Whether income of a Trust involved in mixed activities of religious and charitable nature warrants invocation of Sec 13(1)(b) - NO: ITAT

THE issue before the Bench is - Whether income of a Trust involved in mixed activities of religious and charitable nature warrants invocation of Sec 13(1)(b). And the verdict favours the assessee.

Facts of the case

The assessee is a registered trust under Ss 12A and 80G of the Act and had filed ROI with ‘Nil’ income. The AO observed that the objects of trusts included advancement of religious as well as charitable activities. The AO referred to the observations made in Tribunal decision in case of Ghulam Mohidin Trust in the decision of Landmark group and was of the view that since the assessee trust was a mixed trust it was hit by the provisions u/s 13(1)(b) of the Act. Thus, the AO assessed the income at Rs. 8,15,58,623/-. On the contrary the assessee relied on the High

Court decision in case of Barkate Saifiyah Society. The assessee argued that the major chunk of expenditure incurred was on peace conference held for creating communal harmony and to create a brotherhood among the people of all faith so as to maintain peace and harmony in the country in particular and globally in general. Thus, the activities of assessee trust were not limited to benefiting a particular caste or community. In appeal the CIT(A) was of the view that the provisions u/s 13(1)(b) was not applicable and the same could be invoked only where the objects of trust were solely religious. In respect of assessee trust the CIT(A) was of the view that the objects and activities of trust were of general public utility and thus exemption u/s 11 could not be denied.

Thereafter, the Revenue was in appeal before Tribunal and contended that the assessee trust was carrying out religious activities and thus applicability of provisions u/s 13(1)(b) of the Act was correct. The assessee argued that trust was in existence since 1990 and had never been denied exemption including A.Y. 2004-05 & A.Y. 2006-07 where the assessee return was assessed by AO u/s 143(3) of the Act. Further the assessee stated that the provisions u/s 13(1)(c) could be applied but not provisions u/s 13(1)(b) of the act as applied by the AO since it was a mixed trust and not an exclusively religious trust.

In appeals, having heard the parties, the Tribunal held that:

++ during the course of hearing referring to the details of expenditure incurred AR was specifically required to describe that as to which expenditure can specifically be assigned as religious expenditure incurred exclusively for Muslim community. It was submitted by AR that the major expenses were on peace conference and none of the expenses can be said to have incurred exclusively for religious activity. The DR also could not point out any of such expenditure which can be stated to have incurred exclusively for the purpose of a particular religious community. It has already been mentioned that AO has not pointed out any such expenditure. Therefore, simply on the basis of one or two objects stated in the objects of the trust which are limited to religious activity, it cannot be said that in the year under consideration the assessee has suddenly become purely religious trust….. Even if one has to go by the observation of AO in the assessment order that assessee is a mixed trust, even then clause 13(1)(b) cannot be applied as it is applicable to purely charitable trust as held by Gujarat High Court in the case of CIT vs. Barkate Saifiyah Society. The relevant observations have already been reproduced in the earlier part of this order in para 6.1. Therefore, also benefit of exemption under section 11 cannot be denied to the assessee under section 13(1)(b) of the Act;

++ we find no infirmity in the order passed by CIT(A) vide which it has been held that assessee has wrongly been denied benefit of exemption under section 11 of the Act. We decline to interfere and the appeal filed by the revenue is dismissed.