT Act, 1959 deems it necessary to get the entity registered under section 17 of the RPT Act, 1959, appropriate action can be taken against the trustees of the trust. But this issue can’t be a hurdle in getting registration before the Income Tax Department under section 12AB. [Para 8] In view of discussion, there is no any force in the findings of the Commissioner (Exemption) while holding registration application untenable in the absence of registration under the RPT Act, 1959. [Para 9]

The assessee was a registered public trust under the M.P. Public Trusts Act, 1951. It filed an application for registration before the Commissioner as envisaged under section 12A, read with section 12AA for availing the exemption under section 11.The Commissioner opined that the assessee was a charitable trust and since the object and purpose of the trust was confined only to a particular religious community, the same would attract the provisions of section 13(1)(b) and, therefore, prayer made for registration of the trust was declined. The Tribunal after going through the objects of the assessee- trust came to the conclusion that the assessee was a public religious trust as the objects of the trust were wholly religious in nature and thus, the provisions of section 13(1)(b) which were otherwise applicable in case of charitable trust would not be applicable. The Tribunal therefore, held that the assessee was entitled to claim registration under sections 12A and 12AA.The High Court primarily, was of the view that the decision of the Tribunal was rendered purely on the factual matrix of the case and, therefore, it would be improper to disturb the finding of fact so arrived by the Tribunal. Secondly, the court concluded that the provisions of section 13(1)(b) would not be applicable to the assessee trust as the trust was not created or established for the benefit of any particular religious community or caste. Consequently, the revenue's appeal was dismissed.

On appeal to the Hon’ble Supreme Court, it was held: Under the scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions available to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by the said trust are the subject-matter of exemptions from the taxation under the Act. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemption under sections 11 or 12 by the assessee and the grant or rejection of such application by the Commissioner. A conjoint reading of sections 11, 12, 12A and 12AA makes it clear that registration under sections 12A and 12AA is a condition precedent for availing benefit under sections 11and 12. Unless an institution is registered under the aforesaid provisions, it cannot claim the benefit of sections 11 and 12. Section 13 enlists the circumstances wherein the exemption would not be available to a religious or charitable trust otherwise falling under section 11 or12 and, therefore, requires to be read in conjunction with the provisions of sections 11 and 12 towards determination of eligibility of a trust to claim exemption under the aforesaid provisions. [Para 16] Determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact. It is a question which requires examination of legal effects of the proven facts and documents, that is, the legal implication of the objects of the respondent-trust as contained in the trust deed. It is only the objects of a trust as declared in the trust deed which would govern its right of exemption under section 11 or 12.

It is the analysis of these objects in the backdrop of fiscal jurisprudence which would illuminate the purpose behind creation or establishment of the trust for either religious or charitable or both religious and charitable purpose. Therefore, the High Court has erred in refusing to interfere with the observations of the Tribunal in respect of the character of the trust. [Para 26] Having said so, it is necessary to examine the question, whether the Courts below were justified in coming to the conclusion that the assessee-trust is a public religious trust and therefore, outside the purview of section 13(1)(b) and eligible for exemption under section 11. [Para 27] The objects of the assessee-trust are not indicative of a wholly religious purpose but are collectively indicative of both charitable and religious purposes. It is expedient to comprehend the objects of the assessee-trust with reference to the construction of the expressions 'charitable purpose' and 'religious purpose.' [Para 28] The phrase charitable purpose is expansive and inclusive. The expression 'charitable purpose' is defined in the dictionary clause of the Act under section 2(15). [Para 29] According to section 2(15), the expression 'charitable purpose' has been defined by way of an inclusive definition so as to include relief to the poor, education, medical relief and advancement of any other object of general public utility. A catena of decisions of this Court which have interpreted the said provision and especially the expression 'any other object of general public utility' have observed that the said expression is of the widest connotation. The word 'general' in the said expression means pertaining to a whole class.

Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose. The said expression would prima facie include all objects which promote the well-being of the general public. It cannot be said that a purpose would cease to be charitable even when public welfare is intended to be served. [Para 30] In certain cases, the activities of the trust may contain elements of both: religious and charitable and thus, both the purposes may be over lapping. More so when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community and also public at large. For example, the practice of optional charity in the form of Khairat or Sadaquah under Mohammadan Law would be covered under both charitable as well as religious purpose. Further, while providing food and fodder to animals especially cow is religious activity for Hindus, it would be charitable in respect to non-Hindus as well. [Para 36] Unquestionably, objects which provide for the activities completely religious in nature and restricted to the specific community of the respondent-trust are objects with religious purpose only. However, in respect to the other objects, the fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in colour. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. [Para 38] The activity of providing for food on certain specific occasions and other religious and auspicious events of the Dawoodi Bohra community do not restrict the benefit to the members of the community. Neither the religious tenets nor the objects as expressed limit the service of food on the said occasions only to the members of the specific community. Thus, the activity of Nyaz performed by the respondent-trust does not delineate a separate class but extends the benefit of free service of food to public at large irrespective of their religion, caste or sect and thereby qualifies as a charitable purpose which would entail general public utility. [Para 39] Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of section 2(15) of the Act. The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The Madarsa as a Mohammadan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the said object would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character. [Para 40] Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of section 13. The activities of the trust under such objects would therefore be entitled to exemption accordingly. [Para 41] Further, one has to examine the objects under the provisions of section 13(1)(b) of the Act. It becomes amply clear from the language employed in the provisions that section 13 is in the nature of an exemption from applicability of sections 11 or 12 and the examination of its applicability would only arise at the stage of claim under sections 11 or 12.

Thus, where the income of a trust is eligible for exemption under section 11, the eligibility for claiming exemption ought to be tested on the touchstone of the provisions of section 13. In the instant case, it being established that the respondent-trust is a public charitable and religious trust eligible for claiming exemption under section 11, it becomes relevant to test it on the anvil of section 13. [Para 42] Thus, the second issue which arises for consideration, whether the respondent-trust is a charitable and religious trust only for the purposes of a particular community and therefore, not eligible for exemption under section 11 in view of provisions of section 13(1)(b). [Para 43] In the instant case, the Tribunal has found on facts after analysing the objects of the trust that the respondent trust is a public religious trust and its objects are solely religious in nature and being of the opinion that section 13(1)(b) is solely meant for charitable trust for particular community, negated the possibility of applicability of section 13(1)(b) at the outset. The High Court has also confirmed the aforesaid view in appeal and observed that section 13(1)(b) would only be applicable in case of income of the trust for charitable purpose established for benefit of a particular religious community. The said view may not be the correct interpretation of the provision. [Para 44] The 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. 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. [Para 46] In the present case, the objects of the respondent trust are based on religious tenets under Quran according to religious faith of Islam. As already noticed that the perusal of the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community. The objects, as explained in the preceding paragraphs, do not channel the benefits to any community if not the Dawoodi Bohra Community and thus, would not fall under the provisions of section 13(1)(b). [Para 49] In that view of the matter, it is held that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under section 11. [Para 50] 7. In view of the above authority, it is observed that the Ld. CIT (E), Jaipur mis- interpreted the facts and applied the above authority of the Hon’ble Apex Court to substantiate his version. Whereas, the same was in favour of the assessee and after elaborate discussion on the provisions of Act, Hon’ble Court had allowed the registration in similar circumstances. Respectfully following the above authority, we find force in the arguments of the assessee and view of the Ld. CIT (E), Jaipur is not found to be tenable, hence same is set-aside.

The Order is pronounced in the open court on the 23rd day of September 2025.