Income Tax Appellate Tribunal (ITAT) Bangalore in a recent judgment has held that the registration of the trust u/s12AA of the Income-tax Act, 1961 can not be denied on the ground that the objects of the trust are mixed, partly charitable and partly religious.

Case Details:
I.T.A No 818/Bang/2015
Sri Maramma Temple Seva Trust (Appellant) vs Commissioner of Income-tax (E) (Respondent)
Date of Order: 30-10-2015

Brief Facts of the Case:
Among many general charitable objects, the following objects were part of the trust deed of the appellant trust.

To construct & renovation of Sree Maramma Temple, Countries, Orphanages and allied buildings for the deities which are worshiped by large number of devotees and disciples to provide temporary shelter of the needs etc, by raising funds by way of subscriptions, donations, grants, etc, and accept the article/ornaments (Gold, Silver, etc) donated to the temples.

To make a comparative study of philosophical preaching and religious principles of "Hindu Dharma" and bring together persons who have faith in Hinduism and Hindu Philosophy.

CIT (Exemptions), Bengaluru denied the registration of the trust u/s12AA of the Income-tax Act, 1961 on the ground of it having mixed objects, some of which were charitable and partly which were religious

ITAT Bangalore observed that a similar issue had come up before the Cochin Bench of this Tribunal in two cases, namely Calicut Islamic Cultural Society v. ACIT [(2009) 88 SOT 148] and Markazu Ssaquafathi Ssunniya (ITA No. 641/Coch/2006).

Relying on the judgment of Cochin Bench and judgment of the Hon’ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [(1995) 213 ITR 0492] ITAT directed CIT to grant the registration sought by the assessee u/s.12AA of the Act.

Cases at Cochin Bench
In the said cases the ITAT had observed that the reason advanced by the AO for denial of exemption was that If the assessee was partly engaged in the activity which was a religious and partly charitable, then in view of the decision of the Hon’ble High Court of Jammu & Kashmir in the case of Ghulam Mohidin Trust benefit of exemption u/s 11(1)(a) cannot be given. In both the cases AO had undisputedly accepted the fact that the assessee is not constituted only for the benefits of one community alone but for the benefit of the entire public as such. Moreover, in the institutions run by the assessee, more particularly the educational institutions, the members of the other community are also admitted. Cochin Bench had observed that the entire controversy was revolving around the interpretation of section 11(1)(a) of the Act. Quoting N.S. Bindra’s quote that the English language cannot be treated as instrument of mathematics precision, ITAT observed that if the assessee is engaged as per their objects in mixed activities, which are partly charitable and partly religious, it cannot be said that section 11(1)(a) of the Act does not contemplate such situation.

ITAT further observed that in the case of Ghulam Mohidin Trust it was held that as per the objects of the trust it was partly charitable and partly religious for present two cases it was not the case that in objects of the assessee were partly non-charitable or partly non-religious. In Ghulam Mohidin Trust case there was no proper apportionment of the income between the two objects of the trust as it was left to the exclusive discretion of the trustees, it was an arbitrary discretion given to the trustees to apply the income for the non-charitable and non-religious purposes. Moreover, in that case it was held that section  13(1)(b) of the Act is attracted as the trust was intended to promote science and technology and Muslim theology among Muslim intelligentsia, which was the main and dominant object of the trust. In the present two cases it is not the case of the AO. ITAT held that the principles laid down by the Hon’ble High Court of Jammu & Kashmir had no application as far as the facts of the present these two cases were concerned.

Case at Gujarat High Court
Gujarat HC observed that the definition of the phrase "charitable purpose" is inclusive and it covers a wider field than the field covered by the words "religious purpose". Further, in some cases, even a religious activity by a particular sect would be a charitable activity. The High Court held that a trust can be either for religious purposes or for charitable purposes or it can be for both charitable and religious purposes. The Court held that if the trusts are partly religious and partly charitable, so long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious, exemption under s. 11(1)(a) will be applicable to the assessee.

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