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TMI Blog2014 (8) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... Foundation [2005 (7) TMI 37 - BOMBAY High Court] - the meaning of words advancement of any other object of general public utility has been subject of discussion and adjudication - the definition of chartable purpose u/s.2(15) of the Act includes the words advancement of any other object of general public utility and the objects claims the activities of the trust are for the advancement of objects like the teachings of Buddha to spread and for that purpose the assessee has claimed application of income towards construction of study and research centre for higher Buddhist study including construction of Buddhist temple - Since inception the assessee trust is pursuing the activities connected or associated with preaching, spreading and disseminating the ideas, ideals and the teachings of Lord Buddha. It is also a temple and assessee trust is performing religious functions and it is established for charitable purposes - The present trust was for the higher Buddhist study and research centre to propagate the Buddha thought and philosophy which would admittedly be an object of general public utility - Be it a construction of temple which is a religious activity or construction of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed are identically worded. Hence, we are reproducing the grounds as raised in ITA No. 1540/K/2013 for AY 2007-08, which read as under: 3) For that on the facts and in the circumstances of the case, and without prejudice to the proceeding ground the AO was unjustified in law in denying the benefit of exemption u/s 11 of the IT Act; even though the appellant which was a Charitable Trust had fulfilled all the conditions for claiming the exemption u/s 11 of the IT Act. 4) For that on the facts and in the circumstances of the case, the CIT(A) was unjustified in upholding the AO's order denying the exemption u/ 11 of the Act without appreciating the fact that the AO had denied the claim of exemption on entirely extraneous reasons and facts and / or ignoring the jurisdictional facts that the appellant had applied its income for charitable purposes. 5) For that on the facts and in the circumstances of the case, and without prejudice to the preceding ground the authorities below were unjustified in law and on facts in denying the exemption u/s 11 on the alleged ground that the assessee had applied its income for construction of a Buddhist temple ignoring the provisions of law w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Ld. counsel, the AO himself allowed the exemption u/s. 11 of the Act on being satisfied that the assessee trust has applied the income for charitable purposes except with regard to income which was applied for the purposes other than for construction of the building. The AO in assessment orders for all these three years denied benefit of exemption u/s. 11 of the Act, only to the extent, in each of the three years, the assessee utilised its income for construction of a building, which in his opinion was a temple. The AO found that the trust has taken permission for construction of Buddha Temple at Chakla Basti from Pradhan Dam Din Gram Panchayat. According to AO, there is no object like construction of temple in the objects of the trust and hence he required the assessee trust to explain as to why exemption claimed u/s. 11 of the Act be not disallowed. The assessee trust replied that it has partially constructed an institution for higher buddhist studies and research at Chakla Basti, Shelly Hut, Dam Din, which is covered by the objects of the trust as per clause 3 of the trust deed. The AO was not convinced by the reply of the assessee and he disallowed the exemption claimed u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reveal the fact of construction of Buddha Temple by the assessee at Chakla Busty. However, perusal of the audited accounts for the FY 2006-07 reveals that the assessee had shown expenditure incurred on construction of building to the tune of ₹ 50,25,127.32 as expenditure on construction of Higher studies and research centre. As a result of investigation conducted by the Department it was discovered that although the assessee was engaged in construction of Buddha Temple at Chakla Busty and had incurred expenditure on its construction but claimed exemption u/s 11 of the Act considering such expenditure as expenditure incurred on construction of building meant for higher studies and research centre by way of application of income. The contention of the assessee in the written submission dated 19.09.2012 that the Ld AO was misconceived by the NOC given by the Pradhan of the Damdim Gram Panchayat for construction of Buddha temple is not true. The contention of the assessee that the Panchayat people could not differentiate between Institute for higher Buddhist Studies and Research Centre and Buddha Temple and therefore, the issuance of the NOC mentioning Buddha temple there in casu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment has been collected by the assessee in the post assessment stage obviously emphasize that the building under construction was meant for Obar Chhimeyling Institute for Higher Buddhist Studies and Research and not for Buddha Temple. In this connection it is very important to note that the issuance of NOC by the Gram Panchayat for construction of building for a particular purpose is always at the behest of the assessee who makes application to the Panchayat for the same. If someone wants to make a temple and as the NOC the Panchayat grants the same after considering the prevalent rules and regulations. If NOC is asked for construction of some educational institution the Panchayat grants the same again in accordance with the prevalent rules and regulations. Therefore, issuance of NOC does not conclusively certify the real intention behind the construction. A building under construction for which NOC was obtained for the purpose of construction of temple, in the changed circumstances and in the event of apprehension of detection of violation of laws of the land, might be subsequently used for some other purpose by obtaining another NOC. Keeping in view the above facts, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed to the registered with any Government agency or affiliated/proposed to be affiliated with any national/international University/Association/Institution? b) What are the ongoing or proposed courses/studies/research in the Institute? c) What is the administrative and faculty9 structure of the Institute? d) How many students are enrolled in the Institute and what courses/research activities are they pursuing? e) What is the fee structure for meeting the administrative expenses for running the Institute? f) What is the salary structure for the administrative personnel and faculty? g) Administrative and academic records/documentation. h) System followed for enrolment/admission of students. In the absence of such vital information the claim of the assessee that classes for teaching the students are going on in the completed part of the building is found to be unsubstantiated and unreliable. In course of appellate proceedings the assessee submitted a copy of Deed and Instrument of Trust dated 10.07.1988 in which the objects of the Trust are clearly mentioned. On perusal it is found that construction of Buddha Temple does not find place in the objects of Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust will not be eligible for any exemption under the provisions of section 11 of the Act. In the cases of Saurashtra Education Foundation vs. CIT (Guj) 273 ITR 139 and Bihar Institute of Mining Mine Surveying Vs. CIT (Pat) 208 TR 608 where Charitable Trusts were carrying on educational activities but not conducting any course in formal education and not affiliated to/registered by any authority it was that the Trusts are not eligible for exemption u/s 10(22) of the Act. In the instant case the assessee has not been able to prove that it is carrying on educational activities for availing of exemption u/s 11 of the Act leave aside conducting any course in formal education and getting affiliated to/registered by any authority. In view of the facts stated above I hold that the Ld AO was justified in not granting exemption of ₹ 50,25,127/- u/s of the IT Act, 1961 treating the expenditure incurred on construction of Buddha Temple as not applied for charitable purposes as per the objects of the Trust. The disallowance of exemption of ₹ 50,25,127/- u/s 11 of the IT Act, 1961 made by the Ld AO is confirmed . Aggrieved, assessee came in appeal before us. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e described in the initial application. This building got constructed partially till February, 2009 and was being used as institute for Buddha studies. The building was designed and constructed in such a manner that the same houses a facility for conducting studies by the students learning Buddhist studies. The heading of the valuation report describes the building constructed by assessee trust as under: four storied institute building and three storied hostel building construction . The valuation report further states the total area of the institute building is at 84,522 sft. and of hostel building at 14,691 sft. As per valuation report, the area which the assessee trust constructed at the plinth level and at the basement level consists of 12 class rooms, 2 verandahs, 1 store room and 1 electric room. Another area of 1st floor and 2nd floor was classified as institute building consists of 26 rooms, 3 toilets, 2 kitchen and 1 Tara temple. It is certified by the valuer that the temple on the 1st floor occupies only 3032 sft. In term of percentage temple area comprised in the buildings constructed by the assessee was barely 3.05% of the total area constructed. The empirical da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order sheet entries. One more fact brought to our notice by the assessee that in AY 2010-11 and 2011-12, the AO allowed the claim for exemption on being satisfied that the assessee trust applied its income for charitable and religious purposes. The assessee operated, managed and run the institution of Buddhist learning from the said premises during FY 2009-10 relevant AY 2010-11 and FY 2010-11 relevant AY 2011-12 and expenses incurred on operating and running of the said institute was accounted for in the audited books of account of the assessee trust for these two years, which were allowed by the AO u/s. 11 of the Act. Whether in the above facts and circumstances of the case, the denial of exemption u/s. 11 of the Act to the assessee trust is supported by legal provision of section 11 of the Act or not, is now to be examined. The provision of section 11 of the Act permits a trust registered u/s. 12A of the Act to claim exemption in respect of income derived from assets held in trust, if 85% of its income for the relevant FY relevant to the assessment year in question is applied for religious or charitable purposes. In respect to the application of income for charitable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsistent with the central object of the fund. The selection of individual objects of relief does not necessarily negative a charity. He pointed out that the purposes in the case before him, as also in the case before us, are not merely religious or pious purposes in general. They must also be for the benefit of the Dawoodi Bohra community. In that particular case Mr. Justice Marten pointed out that being gifts at a shrine, they were already consecrated to God, and presumably must be used for religious or pious purposes. Similarly, in the case before us also, the property is settled upon wakf, that is, for purposes which are considered to be religious, pious or charitable according to the notions of members of the Dawoodi Bohra community and further the income in the corpus of these properties settled upon trust must be used for Dawat purposes, that is, for the benefit of the Dawoodi Bohra community. Though the words of clauses 6, 7 and 8 are very wide in terms, in fact, that apparently wide discretion of the Mullaji Saheb is bound down by the two factors, namely, that this is a wakf, a dedication by a Mussalman of property for purposes which, according to the notion of Mussalma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. counsel for the assessee of Hon'ble Bombay High Court in the case of CIT Vs. Rajneesh Foundation (2006) 280 ITR 553(Bom), wherein Hon'ble Bombay High Court has considered the case law of Hon'ble Supreme Court in the case of CST Vs. Sai Publication Fund (2002) 258 ITR 70 (SC) and also CIT Vs. Ahmedabad Ran Caste Association (1983) 140 ITR 1 (SC) and also Sole Trustee, Loka Shikshana Trust Vs. CIT (1975) 101 ITR 234 (SC) and discussed the issue as under: 15. As defined by section 2(15), charitable purpose includes relief of poor, education, medical reliefs and advancements of any other object of general public utility. Admittedly, the respondent does not claim to provide relief to the poor, education or medical relief. It claims that the objects and activities of the trust are for the advancement of other objects of the general public utility like attainment of physical, mental and spiritual health and, thus, realisation of self-consciousness. 16. Words advancement of any other object of general public utility have been subject of discussion and adjudication in several cases. In CIT v. Ahmedabad Rana Caste Association [1973] 88 ITR 354 (Guj.). The trust was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munity would certainly be of immense benefit to the community. . . . With these observations, Gujarat High Court upheld the decision of the Appellate Tribunal granting exemption to the Trust under section 11(1)(a). The Appeal against this judgment was also dismissed by the Supreme Court in CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1. 17. In Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 11 (SC), the objects of the Association were (a) to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth; (b) to carry on all and any of the business of art silk yarn, raw silk, cotton yarn, as well as art silk cloth, silk cloth and cotton cloth, belonging to and on behalf of its members; (c) to obtain import licences for import of art silk yarn, raw silk, cotton yarn, and other raw materials as well as accessories required by its members for the manufacture of art silk, silk and cotton fabrics; (d) to obtain export licences and export cloth manufactured by the members; (e) to buy and sell and deal in all kinds of cloth and other goods and fabrics belonging to and on behalf of the members;... (n) to do a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose tested by the obligation created to spend the money exclusively or essentially on charity.' The learned judge also added that the restrictive condition 'that the purpose should not involve the carrying on of any activity for profit would be satisfied ifprofit-making is not the real object'. We wholly endorse these observations. [Emphasis supplied] (p. 25) Their Lordships further observed as follows : The application of this test may be illustrated by taking a simple example. Suppose the Gandhi Peace Foundation which has been established for propagation of Gandhian thought and philosophy which would admittedly be an object of general public utility, undertakes publication of a monthly journal for the purpose of carrying out this charitable object and charges a small price which is more than the cost of the publication and leaves a little profit, would it deprive the Gandhi Peace Foundation of its charitable character? The pricing of the monthly journal would undoubtedly be made in such a manner that it leaves some profit for the Gandhi Peace Foundation, as, indeed, would be done by any prudent and wise management, but that cannot have the effect of pol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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