Mere use of term Islamic world or Islamic Scholars in objects would not make trust created only for a religious community or cast – ITAT
In a recent judgment, the Hon’ble ITAT has held that mere use of term Islamic world in objects and particularly the Islamic Scholars would not epso facto lead to the conclusion that the assesse trust is created only for religious community or cast.
ABCAUS Case Law Citation:
ABCAUS 3910 (2024) (03) ITAT
Important Case Laws relied upon by parties:
CIT vs. Dowoodi Bhohra Jamat 364 ITR 39(SC)
State of Kerala vs. M.P. Shanti Verma Jain (1998) 5 SCC 63
Brij Vikas Trust 12 taxmann.com 95
CIT vs. Bhagwan Shree Laxmi Narayan Dham Trust 62 taxmann.com 358
CIT vs. Bayath Kutchhi Dasha Oswal jain Mahajan Trust 74 taxmann.com 199
Brahman Sabha Karveer vs. CIT(E) 126 taxmann.com 172
In the instant case, the assessee had challenged the order passed by the Commissioner of Income Tax (Exemption) passed u/s 12AA of the Income Tax Act, 1961 (the Act).
The assessee was a registered Muslim Religious trust. The deed of declaration of Trust listed 29 objects to be achieved by the assessee trust. The assessee applied for registration u/s 12AB vide application in form 10AB.
The CIT(E) denied the registration u/s 12AB of the Act while passing the impugned order on the ground that the assesse trust was a composite trust for religious and charitable purpose and the assessee has been established for the benefit of particular community/religion. The CIT(E) observed that the objects of the trust were confined to benefit to only Muslim community and therefore, it would be covered by restriction u/s 13(1)(b) of the Act even though it functions for public benefit.
Therefore, the CIT(E) held that as per provisions of section 13(1)(b) of the Act the benefit of section 11 & 12 of the Act are not available to the assessee.
Before the Tribunal the assessee submitted that the trust was a Muslim Religious trust registered for promotion of Islam which is based on the five pillars namely; Profession of faith (shahada), prayer (salah), Alms (zakat), Fasting (Roza) & Pilgrimage (hajj). Referring to the objects of the trust, it was submitted that all these objects clearly manifested that the assessee was a religious trust and therefore, the provision of section 13(1)(b) of the Act are not applicable in the case of the assessee.
It was submitted that all the objects of the trust clearly manifested that the assessee is religious trust and therefore, the provision of section 13(1)(b) of the Act are not applicable in the case of the assessee.
The Tribunal noted that the trust had been created to achieve a total of 29 objects which were enumerated in the trust deed. some of the objects were religious in nature however there were many other objects like to make arrangement for providing housing accommodation to the wafood and students; to establish reading rooms community centers, libraries Reference/landing and publishing Islamic literatures; awarding scholarships and giving stipends to brilliant deserving and needy students engaged in the Islamic studies; to organize and manage ways and means for eradication of social and religious evils from the society; to take up scheme and projects for pollution’s control; planting trees and health awareness program, to protest dowry system and to help the people in marriage, funeral and cremation of the dead body etc.
The Tribunal opined that out of the total 29 objects of the trust were undoubtedly charitable in nature. Therefore, the finding of the CIT(E) that the objects of the trust were comprising of religious as well as charitable in nature, was correct.
However, the Tribunal opined that the object to make arrangement for providing housing accommodation to the wafood and students as well as awarding scholarships and giving stipends to brilliant deserving and needy students engaged in the Islamic studies cannot be restricted to a particular community as the students can be from any community pursuing the scholarship in the particular subject. Further to establish reading rooms, community centers, libraries reference/landing and publishing Islamic literatures is also activity which is not restricted only to a specific community but these facilities are available to all who are interested in learning and reading of Islamic literature. Further the activities to organize and manage ways and means for eradication of social and religious evils from the society is also charitable activity and not an activity for the benefit of specific community. Similarly to protest dowry system and to help the people in marriage, funeral and cremation of the dead body as well as the activities for pollution’s control, planting trees and health awareness program etc. are all the activities of promoting well-being of general public and are charitable in nature.
The Tribunal observed that the Hon’ble Supreme Court has observed that in certain cases, the activities of the trust may contain elements of both: religious and charitable and thus, both the purposes may be over lapping. More so when the religious activity carried on by a particular section of people would be a charitable activity for or towards other members of the community and also public at large. For example, the practice of optional charity in the form of Khairat or Sadaquah under Mohammadan Law would be covered under both charitable as well as religious purpose.
The Tribunal further observed that the Hon’ble Supreme Court after analyzing objects and activities of the trust came to the conclusion that if the objects of the trust manifest the dual tenor of religious and charitable purposes, activities are entitled for exemption u/s 11 & 12 of the Act subject to the provisions of section 13(1)(b) of the Act.
In view of the above, the Tribunal opined that the applicability of the provisions of section 13 and particularly section 13(1)(b) would dependent on the fact whether a trust for charitable purpose is established for the benefit of any particular religious community of cast. The Hon’ble Supreme Court has held that even in case of trust having objects of both religious and charitable purpose it would be covered by provisions of section 13(1)(b) if the trust is established for benefit of any particular religious community or cast.
The Tribunal stated that therefore, in order to apply the provisions of section 13(1)(b) it is required to be examined whether such religious charitable activity carried on by the trust are only for the benefit of particular religious community or class or serves across the communities and for society at large. In this regard, the Hon’ble Apex Court had held as under;
“In the present case, the objects of the respondent-trust are based on religious tenets under Quran according to religious faith of Islam. We have already noticed that the perusal of the objects and purposes of the respondent-trust would clearly demonstrate that the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community. The objects, as explained in the preceding paragraphs, do not channel the benefits to any community if not the Dawoodi Bohra Community and thus, would not fall under the provisions of Section 13(1)(b) of the Act.
In that view of the matter, we are of the considered opinion that the respondent-trust is a charitable and religious trust which does not benefit any specific religious community and therefore, it cannot be held that Section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption under Section 11 of the Act.”
The Tribunal opined that the objects of the trust were charitable in nature. the activity of the assesse trust were not restricted to any particular community or cast but those activities were available for the public and society at large. Accordingly, the provisions of section 13(1)(b) cannot be pressed into service to deny the benefit of exemption u/s 11 & 12 to the trust.
The Tribunal further noted that in another case, the Bench had considered the applicability of section 13(1)(b) of the Act. It was held that the Overall objects of the trust as well as activities carried out by the trust are required to be taken into consideration in the light of various judgments including judgment of Hon’ble Supreme Court.
In view of the above, the Tribunal stated that mere use of term Islamic world in the objects and particularly the Islamic Scholars would not epso facto lead to the conclusion that the assesse trust is created only for religious community or cast.
The Tribunal stated that the CIT(E) has accepted this fact in the impugned order that some of the objects of the assessee trust were charitable in nature but denied the benefit on the ground that one of the objects it is stated that to serve all Muslims through the expositions, propagation and implementation of the spiritual teaching of Islam and to create the love of Hazrat Muhammad in the hearts of every Muslim. These were only two of the objects and activities out of the total number of 29 objects and therefore, for bringing the case in the mischief of section 13(1)(b), It is to be considered that whether the non-religious objects which are charitable in nature are confined for the benefit of a particular religious community or cast. When the charitable objects of the trust were not restricted the activities to a particular religious community or cast then it would not fall under the provision of section 13(1)(b) of the Act.
Accordingly following the judgment of Hon’ble Supreme Court, ITAT held that the trust was entitled for registration u/s 12AB of the Act. Hence, the impugned order of the CIT(E) was set aside with direction that the assessee be grant registration u/s 12AB of the Act.
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