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2009 (9) TMI 75 - AT - Income TaxExemption u/s 11 - simultaneous charitable and religious purposes - mixed trust - reading or as and - AO has denied the benefits on the ground that the assessees are societies/trusts established for carrying on activities of charitable as well as religious purposes - Whether, the construction of dome, chapel or convent, etc. amounts to religious purpose or it is simply an object of general public utility? - Third Member appointment - difference of opinion between the ld' JM and the ld' AM - AM held that when law has categorically provided in s. 11(1)(a) that the benefits are available to the assessees carrying on activities of charitable as well as religious nature, there is no provocation to read down the law and state that the benefits will be available only if the assessee is carrying on charitable purposes alone or carrying on religious purposes alone. Religious as well as charitable purposes are covered by the benefits provided u/s. 11(1)(a) as both of them are holy waters. JM did not agree with the proposed order of the AM. HELD THAT - The word or has always separated religious and charitable purposes. The decisions to which I have referred have all along considered the provision relating to grant of exemption containing word or . Therefore, rejection of claim of the assessee on account of word or is unjustified. We do not find that donation to a church or construction of a church is not a purpose which is not of general public utility. Therefore, the contention of the Department that expenditure on religious activities could not be given exemption cannot be accepted, particularly in the context of our polity. We are aware that most of the religious and charitable activities go together in this country. According to the AO, erection of chapels and convents was religious in nature. Accordingly purpose of the trust was held to be partly religious and partly charitable and exemption denied to the assessee. It is difficult to appreciate or agree with aforesaid conclusion. How erection of chapels and convents can be treated purely religious in nature and not charitable. No relevant facts have been brought on record to make out a case justifying denial of exemption under s. 11(1)(a). There is no finding that chapels and convents are to serve a particular community and the purpose would be hit by provisions of s. 13(1)(b). Besides as already recorded a religious purpose can be a charitable purpose and vice versa in India. Therefore, exemption could not be denied to a trust which is partly charitable and partly religious, in the light of above discussion. With utmost respect to the JM we to hold that on facts, JM was not justified in taking a different view than one taken in Calicut Islamic Cultural Society 2008 (7) TMI 621 - ITAT COCHIN . He was at liberty to make out a case for review of the aforesaid decision and for reference and consideration of the issue by a Larger Bench of the Tribunal. This course JM has not followed - we can only say that disregarding of the directions of Hon'ble Supreme Court is not only illegal, but is destructive of the reputation of the institution. I, therefore, disagree with the learned JM on this aspect of the issue. Two trusts in question are partly charitable or religious trusts established after 1st April, 1962 - There is no statutory provision to support proposition of law, stated by the learned JM. The learned JM, like the Revenue authorities, misconstrued the legal implication of the word or in s. 11 (1)(a). JM further referred to provisions of s. 13(1)(b) to hold that exemption of a public charitable trust is forfeited if any part of the income is for the benefit of any particular religious community or caste; scheduled castes, backward classes, scheduled tribes or women being exception. What learned JM had stated is the language of part of s. 13. However, no facts are stated, no case is made out, how provisions of s. 13(1)(b) are applicable in this case. At any rate, I have elaborately discussed above that provision of s. 13 has no application in this case and a trust which is partly religious and partly charitable, is entitled to exemption under s. 11(1)(a) of the IT Act. Thus we are inclined to hold that both assessees are entitled to exemption u/ s. 11(1)(a). For all the above reasons, we agree with the view taken by the AM. The case may now be put up before the regular Bench for disposal of appeals.
Issues Involved:
1. Entitlement to benefits under Section 11 of the Income Tax Act, 1961 for assessees carrying on both charitable and religious activities. 2. Applicability of Section 11(1)(a) to mixed trusts created after 1st April, 1962. 3. Interpretation of "charitable or religious purposes" in Section 11(1)(a). 4. Impact of Section 13(1)(b) on the exemption under Section 11. 5. Judicial precedents and their binding nature on the Tribunal. Issue-wise Detailed Analysis: 1. Entitlement to Benefits Under Section 11 of the IT Act, 1961: The primary issue was whether assessees carrying on both charitable and religious activities are entitled to benefits under Section 11. The Assessing Officer (AO) denied the benefits, arguing that the law under Section 11 does not allow simultaneous charitable and religious activities. The AO emphasized the use of the disjunctive "or" in the statute, suggesting that the legislature intended to allow benefits only for activities that are either charitable or religious, but not both. 2. Applicability of Section 11(1)(a) to Mixed Trusts Created After 1st April, 1962: The AO argued that trusts created after 1st April, 1962, with mixed objectives of charitable and religious purposes, are not entitled to benefits under Section 11(1)(a). This was based on the interpretation that the statute's language prohibits combining charitable and religious purposes for trusts established after this date. 3. Interpretation of "Charitable or Religious Purposes" in Section 11(1)(a): The Tribunal had to interpret whether "charitable or religious purposes" should be read conjunctively or disjunctively. The assessees argued, relying on judicial precedents, that the term should be interpreted to include both charitable and religious activities. The Tribunal in previous cases, such as Calicut Islamic Cultural Society, Kozhikode, had held that institutions with both charitable and religious objectives are entitled to benefits under Section 11. 4. Impact of Section 13(1)(b) on the Exemption Under Section 11: The Revenue contended that Section 13(1)(b) forfeits the exemption of a public charitable trust if any part of the income benefits a particular religious community or caste. However, the Tribunal noted that this provision applies to trusts created for the benefit of a specific community, and not to trusts carrying on both charitable and religious activities without such exclusivity. 5. Judicial Precedents and Their Binding Nature on the Tribunal: The Tribunal emphasized the importance of following judicial precedents. The Tribunal's Co-ordinate Bench had previously ruled in favor of assessees in similar cases, and judicial propriety demanded following these decisions. The Tribunal also considered the latest judgments from High Courts, favoring the interpretation that trusts with both charitable and religious purposes are entitled to exemptions under Section 11. Detailed Analysis: Entitlement to Benefits Under Section 11: The Tribunal noted that the assessees were engaged in activities such as running educational institutions, hospitals, and orphanages, which are undoubtedly charitable. The maintenance of chapels or madrassas for offering prayers was also considered. The Tribunal found no evidence that these activities were exclusively for a particular community or caste. Therefore, the Tribunal concluded that the assessees' activities were entitled to benefits under Section 11. Applicability to Mixed Trusts Created After 1st April, 1962: The Tribunal disagreed with the AO's interpretation, stating that Section 11(1)(a) does not preclude an assessee from carrying on both charitable and religious activities. The Tribunal emphasized that both types of activities are eligible for exemption, and there is no statutory provision prohibiting mixed trusts formed after 1st April, 1962, from claiming benefits under Section 11. Interpretation of "Charitable or Religious Purposes": The Tribunal held that the expression "charitable or religious purposes" should be read conjunctively, meaning that income derived from property held under trust for both purposes should not be included in the total income of the assessee. The Tribunal relied on judicial precedents, including the Andhra Pradesh High Court's decision in CIT vs. Social Service Centre, which supported this interpretation. Impact of Section 13(1)(b): The Tribunal found that Section 13(1)(b) was not applicable in these cases, as there was no evidence that the trusts were created for the benefit of a particular religious community or caste. The Tribunal emphasized that the provision is meant to distinguish between charitable and non-charitable purposes, not to restrict the combination of charitable and religious activities. Judicial Precedents: The Tribunal highlighted the importance of following judicial precedents and noted that the Co-ordinate Bench's decision in Calicut Islamic Cultural Society, Kozhikode, was binding. The Tribunal also considered the latest judgment from the Andhra Pradesh High Court, which supported the assessees' claims. The Tribunal concluded that the appeals should be allowed based on these precedents. Conclusion: The Tribunal allowed the assessees' appeals, directing the assessing authority to grant the benefits of Section 11 of the IT Act, 1961. The Tribunal held that trusts carrying on both charitable and religious activities are entitled to exemptions under Section 11(1)(a), and there is no statutory prohibition against mixed trusts formed after 1st April, 1962. The Tribunal emphasized the need to follow judicial precedents and interpreted the statute to include both charitable and religious purposes for exemption under Section 11.
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