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TMI Blog2014 (3) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act') it would not be interfering with such a finding of fact and secondly, that the respondent being a public religious trust, the provisions of Section 13(1)(b) would not be applicable to it and therefore, dismissed the appeal filed by the Revenue confirming the orders passed by the Tribunal, dated 28.03.2008. 3. Propter commoditatem, we would refer to the conspectus of facts in the lead case for the disposal of the instant batch of appeals. The respondent is a registered Public Trust under the M.P. Public Trusts Act, 1951. The respondent had filed an application for registration before the Commissioner of Income Tax (for short "the Commissioner") as envisaged under Section 12A read with Section 12AA of the Act for availing the exemption under Section 11 of the Act. The Commissioner, after affording an opportunity of hearing to the applicants, had come to the conclusion that the respondent is a charitable trust and since the object and purpose of the trust is confined only to a particular religious community the same would attract the provisions of Section 13(1)(b) of the Act and therefore, declined the prayer made for registration of the trust by his order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent-trust from the ambit of exemption available under Section 11 and 12 of the Act and therefore, the findings and conclusion of the Tribunal as confirmed by the High Court in the impugned judgment and order require to be annulled. 10. Au contraire, the respondent-trust would adopt the stand, that, since it is a Public Religious Trust with the objects solely religious in nature, Section 13(1)(b) would not be attracted and therefore, the finding and conclusion reached by the High Court in its judgment and order does not suffer with any debility and the instant appeals require to be dismissed. 11. At the outset, a brief reference to the relevant provisions of the Act would be apposite. The income of a charitable or religious trust is exempt from taxation under the correlated provisions of Sections 11, 12, 12A, 12AA and 13. Section 11 deals with income from trusts for charitable and religious purposes and sets out which income shall be exigible to taxation. Section 11(1) relates to application of income towards the objects of the trust and exempts income of trusts with objects wholly charitable or religious or parts of income which relate to such objects. Section 11(1A) provides f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous incomes enumerated therein. Section 11 does not apply when the provisions of Section 13 are attracted. Section 13(1)(b) is relevant for the purpose of this case. The same is noticed: "13. Section 11 not to apply in certain cases. (1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof - (a) * * * * (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;" (emphasis supplied) The provision conceptualizes that income of a charitable trust created or established for the benefit of any particular religious community or caste would not be entitled for the benefit of Section 11 or 12 of the Act. Thus, when read in conjunction, while under Section 11 a trust which is established for charitable purposes to benefit a particular religious community may be a valid charitable trust, under Section 13(1)(b) such trust would not be entitled to exemption and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The High Court has framed two issues for consideration, the first of the two being, that, "whether in the facts and circumstances of the case the Tribunal's conclusion that all the objects of the trust are religious in nature is justified or not." The court is of the view that the question whether the respondent-trust is a religious or charitable trust is a question of fact and since it has been positively answered by the last fact finding authority- the Tribunal, it cannot be interfered in an appeal under Section 260-A of the Act. In our view, the High Court ought not to have declined to answer the aforesaid question on grounds that the observations of the Tribunal in respect of the objects of trust are pure finding of fact and that the same having been answered, no question of law would arise for consideration. 19. Normally a finding of fact as decided by the last fact finding authority is final and ought not to be lightly interfered by the High Court in an appeal. The exceptions to the said rule have been well delineated by this Court and for the present case do not require to be noticed. The appellate Courts however ought to be cautious while weeding out such questions an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on "the proper legal effect of a proved fact" is itself indicative that "inferences from facts are not all of them questions of law open to consideration in second appeal but only those which involve the application of some legal principle". Thus, it is only the inferences from proven facts or documents which would require examination in light of a legal principle or application of such legal principle which would be questions of law. To further clarify the above proposition, this Court had referred to the factual position of Ram Gopal v. Shamskhaton, wherein the Privy Council has considered the question involving determination of legal effects of proven facts and observed thus: "In Ram Gopal v. Shamskhaton, one Daud Rao was sought to he made liable on a mortgage to which he was not a party on the ground that be had knowledge of it and had accepted it. In holding that the facts found did not establish any ground of liability, Sir Richard Couch observed: "A finding that the bond shewed that the mortgage deed was accepted by the defendant, as binding obligation upon him, would be an inference of law, an inference which, in their Lordships' opinion, is not a just one from the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice occurs in such a case on account of the High Court missing the real substantial question of law arising in the appeal and erroneously proceeds on the basis that the matter does not involve any question of law and summarily dismisses the second appeal filed by the appellant? 12. In this context we may remember that the legal effect of proved facts and documents is a question of law. (See Dhanna Mal v. Moti Sagar and Gujarat Ginning and Mfg. Co. Ltd. v. Motilal Hirabhai Spg. and Mfg. Co. Ltd) In such cases, if the circumstances so warranted, this Court may interfere in an appeal by special leave under Article 136." (emphasis supplied) 26. In our considered view, determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact. It is but a question which requires examination of legal effects of the proven facts and documents, that is, the legal implication of the objects of the respondent-trust as contained in the trust deed. It is only the objects of a trust as declared in the trust deed which would govern its right of exemption under Section 11 or 12. It is the analysis of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave interpreted the said provision and especially the expression "any other object of general public utility" have observed that the said expression is of the widest connotation. The word "general" in the said expression means pertaining to a whole class. (CIT v. Gujarat Maritime Board, (2007) 14 SCC 704). Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose. (CIT v. Ahmedabad Rana Caste Assn.) The said expression would prima facie include all objects which promote the wellbeing of the general public. It cannot be said that a purpose would cease to be charitable even when public welfare is intended to be served. 31. The Constitution Bench of this Court in CIT v. Surat Art Silk Cloth Manufacturers' Assn. has held that if the primary purpose and the predominant object of a trust are to promote the welfare of the general public the purpose would be charitable purpose. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. White (1893) 2 Ch. 41 (CA)) 35. Unlike the phrase "charitable purpose", "religious purpose" is not defined under the Act. According to lexicographers, the term religious would mean "of or relating to religion." (Merriam Webster Dictionary, Macmillan English Dictionary). The Shorter Oxford English Dictionary defines the term as follows: "Devoted to religion; exhibiting the spiritual or practical effects of religion, following the requirements of religion; pious, godly, devout." In Kanga, Palkhivala and Vyas, Law and Practice of Income Tax, Vol. 1, Ed. 9th (at p. 544) religious purposes are indicated to include the advancement, support or propagation of a religion and tenets. Thus, a religious purpose would be one relating to a particular religion and broadly would encompass objects relating to observance of rituals and ceremonies, propagation of tenets of the religion and other allied activities of the religious community. An example of such would entail activities such as the dance performances (Garba) or distribution of food specifically for people on fast during the Hindu festivities of Navratri. 36. In certain cases, the activities of the trust may contain elements of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... living guide Dai-al-Mutlaq of the time who is the living and visible guide for Dawoodi Bohras. It is an undisputed fact that for the people believing in Islam, writings in Quran are words of Allah for them. The directions given in the Holy Quran are considered by the people of Islamic faith as orders from Allah and the people of Islamic faith obey such orders as holy and religious. The learned Counsel for the assessee has been able to demonstrate that all the objects of the assessee-trust, as noted above, came out from the writings in Quran and as such these are the orders for them while observing Islamic faith." (emphasis supplied) 38. Unquestionably, objects (c) and (f) which provide for the activities completely religious in nature and restricted to the specific community of the respondent-trust are objects with religious purpose only. However, in respect to the other objects, in our view the fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in color. The objects reflect the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The House of Lords in Barralet v. IR, 54 TC 446, has observed that "the study and dissemination of ethical principles and the cultivation of rational religious sentiment" would fall in the category of educational purposes. The Madarsa as a Mohommedan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the object (d) would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character. 41. Therefore, the objects of the trust exhibit the dual tenor of religious and charitable purposes and activities. Section 11 of the Act shelters such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to provisions of Section 13. The activities of the trust under such objects would therefore be entitled to exemption ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h composite objects would not be expelled out of the purview of Section 13(1)(b) per se. The Section requires it to be established that such charitable purpose is not for the benefit of a particular religious community or caste. That is to say, it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large. (Sole Trustee, Loka Shikshana Trust v. CIT, (1975) 101 ITR 234 (SC)). The section of community sought to be benefited must be either sufficiently defined or identifiable by a common quality of a public or impersonal nature. (CIT v. Andhra Chamber of Commerce, 55 ITR 722). 47. This Court in CIT v. Palghat Shadi Mahal Trust, (2002) 9 SCC 685 the muslim residents of Kerala constituted a trust "for the purpose of constructing and establishing at Palghat-a-Shadi Mahal and other institutions for the educational, social and economic advancement of the Muslims and for religious and charitable objects recognised by Muslim law ..." and later clarified that the proceeds would be utilized for the benefit for public at large and upon this basi ..... 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