Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRISAKTIJIT DEY & SHRIRAMIT KOCHAR
IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRISAKTIJIT DEY, JUDICIAL MEMBER AND SHRIRAMIT KOCHAR, ACCOUNTANT MEMBER
ITA no.5463/Mum./2015 (Assessment Year : 2011–12)
The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation 802, Arcadia, NCPA Road ……………. Appellant Nariman Point, Mumbai PAN – AAATH0335D v/s Addl. Director of Income Tax (Exemp.) ……………. Respondent Circle–II(1), Mumbai
Assessee by : Shri Firoze B. Andhyarujina Revenue by : Shri T.A. Khan& Shri V.Justin
Date of Hearing –06.04.2018 Date of Order – 28.06.2018
O R D E R PER SAKTIJIT DEY, J.M.
Aforesaid appeal has been filed by the assessee challenging the order dated 15th September 2015, passed by learned Commissioner (Appeals)–1, Mumbai, for the assessment year 2011–12.
Besides the ground raised in the memorandum of appeal, the assessee vide letter dated 24th August 2017, has raised certain additional grounds. However, at the time of hearing, the learned Counsel appearing for the assessee did not press these grounds.
2 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
Hence, additional grounds are dismissed as not pressed. The only issue arising for consideration as per the main ground relates to disallowance of expenditure of ` 2 crore on account of interest free loan advanced to another trust.
Brief facts relating to the issue in dispute are, the assessee a charitable trust is registered under Bombay Public Trust Act, 1950. The assessee trust is also registered with the Charity Commissioner. The Director of Income–tax (Exemp.), Mumbai, has also granted registration under section 12A of the Act to the assessee. For the assessment year under consideration, the assessee filed its return of income on 27th September 2011, claiming exemption under section 11 of the Act. During the assessment proceedings, the Assessing Officer on verifying the details called for found that as per the income and expenditure account, the assessee has debited an amount of ` 2 crore towards interest free loan given to another trust. He, therefore, called upon the assessee to justify the deduction claimed. In response to the query raised by the Assessing Officer, the assessee vide letter dated 3rd March 2014, justified its claim on the plea that the interest free loan was advanced to another trust having similar object. In this context, the assessee also relied upon CBDT circular no.100 dated 24th January 2017. The Assessing Officer, however, did not find merit in the submissions of the assessee. The Assessing Officer was of the view
3 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
that the advancing of interest free loan to another trust cannot be accepted as application of income, rather, it has to be treated as investment of funds as provided under section 11(5) and section 13(1)(d)(ii). He also observed, the assessee has not actually made the expenditure but it is a loan given to another trust which is recoverable in future. Thus, on the aforesaid reasoning, the Assessing Officer ultimately disallowed the deduction claimed of ` 2 crore. Of course, the Assessing Officer also disallowed depreciation claimed of ` 1,91,17,469. However, since the claim of depreciation is not an issue in dispute in the present appeal, there is no need to deal with the same. Be that as it may, the assessee challenged the disallowance made by the Assessing Officer by preferring an appeal before the first appellate authority.
So far as the issue of disallowance of ` 2 crore is concerned, the learned Commissioner (Appeals) rejected assessee’sclaim basically for the reasons objects of both the trusts are not similar, and further, the interest free loan advanced by the assessee to another trust was not for the purpose of utilization in educational purpose.Hence, he held that as per CBDT circular no.100 of 1973, the advancing of interest free loan to another trust will not amount to application of income for charitable purpose. Secondly, he observed, the object of the other trust is religious.
4 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
Learned Sr. Counsel appearing for the assessee submitted that both the Assessing Officer and the learned Commissioner (Appeals) have rejected assessee’s claim on the reasoning that interest free loan advanced to another trust was not for educational purpose, hence, as per CBDT Circular no.100 of 1973, it will not amount to application of income. He submitted, CBDT Circular no.100 of 1973, cannot be read in a narrow / restrictive manner. He submitted, the reference to the expression “educational purpose” in the said circular is only illustrative since, under general law one charitable object cannot get preference over another. Further, the learned Sr. Counsel submitted, the CBDT Circular no.100 of 1973 speaks of interest bearing loan, whereas, the loan advanced by the assessee is interest free. He submitted, as per Muslim Personal Law, the assessee neither can charge nor accept interest. For that reason, only the assessee has advanced interest free loan. He submitted, after the loan was re–paid, the assessee has offered it as income in assessment year 2012–13. Therefore, bringing the said amount to tax in the impugned assessment year would amount to double taxation. Finally, learned Sr. Counsel submitted, advancement of interest free loan to another charitable trust having similar object amounts to application of income and is not an
5 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
investment / deposit of funds. Therefore, the assessee is entitled to claim exemption under section 11 of the Act. In support of his contention, the learned Sr. Counsel relied upon the following decisions:–
i) DIT(E) v/s Acme Educational Society, [2010] 326 ITR 146 (Del.); ii) CIT v/s Indian National Theater Trust, [2008] 305 ITR 149 (Del.); iii) National Engineering Co–ordination Committee v/s ACIT, [1992] 43 ITD 612 (Pune); iv) DDIT(E) v/s Shree Raj Foundation, ITA no.1242/Mum./2014, order dated 17.08.2016; v) Kanpur Subhash Shiksha Samiti v/s DCIT, [2011] 11 ITR 23 (Luck.); and vi) ACIT v/s MAC Public Charitable Trust, ITA no.1799/Mds./2012, dated 21.08.2013.
Learned Departmental Representative relied upon the findings of the learned Commissioner (Appeals).
We have considered rival submissions and perused the material 7. available on record. We have also applied our mind to the decisions relied upon. So far as the factual aspect of the issue is concerned, there is no dispute that the assessee has advanced interest free loan of ` 2 crore to another trust. It is the contention of the assessee that objects of both the trusts are similar, hence, it will amount to application of fund. In case of CIT v/s Indian National Theater Trust,
6 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
[2008] 305 ITR 149, the Hon'ble Delhi High Court while considering similar issue of advancement of loan by one trust to another held that the word application of income has to be given a wider interpretation keeping in view the purpose for which the provision has been introduced. The Hon'ble Court ultimately concluded that the loan advanced by the trust to another trust having similar object has to be treated as application of income. The other decisions relied upon by the learned Sr. Counsel also express similar view. The reasoning of the learned Commissioner (Appeals) while upholding the disallowance are, firstly, the objects of the assessee and the recipient trust are not similar as the other trust is religious and secondly, the interest free loan advanced by the assessee to another trust was not for educational purposes. Therefore, it is imperative to find out whether the assessee and the recipient trust are having similar objects or not. Since, vital facts on this aspect were not forthcoming from the orders of the departmental authorities, except some general observations and Tribunal being the last fact finding authority, to resolve the factual dispute and to ascertain the correct facts relating to similarity or otherwise in the objects of both the trusts, we have called for and examined the trust deeds of both the assessee and the recipient trust. On examining the trust deed of the assessee, it is seen that the object of the assessee trust is public non communal charitable purpose. From
7 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
the recitals of the recipient trust, viz;Shiate Ali QardanHasana Trust, prima–facie, it appears the objects and purpose of the trusts are of religious nature. However, a deeper analysis of the objects as provided under Clause 4 of the trust deed reveals that, though, it is stated that the object of the trust is to promote and realize the religious tenets and customs of Dawoodi Bohra Community, however, it also speaks of giving Qardan Hasana to Dawoodi Bohras in particular and mankind at large, directly or through the Anjumans and any other organization. The objects also provide for supporting Madarsas and advance religious education and learning. The objects also provide to host and assist in hosting Niyaz (religious meals) on solemn occasions and also to support and assist pilgrims going for Haj and sacred shrines. Thus, as could be seen, one of the common objects between the assessee and the recipient trust is providing Qardan Hasana. However, it needs to be seen whether the religious object of the recipient trust makes it distinct from the assessee trust, hence, it cannot be said that objects of both the trusts are similar, as held by the learned Commissioner (Appeals). In this context, it will be profitable to refer to the decision of the Hon'ble Supreme Court in CIT v/s Dawoodi Bohra Jamat,Civil Appeal no.2492 of 2014(arising out of SLP(C)no.9004 of 2010), judgment dated 20thFebruary 2014. The Hon'ble Supreme Court while considering the issue as to whether the object of a particular trust is
8 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
wholly religious or wholly charitable or both charitable or religious observed that it is a mixed question of law and fact as it requires examination of legal effect of the proven facts and document which are enunciated in the objects of the trust deed. In this regard it is necessary and relevant to reproduce the observations of the Hon'ble Supreme Court:–
“26. In our considered view, 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 but 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. 27. Having said so, we would now examine the question, whether the Courts below were justified in coming to the conclusion that the respondent-trust is a public religious trust and therefore, outside the purview of Section 13(1)(b) and eligible for exemption under Section 11 of the Act. 28. The objects of the respondent-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 respondent-trust with reference to the construction of the expressions “charitable purpose” and “religious purpose.” 29. 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) as follows:
9 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
"charitable purpose" includes relief of the poor, education , medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year;” 30. 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. (CIT v. Gujarat Maritime Board, (2007) 14 SCC 704). 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. (CIT v. Ahmedabad Rana Caste Assn.) The said expression would prima facie include all objects which promote the wellbeing 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. 31. The Constitution Bench of this Court in CIT v. Surat Art Silk Cloth Manufacturers‟ Assn. has held that if the primary purpose and the predominant object of a trust are to promote the welfare of the general public the purpose would be charitable purpose. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charitable trust. (Thiagarajar Charities v. CIT, (1997) 4 SCC 724). in general did constitute a charitable object, the words “in particular for workmen of the company” negative the charitable purpose and therefore, the entire trust could not be considered to have been established wholly for charitable purpose.
10 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
In Abdul Sathar Haji Moosa Sait Dharmastapanam v. Commr. of Agri. Income Tax, (1974) 3 SCC 257, at page 259, this Court considered the question whether the appellant therein was a public charitable trust within the meaning of Section 4(b) of the Kerala Agricultural Income Tax Act, 1950. The 3/4th of the income of the bequest was primarily earmarked for the benefit of near relations of the testator only, it cannot be considered as a public charitable trust. While the rest one-fourth was concluded to form the valid charitable trust. (Trustees of Gordhandas Govindram Family Trust v. CIT). In CIT v. Andhra Chamber of Commerce; Ahmedabad Rana Caste Assn. v. CIT; Sole Trustee, Loka Shikshana Trust v. CIT and Yogiraj Charity Trust v. CIT and CIT v. Andhra Chamber of Commerce,[1965] 55 ITR 722 (SC), it was observed that objects for service and benefit to the general masses would indicate that they are meant for public purpose and thus, would create a public charitable trust. 34. Indubitably, the word „charity‟ connotes altruism in thought and action and involves an idea of benefiting others rather than oneself. (Andhra Chamber of Commerce (supra)). It also cannot be lost sight of that the supreme goal of all religions is philanthropy which could be manifested in various forms. It is held that gifts for religious purposes are prima facie gifts for charitable purposes. (Schoales v. Schoales [1930] 2 Ch. 75 (CA); White v. White (1893) 2 Ch. 41 (CA)). 35. Unlike the phrase “charitable purpose”, “religious purpose” is not defined under the Act. According to lexicographers, the term religious would mean “of or relating to religion.” (Merriam Webster Dictionary, Macmillan English Dictionary). The Shorter Oxford English Dictionary defines the term as follows: “Devoted to religion; exhibiting the spiritual or practical effects of religion, following the requirements of religion; pious, godly, devout.” In Kanga, Palkhivala and Vyas, Law and Practice of Income Tax, Vol. 1, Ed. 9th (at p. 544) religious purposes are indicated to include the advancement, support or propagation of a religion and tenets. Thus, a religious purpose would be one relating to a particular religion and broadly would encompass objects relating to observance of rituals and ceremonies, propagation of tenets of the religion and other allied activities of the religious community. An example of such would entail activities such as the dance performances (Garba) or distribution of food specifically for people on fast during the Hindu festivities of Navratri.
11 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
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. Similarly, service of water to the thirsty would find mention as religious activity in sacred texts and at the same time would qualify as a charitable activity. 37. The Tribunal has analysed the objects of the trust in the light of the holy scriptures and Quran and recorded its satisfaction as follows: “16… The objects of the assessee-trust reproduced above clearly refer to the religion and are supported by reference made to different pages of Holy Quran. The learned Counsel for the assessee referred to the true copies of several pages of Holy Quran written by two of the authors referred to above in which giving of food in days of hunger or orphan is considered as highly religious ceremony. Reference is also made that who will give to the people or poor then Allah will give them in return and, i.e., who will give loan then Allah will give double to them. Likewise, for helping the needy people for religious activities and to carry out religious activities or spend for good, spending wealth in the way of Allah, bestowing mercy, teaching were considered to be highly religious activities. On going through several true pages of Holy Quran written by the authors referred to above, we are satisfied that the learned Counsel for the assessee was justified in contending that all the objects of the assessee-trust are solely religious in nature because each of them refers either to religious occasions, religious education or to religious activities. The 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. The learned Counsel for the assessee has been able to
12 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
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.”
Unquestionably, objects (c) and (f) 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, in our view 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 color. 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. The Privy Council in Re The Tribune, 7 ITR 415 has held that in judging whether a certain purpose is of public benefit or not, the Courts must in general apply the standards of customary law and common opinion amongst the community to which the parties interested belong to. Therefore, it is pertinent to analyse whether the customary law would restrict the charitable disposition of the intended activities in the objects. 39. The provision of food to the public on religious days of the community as per object (a) and (b), the establishment of Madarsa and organizations for dissemination of religious education under object (d) and rendering assistance to the needy and poor for religious activities under object (e) would reflect the essence of charity. The objects (a) and (b) provide for arrangement for nyaz and majlis (lunch and dinner) on the religious occasion of the birth anniversary and Urs Mubarak of Awliya-e-Quiram (SA) and the Saints of the Dawoodji Bohra community and for arrangement of lunch and dinner on religious occasions and auspicious days of the Dawoodi Bohra community, respectively. Nyaz refers to the food a person makes and offers to others on any particular occasion on the occasion of the death of a saint and Majhlis implies a place of gathering or meeting. 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
13 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
qualifies as a charitable purpose which would entail general public utility. 40. 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 House of Lords in Barralet v. IR,54 TC 446, has observed that “the study and dissemination of ethical principles and the cultivation of rational religious sentiment” would fall in the category of educational purposes. The Madarsa as a Mohommedan 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 object (d) 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. 41. Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 of the Act 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. 42.We would now proceed 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. 43. Thus, the second issue which arises for our consideration and decision is, 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 of the Act in view of provisions of Section 13(1)(b) of the Act.
14 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
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) of the Act 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. In our considered view, the said view may not be the correct interpretation of the provision. 45. From the phraseology in clause (b) of section 13(1), it could be inferred that the Legislature intended to include only the trusts established for charitable purposes. That 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. (CIT v. Andhra Chamber of Commerce, 55 ITR 722). 47. This Court in CIT v. Palghat Shadi Mahal Trust, (2002) 9 SCC 685 the muslim residents of Kerala constituted a trust “for the purpose of constructing and establishing at Palghat-a-Shadi Mahal and other institutions for the educational, social and economic advancement of the Muslims and for religious and charitable objects recognised by Muslim law …” and later clarified that the proceeds would be utilized for the benefit for public at large and upon this basis, the trust made a claim for exemption from tax under Section 11. This Court held that the resolution clarifying the object would not validly amend the object of the trust-deed and since the object confined the benefit to only muslim community, it would be covered by the restriction under Section 13(1)(b) of the Act even though it functioned for public benefit. Thus, therein the
15 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
object sufficiently defined or expressly stated beneficiary class and restricted the activities of the trust to a specific community. 48. Further, in State of Kerala v. M.P. Shanti Verma Jain, (1998) 5 SCC 63 this Court has held that propagation of religion and restriction of benefits of activities of trust in its objects to the said community would render the trust as ineligible for claiming exemption under similar provisions of Kerala Agricultural Income Tax Act, 1950. The Court observed as follows: “… The Deed of Trust and the rules run into more than thirty pages out of which six pages of the Trust Deed narrate the philosophy of Jain Dharma. The objects of the Trust clearly show that the Trust is meant for propagation of Jain religion and rendering help to the followers of Jain religion. Even medical aid and similar facilities are to be rendered to persons devoted to Jain religion and to non-Jains if suffering from ailments but the medical aid could be given to them only if any member of the families managing the Trust, shows sympathy and is interested in their treatment. The Tribunal, in our opinion, was right in its conclusion that the dominant purpose of the Trust in the present case was propagation of Jain religion and to serve its followers and any part of agricultural income of the Trust spent in the State of Kerala also could not be treated as allowable item of the expenses.”
In the present case, the objects of the respondent-trust are based on religious tenets under Quran according to religious faith of Islam. We have 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) of the Act. 50. In that view of the matter, we are of the considered opinion 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 of the Act.”
16 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
After examining the objects of that particular trust Hon’ble Apex Court found that while some of the objects provide for activities completely religious in nature and restricted to specific community, however, some other objects like providing food to the public on religious days of the community, establishment of Madarsas and organization for dissemination of religious education and rendering assistance to the needy and poor for religious activity reflect the essence of charity. The Hon'ble Court observed, Niyaz on religious occasions and auspicious days of Dawoodi Bohra Community qualifies as a charitable purpose which would entail general public utility. Thus, as could be seen from the aforesaid observations of the Hon'ble Supreme Court, though, a particular trust may appear to be of religious nature, however, the objects of the trust may exhibit the dual tenor of religious and charitable purposes and activities. Thus, the trust can be considered to be having both religious and charitable objects. Thus, keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid decision, it has to be examined whether the objects of the assessee and recipient trust are similar in nature or not. It is evident, the objects of the recipient trust speaks of providing certain benefits / services to Dawoodi Bohra Community in particular and mankind at large. However, some other object clauses do not expressly provide restricting the benefit to a particular
17 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
community. Further, it needs to be factually verified from the activities of the assessee whether even the charitable objects are for the benefit of a particular community or people at large. These facts have not been verified by the Departmental Authorities. One more vital aspect which requires consideration is, in the course of hearing, it was submitted before us by the learned Counsel for the assessee that the interest free loan of ` 2 crore advanced to the other trust in the impugned year was received back by the assessee in the assessment year 2012–13 and the assessee has offered it as income in the said assessment year. In this context, the learned Counsel for the assessee had referred to the computation of income filed with the return of income for the assessment year 2012–13. Notably, though, the aforesaid issue was raised before the learned Commissioner (Appeals), however, he has not recorded any finding on this aspect of the issue. If the assessee, as claimed, has offered the interest free loan of ` 2 crore after receiving back in assessment year 2012–13, then it will amount to double taxation of the same income if it is again assessed in the impugned assessment year. Thus, if ultimately it is held that advancement of interest free loan to another trust cannot be treated as application of fund and, therefore, has to be taxed in the impugned assessment year, then, it cannot again be taxed in assessment year 2012–13. Therefore, the Assessing Officer is directed to verify the
18 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
claim of the assessee and if it is found to be correct then the said amount has to be excluded from the income offered in assessment year 2012–13. With the aforesaid observations, issues are remitted back to the Assessing Officer for de novo adjudication/assessment after reasonable opportunity of being heard to the assessee. The Assessing Officer must properly examine the objects of both the trusts and make necessary enquiry to find out whether the objects of both the trusts are similar in nature. Further, while deciding the issue the Assessing Officer must keep in view the ratio laid down in the decisions referred to in this order and any other decision which may be cited before him.
In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 28.06.2018
Sd/- Sd/- RAMIT KOCHAR SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 28.06.2018 Copy of the order forwarded to: True Copy By Order (1) The Assessee; (5) The DR, ITAT, Mumbai; (2) The Revenue; (6) Guard File. (3) The CIT(A); Sr. Private Secretary (4) The CIT, Mumbai City concerned; ITAT, Mumbai Benches
19 The Holiness Dr. Syedna Taher Saifuddin Memorial Foundation
Date Initial 1. Draft dictated on Sr.PS 21–25.06.2018 Draft placed before au 2. Sr.PS 25.06.2018 thor Draft proposed & placed 3. before the second JM/AM – – member Draft discussed/approved 4. JM/AM – – by Second Member Approved Draft comes to 5. Sr.PS 28.06.2018 the Sr.PS/PS 6. Date of pronouncement 28.06.2018 Sr.PS File sent to the Bench 7. 28.06.2018 Sr.PS Clerk Date on which file goes to 8. the Head Clerk 9. Date of dispatch of Order