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Income Tax Appellate Tribunal, BANGALORE BENCH ‘A’
Before: SHRI VIJAYPAL RAO & SHRI JASON P BOAZ
PER SHRI VIJAYPAL RAO, JUDICIAL MEMBER
This appeal by the assessee is directed against the order of Commissioner of Income-tax dated 30th May 2014 passed u/s 80G of the Income-tax Act whereby the application of the assessee for grant of recognition u/s 80G was rejected.
The assessee has raised following grounds:
i) That the order of the learned CIT, in so far it is prejudicial to the interest of the appellant, is bad and erroneous in law and against the facts and circumstances of the case. ii) That the learned CIT erred in law and on facts in not granting the approval u/s 80G of the Act. iii) That the learned CIT erred in law and on facts in holding that the objects specified in clause 13 of the Trust Deed is religious in nature. iv) That the learned erred in law and on facts in holding that the objects specified in Clause 13 is a religious object in a proceeding u/s 80G of the Act even though while granting recognition u/s 12AA of the Act it has been held that the objects are charitable in nature. v) Without prejudice to the Grounds No.2 to 4, the learned erred in law and on facts in not granting the approval u/s 80G of the Act even though the appellant had not applied any income towards the object mentioned in Clause 13 and the learned CIT, Belgaum ought to have held that S.80G(5B) is attracted and the appellant is entitled to approval.
In this case, the assessee trust has filed an application for grant of recognition u/s 80G of Income-tax Act on 21/11/2013 in from No. 10G. The assessee trust has been formed on 20th Jan, 2011 and also granted registration u/s 12AA of the Income-tax Act vide order dated 10/2/2012 for two year w.e.f 2012-13. While considering the application for grant of registration u/s 80G Commissioner noted that as per clause-13 of the objects of the trust which is for the religious purpose. He has made a reference to caluse 13 of the objects that it prescribed the object of the institution of religious nature. Accordingly, the Commissioner has denied the grant of recognition u/s 80G by following the decision of the Hon’ble Supreme Court in the case of Upper Ganges Sugar Mills Ltd. Vs. CIT, 227 ITR 578.
Before us the learned AR of the assessee submitted that the application of the assessee was rejected by the Commissioner on the ground that as per clasue-13 of the trust deed which contains the objects of the assessee trust, the Commissioner found that the objective of the trust is for the promotion of Jain religion and, therefore, the assessee’s object is not charitable but it in the nature of non charitable and in the nature of religion. The learned AR submitted that the assessee trust is an educational trust registered as a Public Charitable Trust u/s 12A of the Income-tax Act. Thus, the department has accepted the assessee trust as public charitable trust while granting registration u/s 12A. Even otherwise the clause -13 of the objects of the assessee trust cannot be said to be religious in nature when the main object of the trust is to promote, propagate and provide opportunities, institutions, centers for the study of research in languages with particular emphasis on Sanskrit and prakrut. The study of Jain Agama and Jain Sidahant and Indian Philosophy, cannot be said to be in religious nature when the main object of the assessee trust is to promote the science and literature and to encourage the study of research in all forms of ancient Indian system of thought philosophies, ayurvedic medicine, yoga etc. In support of his contention he has relied upon the judgment of Hon’ble Supreme Court in the case of CIT Vs. Dawoodi Bohra Jamat, 364 ITR 31 and submitted that the Hon’ble Supreme Court has observed that the object of the assessee were collectively inclusive of both charitable and religious purpose and not only religious purpose. Therefore, when it was found that objects of the assessee was to provide assistance to needy and poor for religious activity would not divest the trust of its altruist Character. The Hon’ble Supreme Court after taking into consideration that the object of the trust explain the character of religious and charitable purpose and the activity held that sec. 11 of the Act be allowed to such trust with composite object to claim exemption as a religious and charitable trust subject to the provision of sec. 13 of the Act.
The learned AR has relied upon the decision of Hon’ble Rajasthan High Court in the case of Mishrilal Goardhanlal Batra Charitable Trust Vs. CIT, 307 ITR 221 and submitted that as per the amended provision of sec. 80G when the actual expenditure incurred for religious purpose is not more than 5% of the total income then the registration of the trust u/s 80G cannot be refused on that ground.
The learned AR has submitted that the decision relied upon by the CIT rendered prior to the amendment brought various provision of sec. 80G by amending sec. 5B whereby the expenditure upto 5% of the total income is permitted for religious nature. Thus, the learned AR has submitted that the Commissioner has committed an error for rejecting registration u/s 80G when the assessee has not incurred any expenditure for religious purpose till the year under consideration. He has referred the relevant details from the accounts of the assessee and submitted that none of the expenditure incurred by the assessee till date is in respect of religious purpose. Accordingly the learned AR has pleased that the registration u/s 80G may be granted.
On the other hand, the learned DR has submitted that the decision relied upon by the assessee in the case of Rajesh Balia and Dawoodi Bora Jamat (Supra) are not applicable in the case of the assessee, as the said decision in respect of claim of exemption u/s 11 as well as u/s 12A of the Income-tax Act and not in respect of registration u/s 80G. He has further submitted that as per the provision of sec. 80G, it is the requirement of the explanation 3 that there is only one purpose within the institution or funds overall charitable purpose which is wholly or substantially for the purpose of charitable and there is no scope of any religious nature. He has relied upon the impugned order of the Commissioner as well as decision of Hon’ble High Court in the case of International Sufi Center Vs. DIT(Exemptions) dated 25.1.2011 in of 2010.
We have considered the rival submission as well as relevant material on record. While rejecting the application of the assessee, the Commissioner has given much emphasis on the clause 13 of objects which read as under:
“To promote, propagate and provide opportunities, Institutions, Centers for the study of and research into languages, with particular emphasis on Sanskrit, and prakrut to encourage the study Jain Agama and Jain Siddhant and Indian philosophy, similar traditional, spiritual, science and literature, to encourage study of and research into all forms of ancient Indian systems of thought, philosophies, Ayurvedic medicine, yoga intended to ensure spiritual advancement and propagate a commitment to values in life.”
Thus, it is clear from the objects clause of the assessee trust out of the 22 clause and 7 sub clauses, the Commissioner has picked up only one clause of the trust to hold that objects of the trust are religious in nature. As per explanation 3 to sec. 80G, the charitable purpose does not include any purpose wholly or substantially the whole of which is of religious nature. Therefore, if the purpose of a trust wholly or substantially whole of which of a religious nature then it is excluded from the term charitable purpose. We find that out of the 22 clauses and 7 sub clauses only under clause 13 there is a mention of particular study for encouraging Jain Agama and Jain Siddhanth and Indian Philosophy. For the purpose of considering the charitable purpose of the trust, the selected words of object clause of charitable trust cannot be picked and chosen, but the entire objects of the trust has to be considered holistically. When all other objects are found as charitable purpose then merely because a reference under one clause to encourage the study of Jain Agama and Jain Sidhnth and Indian Philosophy would not constitute or change the character of the purpose and object of the trust from charitable to religious even as per the explanation 3 of sec. 80G. We further note that vide Finance Act 1999 w.e.f 1/4/2000, sub-sec. 5B has been inserted in the provision which reads as under:-
“Notwithstanding anything contained in clause(ii) of sub-section(5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five percent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this sec. apply.”
Thus, it has been provided that the institution or fund which incurs expenditure during the previous year which is of religious nature for an amount not exceeding 5% of the total income shall be deemed to be an institution or fund to which provision of sec. 80G applied. Thus, it is clear that the legislature has permitted the expenditure to the extent of 5% of the total income for the purpose of any religious nature under the provision of sec. 80G.
The learned AR has referred to the balance sheet of the assessee trust for various assessment years from where we find that none of the expenditure so far incurred by the assessee can be said to be of a religious nature and, therefore, the assessee fulfilled the conditions as provided u/s 80G of the Income-tax Act. The Hon’ble Supreme Court in the case of Dawoodi Bohra Jamt (Supra) has also confirmed and recognized the duality of the purpose of religious as well as charitable nature. The provision of sec. 80G also recognizes the duality of purpose with a rider that for the purpose it should not be wholly or substantially the whole of which is religious in nature. In the case in hand the reference of the promotion of study of Jain Agama and Jain Siddhnta by itself would not render the whole of the object of the trust as religious in nature. A similar view has been taken by the Hon’ble Rjasthan High Court in the case of Misrilal Gordhanlal Batra charitable Trust (Supra) as under :-
“On this premise learned counsel for the petitioner further urges that in view of this provision, every year the Commissioner has to consider the ratio between the total income of the trust and the expenditure actually incurred for religious pruposes and only if the substantive part of the income, that is to say more than 5 per cent of total income is incurred for religious pruposes the registration of trust/fund u/s 80G can be refused on that ground.
With this premise, it is further submitted by the learned counsel for the petitioner that the petitioner shall be satisfied if the writ petition is disposed of with the direction to the Commissioner to consider the case of the petitioner trust for renewal of its registration with effect from the insertion of sub sec. (5B) uninfluenced by the impugned order of rejecting the renewal for the assessment years 1995- 2000. In other words, the petitioners’ application for renewal with effect from April 1, 2000, should be considered keeping in view of sub-sec. (5B) of sec. 80G.
In view of the above facts and circumstances of the case, we find that the assessee’s objects cannot be described as wholly or substantially the whole an religious in nature and therefore the judgment relied upon by the learned DR will not help the case of the Revenue.
Accordingly, we set aside the impugned order of Commissioner and direct the Commissioner to grant the recognition u/s 80G of the Act by considering the fact that the assessee has already been granted the registration u/s 12A and picking up a particular reference in one of the clauses of the object would not constitute the entire and whole of the objects of the assessee trust as religious in nature.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 9th Oct, 2015.