1991 (9) TMI 100 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee trust is a public charitable trust or a public religious trust.
2. Applicability of Section 13(1)(b) and Section 11 of the Income Tax Act to the assessee trust.
3. The interpretation of the terms "Dharmada" and "Dharmik" in the trust deed.
4. Whether the trust qualifies as a private religious trust or a public religious trust.

Issue-wise Detailed Analysis:

1. Whether the assessee trust is a public charitable trust or a public religious trust:
The Assessing Officer (AO) classified the assessee as a public charitable trust, relying heavily on the trust deed dated 15th Sept., 1968. The AO noted that the main object of the trust was to provide facilities for staying, indicating it was not a religious trust. The AO also emphasized the use of the term "Dharmada" (charity) instead of "Dharmik" (religious). In contrast, the CIT(A) concluded that the trust was fundamentally a public religious trust, not a charitable trust. The CIT(A) argued that the AO should have considered the trust deed as a whole rather than focusing on specific words. The CIT(A) found that the trust's activities, such as providing accommodation to Jain Pilgrims, were religious in nature and aimed at promoting religious activities.

2. Applicability of Section 13(1)(b) and Section 11 of the Income Tax Act to the assessee trust:
The AO held that the trust was hit by the provisions of Section 13(1)(b) of the IT Act, which disallows exemptions under Section 11 if the trust is for the benefit of a particular religious community or caste. The CIT(A) disagreed, stating that Section 13(1)(b) was not applicable because the trust was a public religious trust. The CIT(A) referenced the Commentary by Kanga & Palkhivala and Supreme Court decisions in CIT vs. Ahmedabad Rana Caste Association and CIT vs. Andhra Chamber of Commerce to support the view that the trust's objectives were religious and not just charitable.

3. The interpretation of the terms "Dharmada" and "Dharmik" in the trust deed:
The AO interpreted "Dharmada" as charity, not religious, and used this to argue that the trust was a charitable trust. The CIT(A) countered this by stating that the AO unnecessarily emphasized these terms. The CIT(A) argued that "Dharmada" and "Dharmik" should be understood in the broader context of the trust deed, which indicated religious objectives. The CIT(A) also cited the Supreme Court decision in CIT vs. Bijli Cotton Mills (P) Ltd., which clarified that "Dharmada" could mean both religious and charitable purposes.

4. Whether the trust qualifies as a private religious trust or a public religious trust:
The AO alternatively argued that even if the trust were religious, it would be a private religious trust because it served a specific sect of Jains, thus not qualifying for exemptions under Section 11. The CIT(A) rejected this, stating that the trust catered to a broad class of people within the Jain community, making it a public religious trust. The CIT(A) referenced several judgments, including those from the Calcutta High Court and Orissa High Court, to support the view that a trust serving a large, unascertainable number of people within a community qualifies as a public religious trust.

Conclusion:
After considering the submissions and materials, the Tribunal found no merit in the Revenue's case. It upheld the CIT(A)'s decision that the assessee trust is a public religious trust, not a public charitable trust, and is entitled to exemptions under Sections 11 and 12 of the IT Act. The Tribunal confirmed that the provisions of Sections 13(1)(a) and 13(1)(b) were not applicable, as the trust was not a private religious trust but a public one. The appeal by the Revenue was dismissed.