2020 (12) TMI 26 - HC - Income Tax

Exemption u/s 11 - tribunal directing CIT(E) to grant registration u/s 12-AA holding that class of beneficiaries are undoubtedly public or a wide section of public - assessee is having mixed objects some of which are charitable and some of which are religious - Whether ingredients of section 12-AA were not satisfied in the case of the assessee - HELD THAT - In RAMCHANDRA SHUKLA VS. SHRI MAHADEOJI AIR 1969 (10) TMI 76 - SUPREME COURT has held that in Hindu system there is no line of demarcation between religion and charity is regarded as part of the religion. In CIT vs. Barkate 1993 (11) TMI 13 - GUJARAT HIGH COURT by placing reliance on aforesaid decisions of the Supreme Court held that the words trust for charitable purpose would include even trust for advancement of religion. It may be noted that if the object of the trust is partly religious and partly charitable so long as no part of income or corpus is utilized for a purpose which is not either charitable or religious a trust is entitled to exemption under Section 11(1)(a) of the Act and such a trust is entitled for registration under Section 12AA of the Act. We are in agreement with the view taken by High Court of Gujarat. The decision relied upon by the revenue in case of SHERVANI CHARITABLE TRUST 2006 (8) TMI 631 - ALLAHABAD HIGH COURT has no application to the facts of the case as in the aforesaid case only 1/3rd of the income was to be spent on charitable objects and remaining income was to be spent on maintenance and support of members of the settlors family. Therefore in the aforesaid case it was held that the assessee is not entitled to the benefit of exemption which admittedly is not a case here. substantial questions of law framed by a bench of this court are answered against the revenue

Summary

Issues:
1. Registration under Section 12-AA of the Income Tax Act
2. Rejection of 80G registration

Analysis:

Issue 1: Registration under Section 12-AA of the Income Tax Act
The case involved an appeal under Section 260A of the Income Tax Act, 1961 regarding the registration of a trust under Section 12AA. The trust in question was engaged in both religious and charitable activities. The Commissioner of Income Tax (Exemptions) had rejected the trust's application for registration under Section 12AA on the grounds that the trust had mixed objects, some of which were charitable and some religious. The Commissioner held that registration could only be granted to trusts wholly for charitable or wholly for religious purposes, not partly. However, the Income Tax Appellate Tribunal, relying on a decision of the Gujarat High Court, held that a trust with both religious and charitable purposes could be registered under Section 12AA. The High Court agreed with the Tribunal's interpretation, stating that as long as no part of the trust's income or corpus was used for non-charitable or non-religious purposes, the trust was entitled to exemption under Section 11(1)(a) of the Act and could be registered under Section 12AA.

Issue 2: Rejection of 80G Registration
The second issue pertained to the rejection of 80G registration. The Tribunal did not consider this issue in its order. The High Court did not delve into this matter further as the primary focus was on the registration under Section 12AA. The Court's decision was based on the interpretation of the law regarding trusts with mixed charitable and religious objects and their eligibility for registration under Section 12AA, which was the main contention in the appeal.

In conclusion, the High Court dismissed the appeal, ruling in favor of the assessee and against the revenue. The Court upheld the Tribunal's decision that trusts with mixed charitable and religious purposes could be registered under Section 12AA as long as their income and corpus were used solely for charitable or religious activities. The Court distinguished this case from previous judgments where trusts had failed to meet the requirements for exemption due to the mixed nature of their objects and expenditure.