TITLE: A
charitable and religious trust which does not benefit any specific religious
community is not hit by s. 13(1)(b) & is eligible to claim exemption u/s 11
CASE: CIT vs. M/s Dawoodi
Bohara Jamat (Supreme Court)
The assessee filed an application for registration before
the CIT for registration u/s 12A/ 12AA to avail exemption u/s 11. The CIT held
that though the assessee was a charitable trust, since its object and purpose
was confined only to a particular religious community (Dawoodi Bohra), the bar
in s. 13(1)(b) was attracted. On appeal, the Tribunal held that as the objects
of the trust are wholly religious in nature, the provisions of s. 13(1)(b)
which are otherwise applicable to charitable trusts was not applicable. The
assessee was held entitled to claim registration u/s 12A & 12AA. On appeal
by the department, the High Court declined to entertain the appeal on the
ground that the Tribunal had given a finding of fact that the assessee was a
religious trust. On further appeal by the department the Supreme Court had to
consider (i) whether the issue as to whether the assessee was a charitable/
religious trust was a finding of fact & (ii) whether the assessee was hit by
the bar in s. 13(1)(b).
HELD
by the Supreme Court:
(i) 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 and should the question in examination involve examination of
finding of fact, ex cautela abundanti the appellate Courts would require to
examine that whether the question involves merely the finding of fact or the
legal effect of such proven facts or documents in appeal. While the former
would be a question of fact which may or may not be interfered with, the latter
is necessarily the question of law which would require consideration. It is
often that the questions 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;
(ii) The legal effect of proved facts and
documents is a question of law. The 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 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 u/s 11 or 12. It is the analysis of these objects in the backdrop of
fiscal jurisprudence which would illuminate the purpose behind creation or
establishment of the trust for either religious or charitable or both religious
and charitable purpose. Therefore, the High Court has erred in refusing to
interfere with the observations of the Tribunal in respect of the character of
the trust;
(iii) In certain cases, the activities of a
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;
(iv) On facts, the objects of the assessee
are not indicative of a wholly religious purpose but are collectively
indicative of both charitable and religious purposes. 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 intent of the trust as observance of the tenets of Islam,
but do not restrict the activities of the trust to religious obligations only
and for the benefit of the members of the community. In judging whether a
certain purpose is of public benefit or not, the Courts must in general apply
the standards of customary law and common opinion amongst the community to
which the parties interested belong to. Customary law does not restrict the
charitable disposition of the intended activities in the objects. Neither the
religious tenets nor the objects as expressed limit the service of food on
religious occasions only to the members of the specific community. The activity
of Nyaz performed by the assessee does not delineate a separate class but
extends the benefit of free service of food to public at large irrespective of
their religion, caste or sect and thereby qualifies as a charitable purpose
which would entail general public utility. Even the establishment of Madarsa or
institutions to impart religious education to the masses would qualify as a
charitable purpose qualifying under the head of education u/s 2(15). The
institutions established to spread religious awareness by means of education
though established to promote and further religious thought could not be
restricted to religious purposes. The assessee is consequently a public
charitable and religious trust eligible for claiming exemption u/s 11;
(v) The interpretation of the Tribunal
& High Court that s. 13(1)(b) would only be applicable in case of income of
a trust for charitable (& not religious) purpose established for benefit of
a particular religious community is not correct. S. 13(1)(b) applies also to
composite trusts set up for both religious and charitable purposes if it is
established for the benefit of any particular religious community or caste.
(vi) On facts, though the objects of the assessee-trust
are based on religious tenets under Quran according to religious faith of
Islam, the perusal of the objects and purposes of the assessee would clearly
demonstrate that the activities of the trust are both charitable and religious
and are not exclusively meant for a particular religious community. The objects
do not channel the benefits to any community if not the Dawoodi Bohra Community
and thus, would not fall under the provisions of s. 13(1)(b).
Related Judgements
1. Shiv Mandir Devsttan Panch Committee
Sanstan vs. CIT (ITAT Nagpur)
2.
Vanita Vishram Trust vs. CCIT (Bombay High Court)
3. Himachal Pradesh Environment
vs. CIT (ITAT Chandigarh)
