SHREE MALIYA KADVA PATEL SEVA SAMAJ,,JUNAGADH vs. THE INCOME TAX OFFICER, WARD-1(3),, VERAVAL

The solitary issue in the present appeal relates to denial of exemption u/s. 11 of the Act, as a charitable trust, to the assessee. And the ground raised by the assessee in this regard reads as under:

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).

Ld DR however vehemently supported the order of the Ld.CIT(A) contending that the objects of the assessee trust clearly showed that it was created for the benefit of a particular caste i.e Kadva Patels, and was therefore clearly ousted from enjoying the benefits of exemption u/s 11 of the Act, as per section 13(1)(b) of the Act. The relevant findings of the Ld.CIT(A) at para 5.1 of the order is as under: 5.1 “The case law cited by the Ld. A.R. of Leuva Patel Nutan Kelwani Mandal vs. ITO (supra) does not help the case of the appellant because the Hon’ble ITAT, Ahd in that case had opined that – (1) Section 13(1)(b) could not be invoked because the beneficiaries were the children who are covered under Explanation (2) to the section 13, and (2) the Leuva Patel community consist mainly of agriculturists and cannot be dubbed as religious community or caste, while arriving at the second component of their judgment, the Hon’ble ITAT has agreed with the basic contention of the Leuva Patel community that they are different from Kadva Patel in a sense that they (Leuva in contrast to Kadva) are heterogeneous community including persons of different religions induldged basically in agriculture and thus they do not constitute a caste. It was pointed out by the ITO in that case that Leuva Patel are so different from kadva patel that generally inter-group marriage is not allowed and therefore both 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. “

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

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.

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 exclude from the total income of the previous year of the person in receipt thereof— (a) …….. (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;

As is evident from a bare reading of the above, Section 13 makes an exception to the exemption granted u/s 11 r.w.s 12 of the Act to incomes of charitable trusts, denying exemption to religious or charitable trusts in certain situations. Clause(b), with which we are seized, relates to one such situation, being a charitable trust for the benefit of a particular religious community /caste, i.e a communal trust.

This denial of exemption to communal trusts was not there in the Income Tax Act ,1922,.The Hon’ble apex court had the occasion to examine the eligibility to exemption of charitable trusts created for the benefit of a particular caste or community ,under the old Act, i.e. 1922 Act. The issue before it was whether such Trusts catering to a particular community created prior to 1st of April 1961,

Having said so, for understanding who exactly have been excluded from the benefit of exemption, it is imperative to determine the import of the words”religious community” and “caste”, trusts created for whose benefit have been denied exemption. The word religious community implies a community which owes its origins to a religion;it is a community /group of people who practice the same religion.

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

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 society.

Proceeding from here we shall examine the objects of the assessee trust whether they are for the benefit of a particular religious community or caste. The copy of the trust deed placed before us at paper book page no. 1 to 20 lists the objects as under: 1. this trust shall provide lodging and board facility to the brothers and sisters of Kadva Patel Patidar Samaj and for that, there shall be purchased necessary lands, construct a building or keep on rent. 2.That, this trust shall provide facilities of building, vessels, movable and immovable properties, beds, etc. in an marriage ceremony of the brothers and sisters of our caste Kadva Patidar Sarnaj either on rent or in any other manner. 3. That, this trust shall provide medical facility to the necessary people of the society i.e. hospitals, dispensary, resident centres, medical centres, nursing homes, Anath Ashrams, etc, and also shall make medical assistance to such institutions and shall maintain the same. 4. That, for the publication and development, this institute shall establish Schools, Colleges, Research Centres, etc. and shall maintain it and shall also other educational activities and shall make help to such other institutes and maintain. 5. That, shall make economic and other helps to the peoples of the societies who are affected in earthquake, draughts or in any natural calamity as well as also shall provide grass, water, shelter etc. to the affected cattle, birds, etc, and shall also do other necessary activities. 6. That, there shall be make assistance to the required peoples of the society either by economically or by doing other works and shall make assistance to such

A bare perusal of the objects reveals that the first two objects clearly are solely for the benefit of Kadva Patels only, arranging accommodation facilities for them and helping the community members during marriages. The rest appear to be for the benefit of all members of society and thus not restricted to a particular community.

Going further whether Kedva Patels could be termed as a religious community, we find that the answer is in the negative. The aspect, relating to the origin to Kadva Patel community and the Leuva Patel community was examined 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 development of the children of the community through education and all round development of community. Q. No. 2. Who are included in the children of the community ? A. No. 2. The children of the agriculturists are included.

The AO thereafter traced the historical background of the said community along with the Kedva Patel community which is reproduced at para 8 of the order as under: 8. In his assessment order passed afresh, the IJO has traced the historical background, which reads as under : "2. So far as historical back-ground of the Leuva Patel Caste is concerned, on an extensive inquiry, it is revealed that— As per one Legend Lord Ramchandraji had two sons 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'.

Taking note of the same the ITAT held that the Leuva Patel community did not qualify as a religious community at para 14 of its order as under: 14. Now the constitution of the assessee-trust (the relevant portion which is reproduced above) states that the assessee-trust is mainly created for benefit of the children of the Leuva Patel Community. Under the said constitution, the assessee-trust is required to start institutions, hostels, etc., for the benefit of the children of the Leuva Patel Community. Therefore, in our opinion, the assessee's case could not be brought within the provisions of s. 13(l)(b) of the Act, in view of the Explanation 2 to the said section. It appears that this aspect of the matter has escaped the attention of the lower authorities. Apart from this, on going through the historical background and the material already brought on record, we are of the view that the assessee's contention that the provisions of s. 13(l)(b) of the Act are not applicable in its case is well founded and should be accepted. We have come to this conclusion as it is quite apparent from the material already brought on record that the Leuva Patel Community consists mainly of agriculturists. Such community cannot be dubbed as religious community or caste as has been held by the IT authorities. In this view of the matter, the order of the Tribunal in the case of Shri Rajkot Viswakarma Kelwani Mandal (to which one of us was a party) squarely supports the stand taken on behalf of the assessee. Even though the decision of the case of Ahmedabad Rana Caste Association (supra) considered the provisions of s. 11(1)(a) of the Act, in our opinion the that case, the Hon'ble Supreme Court has clearly indicated as to how an association of a particular caste has to be considered while applying the provisions of s. 11 of the Act. In other words, the reliance placed by the assessee on the said decisions of the Hon'ble Supreme Court 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.

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

Thus what emerges from the above deliberation is that two objects of the assessee trust are for the benefit of a particular caste, i.e Kedva Patel, providing boarding and lodging facility and enabling marriages of the members of this caste only. The rest of the objects are clearly for the benefit of public at large, providing medical benefit, assistance to the needy and those in distress during natural calamities, to the public at large without any discrimination in caste or creed.

The question whether section 13(1)(b) would apply only to charitable trusts established solely for communal purposes or to those for mixed purposes also, has been considered by the apex court in the case of CIT vs Dawoodi Bohra Jammat (2014) 364 ITR 31(SC), in which case the Hon’ble apex court found that the trust had both religious and charitable flavor and on the question of applicability of section 13(1)(b) to such trusts went on to hold that it would apply to such mixed trusts also. Relevant portion of the order of the Hon’ble apex court is as under: 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.

Thus, in the present case also the provisions of section 13(1)(b) will apply, the trust being of charitable character with two of its objects exclusively for the benefit of the Kedva Patel Caste. The assessee trust we hold therefore is not entitled to exemption u/s 11 of the Act on incomes applied for the benefit of the Kedva Patel community ,as per section 13(1)(b) of the Act.The AO is directed to determine the incomes so applied,after verifying all facts giving the assessee a due opportunity of hearing, and deny application of the same for charitable

The contentions of the Ld.Counsel have all been dealt with by us above. The argument that the trust has been created for public at large is negated by the contents of the objects in the trust deed which clearly point two of them as for benefitting the Kedva Patel Community only. In this regard the reliance placed by the Ld.Counsel for the assessee on the decision of the Hon’ble apex court in the case of Rana Caste(supra) we find is misplaced ,since as noted above the said judgment was rendered in the backdrop of the Income Tax Act ,1922 ,when there was no such provision para materia to section 13(1)(b) of the 1961,Act.This dinstinction ,as pointed out above by us, was noted even by the Hon’ble apex court. The contention of the Ld.Counsel for the assessee that section 13(1)(b) does not apply to composite trusts ,we have noted above is contrary to the decision of the Hon’ble apex court in Dawoodi Bohra Jamaat (supra). All decisions relied upon by the Ld.Counsel for the assessee are either distinguishable for the reason that they were rendered on the issue of grant of registration u/s 12A of the Act, which is a totally different proposition, where the provisions of section 13(1)(b) in any case do not get invoked at all. We have also dealt with the issue of nature of the Kedva Patels and found them to be a caste. The decision of the ITAT in the case of Leuva Patel Nutan Kelwani Mandal 12 ITD 276(Ahd), which the assessee has relied upon stating that it was established in the said case that both the Leuva and Kedva Patel Community were neither religious communities nor caste, we have noted examined the issue only from the aspect of the community having any connection with a particular religion. Therefore it cannot be said that there was any finding relating to the group of people representing a caste.

In view of the above, appeal of the assessee is dismissed in above terms.