M/S. JAN SEWA JAGRITI MUNCH SOCIETY,SONEPAT vs. CIT, ROHTAK

ORDER PER J. SUDHAKAR REDDY, AM: Both these appeals by the assessee are directed against the orders passed by the CIT, Rohtak, dated 27.6.2014, u/ss 12AA(1)b)(ii) and 80(G), respectively, of the Income-tax Act, 1961 (hereinafter also called ‘the Act’).

Rohtak, passed u/s 12AA(1)b)(ii) of the Act, wherein the application of the assessee filed in Form No.10A, for registration u/s 12AA was rejected. is directed against the rejection of the application of the assessee for registration u/s 80(G) of the Act.

a) The assessee does not satisfy the very essence of charity, which is necessary for getting the status of being charitable as is required in view of section 2(15) of the Act; b) The AO as well as the Joint Commissioner of Income-tax has reported that the main aims and objects of the society is to promote the inherited culture and festivals and this does not fall within the ambit of section 2(15); c) On page No.7 of the Memorandum and Articles of Association of the assessee society, it is noticed that the Resolution No., date of meeting, etc., are blank. Thus, the Memorandum and Articles of the assessee society are incomplete and fructuous, as the assessee failed to file an explanation; d) A perusal of the Income & Expenditure Statement for the financial years 2010-11, 2011-12 and 2012-13 demonstrates that the assessee society has made huge expenditure on account of Dussehra festival, Ekadashi expenses, Hanuman Jayanti and religious social programmes. The expenditure as a percentage of total expenses is more than 50% and as these expenditure incurred are for religious activities, it cannot be treated as charitable. Thus, the assessee is not entitled to registration; and e) The Dissolution clause is not in accordance with the law.

a) A perusal of the objects demonstrates that they are charitable in nature; b) As the assessee is incurring expenditure to help poor and needy and for the marriage of poor girls and for paying fees of poor students, and, hence, the proviso introduced to section 2(15) is not applicable; c) The Dissolution Clause is in accordance with law as it is seen from the Memorandum of Association; d) Incurring expenditure for conducting Dussehra festival, etc., cannot be considered as having been incurred for religious purposes, as it is for the benefit of the society and as Hinduism is not a religion and no restriction is placed on any community or caste from attending these celebrations; and e) That the amended constitution of the society is prepared and it was the incomplete and an unsigned copy which was with the CIT and the signed copy was later made available to the ld.CIT which was not considered. 5. Reliance was placed on the following:- i. 88 ITR 354 (Guj); ii. 42 Taxman.com 77 (All); iii. 27 Taxman.com 100 (Nagpur); and 4 iv. 140 ITR 1 (SC); 6. The ld. DR, on the other hand, submitted that all the papers filed by the assessee by way of paper book before the Tribunal were not available with the ld.CIT(A) and that the certificate given is wrong. He pointed out to the page 11 of the paper book and submitted that the clause of dissolution and disposal of assets is against the provisions enabling the ld.CIT to grant registration u/s 12AA of the Act. She also pointed out that the dates and the resolution nos. were left blank and all the members of the association signed on these blank dates. Thus, she submits that under such conditions the CIT was right in rejecting the application of the assessee for registration. Referring to the Memorandum registered on 26th day of July, 2013, she submitted that these papers were not before the CIT. She argued that more than 50% of the expenses were made on religious purposes such as celebration of Hindu festival like Dussehra, etc., and under such facts registration u/s 12A cannot be granted. She pointed out that the assessee has admitted that it would fall under the category ‘the advancement of any other object of general public utility’ specified by section 2, sub- section (15) of the Act and not in the other categories.’ She relied on section 13(1)(b) of the Act and submitted that the benefit u/s 11 is to be denied if the trust or institution is created or established for the benefit of any particular religious community or caste and, hence, the CIT was right in denying exemption. She relied on the judgment of the Hon’ble Supreme Court in the case of CIT, Ujjain vs. Dawoodi Bohara Jamat.

In our view, this decision is in favour of the assessee. The Hon’ble Supreme Court held as follows:-

“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 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 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] 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, 8 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. [Para 45] 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] In the result, the appeals are dismissed. [Para 51]”

He pointed to page 40 and 41 of the paper book which consists of a letter written by the assessee to the Income-tax Officer (Hqrs.) (Vig.), Rohtak, who was conducting the inquiries on behalf of Commissioner of Income-tax and pointed out that the new registration certificate along with the Memorandum of Association was furnished. He submitted that section 13(1)(b) is not attracted in this case.

“a) To promote the in heritage, Culture and Festivals of India. b) To help the poor, needy people in form of cash and objects. c) To help the poor child in continuing their studies d) to cooperate and assist with the others social institutions/organizations having the similar aims and objects. e) to support and help the people at the time of natural calamities. f) to set up old age home for the needy old people. g) to arrange cultural programme, satsang, Yoga and religious programmes for recreation and spiritualism enhancement. h) to seek help and assistance from the Govt State/Central/Local Bodies to achieve the above aims and objects. i) To co-ordinate and take up the matter with govt./administrative authorities/ similar agencies in the public interest.”

“3. Its assets and liabilities shall be first used to liquidate and liabilities and the left over properties/assets, if any shall be considered for transfer to any other society established with identical aims and objectives or to District Collector for use thereof in the General Public interest.” 12. A perusal of this clause demonstrates that the requirement of law is fulfilled. Thus, in view of the amended clause, the rejection of registration on this ground is not valid. Regarding the blank left by not filling the Resolution No., and date by the promoters, we find that in the later registration documents such gaps are not there. The registration is to be considered based on the new Memorandum which is currently in force. Thus, this objection of the ld.CIT has been removed by the assessee.

“HELD Objects of assessee was charitable in nature • The definition of charitable purpose is inclusive one. It includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. The objects held on by the assessee-trust are charitable within the meaning of section 2 sub- section (15). Some of the objects fall within the 'advancement of any other object to general public utility'. Proviso to section 2 sub-section (15) restricts the meaning 'advancement of any other objects of general public utility'. But the Commissioner has not stated that proviso to section 2 sub-section (15) is applicable in the case of the assessee. [Para 9] Assessee had not violated conditions laid down in clause (iii) of section 80G(5) • The objects as has been pointed out by Commissioner, nowhere talks of advancement, support or propagation of particular religion, worshipping of Lord Shiva, Hanumanji, Goddess Durga and maintaining of temple cannot be regarded for the advancement support or propagation of a particular religion. • No evidence or material was placed on record which may prove that these objects relate to a particular religion. No doubt the revenue argued that it relate to Hindu Religion but it is not so. Lord Shiva, H anumanji, Goddess Durga does not represent any particular religion, they are merely regarded to be the super power of the universe. [Para 10] • A religion undoubtedly has its basis in a system of beliefs or doctrines which are regarded by those who profess that religion as conducive to their spiritual well being, but it will not be correct to say that religions is nothing else but a doctrine or be lief. A religion may not only lay down a code of ethical rules for its followers to accept, but it might prescribed rituals and observances, ceremonies and modes of worship which are regarded as integral parts of a religion, and these forms and observances might extend even to matters of food and dress. • No material or evidence has been brought on record by the department which may prove that any person coming, worshipping and maintaining the temple has to follow a particular code of ethical rules and has to carry out the prescribed rituals and observances, ceremonies and modes of worship. The entry is not restricted to a particular group of persons. Any body whether want to worship or not and want to maintain or not can come to the temple and avai l of all the facilities available to the public at large . 13

• Therefore, these objects cannot be regarded to be the religious objects. Until and unless the activities for which the trust is established, involve the activity religious purpose, it cannot be said that the assessee has not complied with the condition No. (iii ) enumerated under section 80G(5). [Para 11] • Even all the building maintenance expenses, free food expenses and festival, prayer and daily expenses cannot be regarded to be the one incurred for religious object, even if the object is regarded to be religious one. It is not denied that in the building the assessee was carrying yoga centre, tailoring training centre as well as food for the needy and optical centre for the poor. [Para 12] Expenses incurred for worshipping Lord Shiva and maintenance of temple not religious purpose • Commissioner must be aware of that the Hindu consists of a number of communities having the different Gods who are being worshipped in a different manner, different rituals, different ethical codes. Even the worship of God is not essential for a person who has adopted Hinduism way of life. Thus, Hinduism holds within its fold men of divergent views and traditions who have very little in common except a vague faith in what may be called the fundamentals of the Hinduism. The word 'community' means a society o f people living in the same place, under the same laws and regulations and who have common rights and privileges. This may apply to Christianity or Muslim but not to Hinduism. Therefore, it cannot be said that Hindu is a separate community or a separate religion . • Technically Hindu is neither a religion nor a community. Therefore, expenses incurred for worshipping of Lord Shiva, Hanuman, Goddess Durga and for maintenance of temple cannot be regarded to be for religious purpose. Under these facts and circumstances, the Commissioner is not correct in law in not allowing the approval to the assessee-trust under section 80G . • Accordingly, the order of the Commissioner is set aside and the Commissioner is directed to grant approval to the assessee-trust under section 80G(5)( vi ) [Para 13] .”

“Pathak, J.—These appeals by certificate granted by the High Court of Gujarat are directed against the judgment of the High Court delivered on June 29/30, 1972, on the application of s. 4(3)(i) of the Indian I.T. Act, 1922, and s. 11 of the I.T. Act, 1961. The assessment years involved are 1960-61, 1961-62 and 1962-63 (the corresponding accounting periods being the financial years ending March 31, 1960, March 31, 1961, and March 31, 1962 respectively). The ITO held that the respondent was not entitled to the benefit under s. 4(3)(i) of the Act of 1922 in respect of the first two assessment years and under s. 11 for the assessment year 1962- 63. The ITO proceeded on the view that the objects for which the respondent association was constituted contained certain clauses which permitted the respondent to apply the income to purposes which were not wholly charitable. The AAC maintained the order of the ITO. But the Income-tax Appellate Tribunal took an entirely contrary view and held that the respondent was entitled to the exemption claimed by it. Upon a reference made at the instance of the Commissioner of Income-tax, Gujarat, the Appellate Tribunal referred the following question for the opinion of the High Court: "Whether, on the facts and in the circumstances of the case, the income of the assessee-trust is exempt under s. 4(3)(i) of the Indian I.T, Act, 1922, and s. 11 of the I.T. Act, 1961?"

Before the High Court the controversy centred around sub-cls. (4) and (5) of cl. 3 of the memorandum of association of the respondent-association as well as sub-cl. (4) of cl. 8. The High

Court after considering the entire matter at length in the light of the prevailing case law has found that the objects sufficiently control the application of the income derived by the respondent-association to purposes which can be described as entirely religious and charitable. After hearing the learned counsel for the parties we see no reason for interfering with the judgment of the High Court. The appeals are dismissed. Costs in one set. Appeals dismissed.”

“8. On the question of scope of enquiry by CIT under Section 18G (5) (vi) the Tribunal relied on Radhasoami Satsang v.CIT [1992] 193 ITR 321/60 Taxman 248 and Sonepat Hindu Educational & Charitable Society v. CIT [2005] 278 ITR 262/147 Taxman 1 (Punj. & Har.), and recorded finding as follows:— "We find that at the time of granting the registration under Section 12AA, the Commissioner has limited power only to examine objects of the Trust and genuineness of the activities. The law requires that he should pass a speaking order. In the case under consideration, we notice that the assessee has furnished all the required details before the CIT. As regards the objects of the trust; we notice that these are charitable objects in accordance with Section 2 (15) of the Act. To carry sewa puja of Sri Girdhari Ji and carry Akhand Naam Sankirtan uninterruptedly in Aashram is one type of meditation and yoga. The trust carries such meditation and yoga since its inception, more than last 50 years. Such types of meditation accepted not only in India but are accepted in western country also as a great source for physical and mental health and spiritual attainment. When a large number of people feel that meditation is a great source for physical, mental and spiritual well being, it must be held that these activities are for the advancement of general public utility. Maintaining Samadhi of Guru is also charitable purpose in accordance with Section 2 (15) o the Act and Pooja of such Samadhi reminds people of ideology of Guru, in whose memory pooja is carried out. Organizing bhandara is an activity of providing foods to persons irrespective of any cost or religious. Such bhandara activities are like day meal food scheme of the government. When the government is running such scheme, under those circumstances, it cannot be said that objects of the trust are not charitable. Running gaushala, Piaau and providing dana to birds is also charitable activities. The assessee discharged the burden in this regard by furnishing all necessary details of copy of trust deed pointing out various charitable objects of the trust and expenditures incurred on charitable activities."

The order pronounced in the open court on 17.11.2015.