2022 (5) TMI 334 - AT - Income Tax

Exemption u/s 11 - grant of registration u/s.12AA - Religious Trust v/s Charitable Trust - CIT(E) exemption was of the view that the objects of the trust were for religious purpose and therefore registration can be granted only as Religious Trust rather than Charitable Trust - HELD THAT - Section 13(1)(a) bars exemption to any private religious trust, which does not enure for the benefit of the public. Section 80G(5)(iii) makes a distinction in cases of institutions or funds, which are for the benefit of any particular religious community or caste - say for Hindus, Muslims, Christians or for Brahmins, etc. Donors to such trusts are debarred from claiming benefit of deduction from income for donations made to such trusts. Conversely, it follows that for donations made to religious bodies, which do not fall in the category mentioned in section 80G(5)(iii), benefit of deduction under section 80G can be claimed. Thus, it could be said that a public religious trust, not meant for the benefit of a particular community, caste or section, will be entitled to claim exemption on its income in the same way as a public charitable trust. A perusal of the original will of late His Holiness Sri.Channa Basava Swamy, reveals that he had only public benefit in mind to be the beneficiaries and the benefit was through performing puja and all kinds of religious activities. No private person belonging to any caste or creed, is the beneficiary. Assessee is admittedly carrying out the activities of providing free food and Hostel Facilities to Students and also to General Public. The facilities provided are for people without distinction relating to caste, creed or community. The Author of the trust has clearly specified in his Will that he has received monies and properties from people of different caste and creed which clearly proves that the Trust is not dedicated to only one religion or caste. People from different walks of life are free to enter the Holy place, meditate, pray and worship. The monies collected in the form of voluntary contributions are utilised for providing food and hostel facilities, Conducting Training for creating employment, helping the needy people by giving them Sewing machines and other necessary equipment and support for sustaining livelihood for mainly people below poverty line. The Audited Financial Statements for the past three Assessment years clearly shows the nature of activities carried out which are majorly charitable in nature. Besides the above, the Assessee has also enclosed Newspaper reports in support of its claim that the activities carried out are in the nature of supporting general public and not related to any particular caste, community or creed. We are of the view that the objects and purposes of the Assessee are both charitable and religious, the Assessee does not exist exclusively for the benefit of a particular religious community. The objects do not channel the benefits to any community and thus, would not fall as an institution existing solely for religious purpose. In that view of the matter, we are of the view that the Assessee is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that it exists solely for religious purpose. It cannot be characterised as religious object especially when it does not make a distinction between caste, creed, race, religion, etc. Thus we are satisfied that the plea of the Assessee to recognize it as existing for Charitable Purpose deserves to be accepted and is accepted. We accordingly allow the plea of the Assessee and direct that the registration be allowed treating the Assessee as existing for Charitable purpose . - Assessee appeal allowed.

Issues Involved:
1. Delay in filing the appeal.
2. Nature of the trust's activities: religious vs. charitable.
3. Eligibility for registration under Section 12AA of the Income Tax Act, 1961.
4. Eligibility for recognition under Section 80G of the Income Tax Act, 1961.

Detailed Analysis:

1. Delay in Filing the Appeal:
The Assessee's appeal was delayed by three days due to the trustees' delay in obtaining legal advice and convening a Board of Committee meeting. The Tribunal found the delay to be due to a reasonable cause without any negligence or lack of due diligence. Consequently, the nominal delay in filing the appeal was condoned.

2. Nature of the Trust's Activities: Religious vs. Charitable:
The Assessee trust was originally created with the purpose of performing religious activities, as per the will of its founder, which included performing pooja and other religious ceremonies. However, over time, the trust expanded its objectives to include various charitable activities such as providing free food, education, and hostel facilities to students and the general public, without any discrimination based on caste, creed, or religion. The Assessee argued that the trust's activities were predominantly charitable, citing the case of M/S. Shiv Mandir Devasttan Panch Committee Sanstan vs. CIT, where it was held that worshipping deities and maintaining temples did not constitute a religious purpose but were part of a way of life.

3. Eligibility for Registration under Section 12AA:
The CIT(E) had granted the Assessee registration under Section 12AA of the Income Tax Act, 1961, but categorized the trust's activities as "religious" rather than "charitable." The Tribunal noted that the trust's activities, as per the supplementary deed, were charitable and aimed at public benefit. The Tribunal emphasized that the trust did not benefit any specific religious community and that its activities were open to all, regardless of caste, creed, or religion. The Tribunal cited the Supreme Court's decision in CIT v. Dawoodi Bohra Jamat, which held that trusts with composite objects of religious and charitable activities that benefit the public at large are eligible for registration as charitable institutions. Consequently, the Tribunal directed that the Assessee be recognized as existing for "charitable purposes."

4. Eligibility for Recognition under Section 80G:
The Assessee's application for recognition under Section 80G was rejected by the CIT(E) on the grounds that the trust was categorized as a "religious trust," and Section 80G benefits are not available to religious trusts. The Tribunal, however, noted that the Assessee's activities were predominantly charitable and did not exclusively benefit any particular religious community. The Tribunal cited the case of CIT v. Christian Medical College, which held that institutions performing charitable activities without discrimination based on caste, creed, or religion should not be denied recognition under Section 80G. The Tribunal concluded that the Assessee should be treated as a charitable trust and eligible for recognition under Section 80G.

Conclusion:
The Tribunal allowed the Assessee's appeal, recognizing the trust as existing for "charitable purposes" and directed that the registration under Section 12AA be granted accordingly. The Tribunal also implied that the Assessee should be eligible for recognition under Section 80G, given its charitable activities and non-discriminatory nature.

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