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2013 (10) TMI 765 - AT - Income TaxDenial of exemption u/s 11 of the Income Tax Act for a Trust registered u/s 12A of the Act Trust hit by the provision of section 13(1)(b) of the Income Tax Act Held that - As per the judgment of Hon ble Jammu & Kashmir High court in the case of Ghulam Mohidin Trust v. CIT 2000 (11) TMI 99 - JAMMU AND KASHMIR High Court , wherein it has been held that trust was a religious trust created exclusively for the benefit of persons belonging to a particular religious community, which is the Muslim community. Even the ex gratia grants and loans on easy terms for further studies and research are confined to Muslims - Trust was covered within the ambit of clause (b) of section 13(1) which denies exemption of income to such trusts under section 11 of the Act - Clause (a) of section 13(1) of the Act was also attracted because whole of the income from property held under the trust, which is a private religious trust does not enure for the benefit of the public In the above mentioned Ghulam Mohidin Trust case, assessee-trust was not entitled to claim exemption under section 11 of the Act for the income derived by it from the property held under the trust But this case is not applicable in the present case of the Assessee in hand Reliance has been placed upon the judgment in the case of CIT v. Sun Engineering Works P. Ltd. 1992 (9) TMI 1 - SUPREME Court , wherein it has been held that the court must carefully try to ascertain the true principle laid down by the decision and not pick out words or sentences from the said judgment divorced from the context of the question considered by the court in that case to support their reasoning Judgment of the Hon ble J&K High Court in the case of Ghulam Mohidin is not applicable to the case of the assessee as none of the object of the trust has limited the application of the entire income to a particular community. In the present case, total expenditure incurred by the assessee at ₹ 5,53,27,631 the major expenses of the assessee is on conducting a peace conference which were to the tune of ₹ 4,84,61,830. It was a 10 day peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its message of peace for entire humanity to help, remove misconception, false fear, hate of Islam globally to help realise that justice, human rights, moral values and peace be it on any individual or at world wide collective level are a must for effective human progress and realistic global unity - The said peace conference cannot be held to be a mere religious activity for the benefit of a particular community. Even if one has to go by the observation of the Assessing Officer in the assessment order that the assessee is a mixed trust, even then clause 13(1)(b) cannot be applied as it is applicable to purely charitable trust as held by the hon ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society 1993 (11) TMI 13 - GUJARAT High Court Benefit of exemption u/s 11 is allowed to the Assessee Decided against the Revnue.
Issues Involved:
1. Whether the assessee is entitled to exemption under section 11 of the Income-tax Act, 1961. 2. Applicability of section 13(1)(b) of the Income-tax Act, 1961 to the assessee. 3. Consistency in granting exemption under section 11 in previous assessment years. 4. Assessment of gross receipts versus net income. Issue-wise Detailed Analysis: 1. Entitlement to Exemption under Section 11: The primary issue revolves around whether the assessee, a trust registered under sections 12A and 80G of the Income-tax Act, 1961, is entitled to exemption under section 11. The Assessing Officer (AO) denied the exemption, assessing the trust's income at Rs. 8,15,58,623 instead of the nil income returned by the trust. The AO argued that the trust's objects included promoting the Islamic faith and religious activities, making it a "religious and charitable trust," and thus ineligible for exemption under section 11. However, the Commissioner of Income-tax (Appeals) [CIT(A)] observed that the trust's aims and objects did not restrict benefits to a particular religious community and were available to the general public. The CIT(A) concluded that the provisions of section 13(1)(b) were not applicable as the trust was not exclusively for the benefit of a particular religious community or caste. 2. Applicability of Section 13(1)(b): The AO applied section 13(1)(b), which denies exemption to trusts established after April 1, 1961, if they are for the benefit of a particular religious community or caste. The AO cited the case of Ghulam Mohidin Trust v. CIT, where a trust with mixed objects was denied exemption. However, the CIT(A) and the assessee relied on the Gujarat High Court's decision in CIT v. Barkate Saifiyah Society, which held that section 13(1)(b) does not apply to trusts with both charitable and religious objects. The CIT(A) found that the trust's activities, such as organizing a peace conference aimed at communal harmony, were for the general public utility and not confined to a particular religious community. 3. Consistency in Granting Exemption: The assessee argued for consistency, pointing out that it had been granted exemption under section 11 in previous assessment years, including 2006-07 and 2004-05, despite similar objects and activities. The principle of consistency, as upheld by the Supreme Court in Radhasoami Satsang v. CIT, suggests that in the absence of any material change, the Revenue should not take a different view in subsequent years. The CIT(A) accepted this argument, noting that the trust had consistently been granted exemption and there was no justification for denying it in the current year. 4. Assessment of Gross Receipts versus Net Income: The AO assessed the gross receipts of the trust without allowing for the expenditure incurred. The assessee argued that only the net income should be assessed, as supported by the decision in Nirmal Agricultural Society v. ITO, where it was held that in cases where exemption under sections 11 and 13 is denied, only the net income should be assessed, not the gross receipts. The CIT(A) agreed with this view, noting that the major expenditure incurred by the assessee was on a peace conference, which could not be classified as purely religious activity. Conclusion: The appellate tribunal upheld the CIT(A)'s decision, finding no infirmity in the order and dismissing the Revenue's appeal. The tribunal agreed that the assessee was entitled to exemption under section 11, that section 13(1)(b) was not applicable, that consistency in granting exemption should be maintained, and that only net income should be assessed if exemption is denied. The order pronounced on January 9, 2013, confirmed the CIT(A)'s directive to allow the exemption under section 11 to the assessee.
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