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TMI Blog2014 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of spiritual nature is against the interpretation of law adopted by several courts including the apex court. 5. That Section 115BBC has no applicability on the assessee, as the prerequisites for applicability of the said section are not fulfilled in the case of the assessee. 6. The calculation of tax and interest is wrong. 7. That the appellant prays for leave, to add, alter, amend or vary any of the grounds either before or at the time of hearing of the appeals." 2. The relevant facts of the case as appearing from the assessment order are that the assessee returned NIL income by way of its return filed on 29.09.2009 accompanied by Audit Report in Form No-10B alongwith Balance Sheet, Income and Expenditure Account etc. The same was processed u/s 143(1) and subsequently selected for scrutiny by notice u/s 143(2) and 142(1) etc. The facts of the assessee's case are discussed by the Assessing Officer in the following manner :- "The assessee was accorded Registration u/s 12A vide letter No.DIT(E) 2005- 06/B-1080/04/207 dated 20.05.2005 issued by the Department. During the year, the assessee was mainly involved in imparting of spiritual education through the lectures/samagam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of Sec. 115BBC of the Act. The case of the assessee is not of public religious trust but a case of spiritual organization. Therefore the case of the assessee is clearly hit by the provision of Sec. 115BBC of the I.T.Act. 1961. The donation of Rs. 27,25,306/- is treated as anonymous donations and accordingly is brought to tax as per the provision of Sec. 115BBC(1)(i) of the I.T.Act, 1961. Since the assessee has furnished inaccurate particulars of its income, Penalty proceedings u/s 271(1)(c) are being initiated separately." 3. Aggrieved by this the assessee went in appeal before the First Appellate Authority. Before whom the following submissions were made:- 2. Facts "That the assessee Trust was set up on 30th December, 2002 to carry out various charitable/ spiritual/ religious objects as set out in the Trust Deed. The Trust during the year under appeal was mainly involved in the following activities: a. Imparting of spiritual education to the poor and masses of all castes, religion and creed for upliftment of mankind. b Helping in organising Samagams with blessings of Brahamrishi Shree Kumar Swamiji wherein He delivers cosmic grace by his presence for physical, mental. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at Joshimath in North India, Dwarka in the West, Shringeri in the South and Puri in the East. The other system is the akhara system of which the Mahamundaleshwaras are a part. Their origin dates from the early days of Islamic invasions into India (around or just prior to 1000 CE) when many monks became the targets of murderous attacks. In order to protect themselves, they formed "regiments" of monk-warriors who, to this day, preserve the traditional martial arts of India in addition to their spiritual practices. So in addition to being a way to organize the orders at a local level they have historically also served as paramilitary regiments with the Mahamandaleshwaras as generals, as it were, of these regiments. Since major part of the activities actually carried out by the assessee trust during the year under consideration were of religious/ spiritual nature, no recognition u/s 80G was obtained by the trust." 4. Not convinced with the explanation the CIT(A) confirmed the action of the AO. 5. Aggrieved by this the assessee is in appeal before the Tribunal. 6. Ld. AR referring to the facts of the case submitted that the assessee trust is covered within the exception carved ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered by the said Swamiji to the public at large. Referring this material it was submitted the doubts prevailing in the minds of the AO and CIT(A) in regard to what is spiritual is explained by relying upon various religious texts and the discourses thereon. It was contended that it is a wellaccepted fact that whatever may be the religion spiritualism cannot be weeded out from it. The following submissions extracted from the synopsis filed were heavily relied upon:- "Income of wholly charitable or religious trusts or institutions or partly charitable or religious trusts or institutions is exempt under the Income-tax Act subject to fulfillment of certain conditions. In order to tax unaccounted money being contributed to these institutions by way of anonymous donations, it is proposed to insert a new section 115BBC so as to provide that any income by way of anonymous donations of the entities referred to in that section shall be included in the total income and taxed at the rate of 30 per cent. Anonymous donations received by the following entities shall be covered by the new section:- a) any trust or institution referred to in section 11; b) any university or other educationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or any hospital and or other medical institutions and it has been amply clarified that anonymous donations to religious trust or institutions shall not be taxed. 6.2. In the said background referring to Paper Book filed consisting of 125 pages over and above the synopsis and decisions relied upon consisting of 94 pages reference was made to pages 5-41 which contain the copy of the trust deed which include at pages 5 to 8 in clause 5 the objects of the Trust. Specific attention was invited to sub-clause (i), (vii), (viii), (xi), (xii), (xiv), (xvii) etc. of the same so as to contend that the trust was incorporated for charitable purposes and advancement of general public utility. These sub-clauses are extracted hereunder for readyreference:- "i). To establish, promote, set-up, run, maintain assist finance, support and/or help in setting up and/or maintaining and/or running schools, and other institutions orphanages, widow home, poor houses or other establishments of relief and/or help to the poor, old and infirm people. vii) To arrange, establish, manage and supervise orphanages, old age homes, night shelters, Hospitals, Dharmshala, NariNiketan and Mahila Ashram etc. viii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, under the scheme of the Act, Sections 11 and 12 are substantive provisions which provide for exemptions available to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by the said trust are the subject-matter of exemptions from the taxation under the Act. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemption under Section 11 & 12 by the assessee and the grant or rejection of such application by the Commissioner. A conjoint reading of Section 11, 12, 12A and 12AA makes it clear that registration under Sections 12A and 12AA is a condition precedent for availing benefit under sections 11 and 12. Unless an institution is registered under the aforesaid provisions, it cannot claim the benefit of Sections 11 and 12. Section 13 enlists the circumstances wherein the exemption would not be available to a religious or charitable trust otherwise falling under section 11 or 12 and therefore, requires to be read in conjunction with the provisions of Sections 11 and 12 towards determination of eligibility of a trust to claim exemption under the aforesaid prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and question of fact are intricately entwined, sometimes to the extent of blurring the domains in which they ought to be considered and therefore, the issue requires a cautious consideration. Their Lordships held it was submitted that the question where the legal effect of proven facts is intrinsically in appeal has to be differentiated from the question where a finding of fact is only assailed has to be considered carefully. Briefly carrying us through the intervening paras of the said judgement the Ld. AR submitted that after referring to various decisions relied before the Apex Court in para 26 their Lordships came to the conclusion that determination of nature of trust whether it is wholly religious or wholly charitable or whether both charitable and religious under the Act is not a question of fact and requires examination of legal effects of the proven facts and documents and for that implications of the objects of the trust as contained in the trust deed need be considered. It was emphasized that their Lordships held that it is only the objects of a trust in the trust deed which would govern its right of exemption u/s 11 or 12 of the Act. For the said purpose it was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, attention was invited to the observation that indubitably the word 'charity' connotes altruism in thought and action and involves an idea of benefitting others rather than oneself the relevant extract is reproduced hereunder on which heavy reliance is being placed :- "34...........It also cannot be lost sight of that the supreme goal of all religions is philanthropy which could be manifested in various forms. It is held that gifts for religions purposes are prima facie gifts for charitable purposes. (Schoales v. Schoales [1930] 2 Ch. 75 (CA); White v. White (1893) 2 Ch. 41 (CA))." 7.5. Ld. AR placed further heavy reliance on the following observation of the Court in support of the facts of the present case:- 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, Palkhiva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erested belong to. The relevant extract from para 37 of the decision of the Apex Court is reproduced hereunder:- "In Re The Tribune, 7 ITR 415 has held that in judging whether a certain purpose is of public benefit or not, the Courts must in general apply the standard of customary law and common opinion amongst the community to which the parties interested belong to. Therefore, it is pertinent to analyse whether the customary law would restrict the charitable disposition of the intended activities in the objects." 7.8. In the said background referring to para 39 of the said judgement and the discussion thereon it was submitted the objects of the trust which included activities like providing food on religious days of the community and establishment of Madarsa or institutions for dissemination of religious education and rendering assistance to needy and poor for religious activities, it was pointed out has been held to reflect the essence of charity and benefit of which was not limited to the members of the community itself as neither religious tenets nor objects limited the benefit to the members of that community only. Considering all these facts it was submitted their Lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter is necessarily the question of law which would require consideration." 8.2. In these circumstances, referring to para 20 it was pointed out that their Lordships held that the question of law and fact can be intricately entwined sometimes to the extent of blurring the domains as such cautious action is required. In this background it was emphasized that the Lordship held that it is only proven facts which are required to be considered. For ready-reference we extract the relevant portion hereunder:- 20. "It is often that the question of law and fact are intricately entwined, sometimes to the extent of blurring the domains in which they ought to be considered and therefore, require cautious consideration. The question where the legal effect of proven facts is intrinsically in appeal has to be differentiated from the question where a finding of fact is only assailed." 8.3. In the facts of the present case it was submitted that merely having photographs which showed that some lecture/discourse has been addressed and some of persons have attended the same does not prove that the assessee is engaged in the charitable activities for which it was constituted as such the judgement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mines Surveying vs CIT 208 ITR 608 (Patna) iii). Professional Education and Research Foundation vs DIR(E) 20 Taxman.com 47 8.5. Relying heavily upon Sec.115BBC and sub-section (1) & (2) of the same, it was argued that the same has rightly been applied to the facts of assessee's case. 9. The Ld.AR in reply submitted that the arguments of the Ld. Sr. DR have to be in the context of the finding recorded by the AO or the CIT(A) and the Ld. Sr. DR cannot completely re-argue the case and attempt to improve the case of the AO ignoring the fact that the AO has observed that he is satisfied that the assessee is falling within the scope of "general public utility" as would be borne out from unnumbered para 2 of the assessment order. Accordingly it was argued the assessee is not required to prove at this stage to the satisfaction of the Ld. DR that the assessee trust is engaged in charitable activity the only issue for consideration is that is the assessee's grievance justified on facts that the anonymous donation as considered in sec.115BC is not attracted. Accordingly the arguments of the Ld. Sr. DR, it was stated are mischievous and raking an issue which does not arise. It was his stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has established that that facts are pari materia with the facts as considered by the Apex Court in CIT, Ujjain vs Dawood Bohara Jamat which have not been rebutted by the Revenue either on facts or on law and referring to the same it was submitted they have not been upset by a larger Bench of the Apex Court, the same deserves to be followed. 10. We have heard the rival submissions and perused the material available on record alongwith the case law relied upon. It is seen that the short question which falls for our consideration is that whether in the facts and circumstances of the case has section 115BBC been rightly involved by the tax authorities or not. For the said purpose it is necessary to extract the relevant provision as it stands on the statute hereunder:- "115BBC. (1) Where the total income of an assessee, being a person in receipt of income on behalf of any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educational institution; or any hospital; or other medical institution; run by said trust or institution is also covered under the exception to the said section. 10.3. In the facts of the present case it is seen that the Assessing Officer has given a finding that the assessee is falling within the scope of "general public utility." Reverting again to the facts on record it is seen from the copy of the Trust Deed available on record which is at pages 5 to 41 of the paper book filed. A perusal of the same shows that the aim of the trust has been set out at page 4 of the same (paper book page 7). The same reads as under:- "1. Whereas the founder is desirous of creating on endowment by setting a part and establishing a fund for the public Charitable objects, and purpose in India, thereinafter expressed." 10.4. The aims and objects of the trust which are required to be considered are set out in clause 5 of the trust deed and the same are reproduced hereunder for readyreference :- i) "To establish, promote, set-up, run, maintain assist finance, support and/or help in setting up and/ or maintaining and/or running schools, and other institutions orphanages, widow home, poor houses or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for advancement of education and of knowledge in arts, science, literature, humanities and all other useful subjects in all their manifestations. xv) To establish, maintain and run dispensaries, nursing homes, hospitals, providing medical treatment to all human diseases with all scientific and technical and tests of all kinds. xvi) To open fund, establish, promote, set-up, run maintain assist, finance, support and/or help in the setting up and/ or maintaining, boarding houses, libraries, reading rooms and other training and vocational institutions. xvii) To promote, organize, administer, establish support, maintain and/ or grant and the person institution or society or organization what is every having for the objects or charitable purpose and to incur expenditure in connection therewith." (emphasis provided in the present proceedings) 10.5. On a consideration of the above, we find that the tax authorities have completely mis-directed themselves in considering the issue. It is seen that whereas the AO holds that the assessee falls within the scope of "general public utility" ignores his own finding while deciding the question of anonymous donations and contradicts himself and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of a wholly charitable trust or institution by way of anonymous donation shall be included in its total income and taxed at the rate of 30 per cent. Anonymous donation made to wholly charitable and religious trusts of institutions, i.e. Mixed purpose trusts of institutions shall be taxed only if it is for any university or other educational institution or any hospital or other medical institution run by them. Anonymous donation to wholly religious trusts or institutions will not be taxed. (emphasis provided by the Bench) 25.3. Anonymous donation has been defined in the new section to mean any voluntary contribution referred to in section 2(24)(iia) of the Act, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. 25.4. Consequential amendments have been made in section 10(23C) and section 13 to provide that any income by way of any anonymous donation which is taxable under section 115BBC shall be included in the total income of the assessee. 25.5. Applicability-from assessment year 2007-08 onwards." 5.1. Furthermore, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construed to give them sensible meaning having regard to well known and accepted concepts so as not to lead to a manifestly absurd or anomalous result which could not have been intended by the Legislature. Hence the expression "religion" has to be appropriately construed in the context of the document i.e. the Trust Deed in the present case. Before we proceed to consider the Trust Deed, it also needs to be kept in mind that it is a well accepted principle of interpretation that the nomenclature adopted by the parties in any document is not conclusive to indicate the real nature of the document or the intention it actually records. It is the duty of the Court to see and examine what in truth is the essential and factual nature of the document. This Rule relating to inconclusiveness of the nomenclature adopted is more relevant in interpretation of document then on law and Court is never found or concluded by language which may have been used in the document. Hence in order to determine whether the expression "spiritual" used in the Trust Deed conveyed its real nature and meaning it must follow that it is the Trust Deed itself and its form and content which is to be examined and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, mental and financial help" including and not exclusively affected on account of natural calamities. etc. like flood, fire, famine, drought, earth-quakes, storm, accident, pestilence, drought, epidemics etc. A perusal of the above enumerated list when taken in the contest of extreme devastating tragedies and the needs of destitute; old age; infirm etc needs no specific treatise to bring out the potential importance and benefits of spiritual lecture to the target group of mentally disturbed, destitute due to calamities, natural or man-made, age, orphaned, widowed etc. The potential benefit and succor to these target groups by way of some philosophy or imparting of belief that there is some power beyond all this which is watching out for them cannot either be under-estimated or over-emphasized and has to be considered in the proper perspective. The fact that these arguments/philosophy on the touchstone of science may fail and to some of us non-believers maybe only rhetoric is not a relevant consideration as what cannot be cured has to be endured, for a person on his last breath is no reason to callously subscribe to the philosophy that such a person should be deprived of the psych ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese discussions/lectures are not divorced from religion as mankind is exhorted in the name of God and saints to take care of the weak and the needy. Accordingly considering the entire conspectus of facts, circumstances and position of law, we hold that the Revenue has incorrectly applied section 115BBC to the facts of the assessee's case. 10.10. In order to come to the said conclusion, we have relied upon the observation and findings of the Apex Court in the case of CIT, Ujjain vs Dawoodi Bohara Jamat and the ratio decidendi laid down therein which holds that it is the objects of the trust which are required to be seen and the standards to be applied for considering the same are those of the customary law and common opinion amongst the community to which the parties interested belong to. The present trust as it's very name suggests is formed by the community which has never looked down upon any other religion and over the times has constantly maintained and upheld the diverse and at times contradictory individual beliefs and practices of its followers with the attitude of live and let live as it is not a static religion but a living religion, a way of life. The religion of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndu mythology to which the Ld. Sr. DR refers but of almost all major religions of the world are stated to have depended on the alms and charity given by the town/village people. This is a well-accepted fact and the donor of the alms by almost all religions are exhorted ideally to remain unidentified. Mythology may not live up to the exacting standards of history as we understand but cannot be outrightly rejected as fairy tales or imagination as mythology can be described as history which has been carried through by word of mouth and also has a very important role in understanding history of people and nations. Thus not only mythology supports this general belief of an ideal donor who remains unidentified but even various religious written texts and treaties also idealise a donor who remains unidentified. The statute it is seen does not bar this in the case of wholly religious purposes trust or in the case of wholly religious and charitable purposes trust ....unless the other condition of section 115BBC(2)(b) are fulfilled with which we are not concerned in the facts of the present case. 10.13. For the sake of completeness, we also would deem it appropriate to address the decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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