Ita/153/2003 Of Comm. Of Income Tax v. Janhit Sewa Charitable Trust

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.153 of 2003 (O&M)Date of decision: March 25, 2014 The Commissioner of Income Tax, Faridabad Ajay Kumar Mittal,J 1.This order shall dispose of a bunch of 21 appeals 1.e. ITA Nos. 153 of2003, 285 to 287 of 2006, 57, 58, 60 to 63, 65 to 68, 83, 84,116, 126 of 2007, 402of 2009, 346 and 479 of 2010 as learned counsel for the parties are agreed that theissue involved in all these appeals is similar. However, the facts are being extractedfrom ITA No.153 of 2003. oOITA No.153 of 2003 has been preferred by the revenue under section260A of the Income Tax Act, 1961 (in short, “the Act’) against the order of IncomeTax Appellate Tribunal Delhi Bench 'D' Delhi (in short, “the Tribunal’) dated11.10.2002, Annexure P.5 in ITA No.1554/Del/2001 for the assessment year 1997798. It was admitted on 8.5.2006 to consider the following substantial question oflaw:- ““Whether on the facts and in the circumstances of the case, th Hon'ble ITAT has erred in cancelling the order under section 263 ofthe Income Tax Act, 1961 ignoring that the assessment order waspassed without going through the books of account and withoutbringing to tax the correct and complete income?” 3] The facts, in brief, necessary for adjudication of the controversy involved, as narrated in the appeal may be noticed. The assessee trust wasregistered under Section 12A of the Act. Return declaring nil income for theassessment year 1997-98 was filed on 28.10.1997 which was processedunder Section 143(1) (a) of the Act vide order dated 26.2.1998,Assessment under section 143(3) of the Act was completed on 21.3.2000,Annexure P.1 at nil income. The said assessment was cancelled undersection 263 of the Act by the Commissioner of Income Tax, Rohtak (CIT)vide order dated 26.3.2001, Annexure P.2 holding that the Assessing Officerhad not examined the books of account and passed order under Section 143(3) of the Act without making enquiries regarding the genuineness ofactivities and expenditure claimed. It was also observed that the trustee ShriShambhu Dayal Shastri alias Swami Sudershan Acharyaji, his witeSmt.Asharfti Devi and two sons were beneficiaries of the trust. They wertaking food and residing 1n the trust premises. It was further noticed that thetrust was running a bookshop in the premises and sale proceeds of thesebooks were not recorded in the books of account of the Trust. No receipt ofsale of books was issued. The CIT concluded that the order passed by theAssessing Officer granting exemption to the trust and adopting its Income atLnil was erroneous and prejudicial to the interest of the revenue. The samewas set aside with a direction to the Assessing Officer to pass a fresh orderafter taking into account the various observations made and findings given ITA No.153 of 2003 (O&M) in the order. Vide order dated 27.3.2002, Annexure P.3, the AssessingOfficer after examining the matter passed fresh assessment order andassessed the income of the assessee at484,12,517/- in addition to levy ofinterest under Sections 234A, 234B and 234C and penalty under Section271\(1) (c) of the Act. The assessee went in appeal before the Tribunalagainst the order passed by the CIT under Section 263 of the Act. Vide orderdated 10.10.2002, Annexure P.5, the Tribunal set aside the said order passedby the CIT and restored that of the Assessing Officer. The assessee also filedappeal before the Commissioner of Income Tax (Appeals) [CIT(A)] againstthe assessment order passed by the Assessing Officer under Section 143(3)/263 of the Act. Vide order dated 5.12.2002, Annexure P.4, the said appealwas also allowed. It was held that keeping in view the decision of theTribunal by which the order of the Assessing Officer had been restored, theassessment framed as a consequence of the order of CIT be annulled.However, in the case of Shri Shambhu Dayal Shastri, trustee, the additionswere made on protective basis which were also set aside by the Tribunal.Hence the present appeals by the revenue. 4 We have heard learned counsel for the parties and perused therecord. 4 Learned counsel for the appellant-revenue submitted that theAssessing Officer while passing assessment order, Annexure P.| on21.3.2000 for the assessment year 1997-98 had, 1n a cursory manner withoutdiscussing anything, allowed the benefit of Sections 11 and 12 of the Act bytreating the assessee to be a charitable institution without their duecompliance. The CIT exercising the powers under section 263 of the Act ITA No.153 of 2003 (O&M) A after noticing the activities of the assessee had rightly set aside the saidorder in its revisional jurisdiction and the Assessing Officer thereafter hadpassed an assessment order taxing the assessee as an association of persons.It was contended that the major portion of the receipts was spent by theassessee on construction of temple and other non-charitable activities and,therefore,it could not be held to be utilisation of funds for charitablepurposes. Reliance was placed upon judgments reported in Shri GopalLalji-ka-mandir Trust v. CIT,(1984) 146 ITR 513 (MP) and|KizhakkeKovilakam Trust v. Assistant Commissioner of Income Tax, (2002) 256ITR 238 (Ker.). 6.Controverting the submissions made by learned counsel for theappellant-revenue, learned counsel for the respondent-assessee submittedthat the assessee was a charitable trust and had been granted registrationunder section 12A of the Act and as such the assessment was required to bemade in accordance with Sections |] and 12 of the Act. [Learned counselalso submitted that in case the income was applied for charitable purposesand there had been no violation under section 13(1) of the Act, theexemption had to be granted.Reliance was placed on judgments inMalayammal and others vy. A.Malayalam Pillai and others1991 Supp. (2)SCC 579,CIT vy, Social Service Centr, ((2001) 250 ITR 39 (AP), |HiralalBhagwati v. CIT,(2000) 246 ITR 188 (Guj.) [affirmed in |ACIT v, SuratCity Gymkhana,(2008) 14 SCC 169 (SC)] and-Raghunath Das PartharDharamshala vs. Cll, (1956) 158 [TR 432 (Rayj.)in support of thesubmissions. Learned counsel further argued that the order under Section263 of the Act was different from the reasons given in the notice sent to the ITA No.153 of 2003 (O&M) 5 assessee under the said provision. With regard to the submission whetherthe temple is a public trust, reliance was placed upon judgment inKamchandra Shukla vs. Shree Mahadeoji, AIR 1970 SC 548 which wasfollowed 1nCommissioner of Income Tax yv. Barkate Satfiyah Societ9(1995) 213 ITR 492 (Guj.). Learned counsel had referred to CM No.11042CII of 2012 urging that the assessee-trust was carrying on charitableactivities as it has since constructed the temple, 1s running Gaushalas, langarorganized in the Langar hall, holding medical camps where distribution ofmedicines for the poor is being made. Besides this, the assessee 1s running aSanskrit school attached with Library and holding havans from time totime. Photographs in support thereof have also been appended alongwith theapplication. TiAfter hearing learned counsel for the parties and perusing therecord, we do not find any merit in the contentions of learned counsel forthe revenue. § The following issues arise for adjudication in the presentappeals:- (1) Whether the respondent-trust is charitable trust and,therefore, its income was exempt from tax under Sections 11and 12 of the Act? (11)Whether the CIT was justified in assuming jurisdictionunder Section 263 of the Act in the facts and circumstances ofthe present case? Q We proceed to examine whether assessee is a charitable trustentitled to benefit of Sections 11 and 12 of the Act. The assessee M/s JanhitSewa Charitable Trust came into existence on 2.6.1989 1.e. the date on ITA No.153 of 2003 (O&M) institution. In terms of Clause 4 of the trust deed, the aims and objects of theTrust were to give education and medical relief, relief of poor and any otherobjective of general public utility not involving the carrying of any activityfor profit and such purposes; (1) Whether the respondent-trust is charitable trust and,therefore, its income was exempt from tax under Sections 11and 12 of the Act? (11)Whether the CIT was justified in assuming jurisdictionunder Section 263 of the Act in the facts and circumstances ofthe present case? Q We proceed to examine whether assessee is a charitable trustentitled to benefit of Sections 11 and 12 of the Act. The assessee M/s JanhitSewa Charitable Trust came into existence on 2.6.1989 1.e. the date on ITA No.153 of 2003 (O&M) institution. In terms of Clause 4 of the trust deed, the aims and objects of theTrust were to give education and medical relief, relief of poor and any otherobjective of general public utility not involving the carrying of any activityfor profit and such purposes; (a) To establish, promote, support, maintain and/or grant aid or otherfinancial assistance to schools, colleges, hostels, libraries, reading room,lecture hall, museum and other establishment and institutions for thedevelopment of education and diffusion of useful knowledge. (b) To grant scholarships, stipends, free studentship, prizes, rewards andallowances or other financial assistance to students. (c) To establish, promote, support, maintain, help run and grant aid/or otherfinancial assistance to dispensaries, hospital, nursing homes, maternityhomes, child welfare centres, sanitoriums, clinics, laboratories, mobilemedical units, ambulances, medical and/or surgical camps and otherestablishment for giving medical relief to the public. (d) To establish and maintain hospitals and/or other institution for thereception and treatment of persons suffering from illness or mentaldefectiveness or for the reception and treatment of persons duringconvalescence or of persons requiring medical attention or rehabilitation.(e) To do any other act of medical relief for philanthropic purposes and notfor the purposes of profit. ({) To provide food, clothing and/or shelter for the poor and/for needypersons and to give help to them either in cash or kind or otherwise. (g) To establish, maintain and/or grant aid to homes, orphanages or otherestablishments for relief of and to give help to the poor and destitute and ITA No.153 of 2003 (O&M) physically handicapped persons, orphans and widows and otherwise providefor them. (h) To establish, maintain, construct and/or grant aid to guest houses and/ordharmasalas, ashrams for the use of the public. (1) To construct public roads, parks, gardens, well, tubewells, tanks andjalkshetra and/or maintain and/or grant aid for the construction/maintenanceand/or repairs of the same for the use of general public. (J) To grant relief to the people affected by earthquake, flood, fire, famine,pestilence and other natural calamity of similar nature and to give donation,subscriptions or contributions to institutions, establishments or personsdoing such relief works, (k) To give financial assistance to local authorities, municipalities and suchother bodies engaged 1n public utility services, (1) To renovate or repair any such temple, mosque, gurdwara, church or other place as 1s notified by the Central Government in the official gazetteto be of historic archeological or artistic 1mportance or to be a place ofpublic worship of renown throughout any stage or states. (m) To protect and give help for the improvement and protection of animalsand birds of all kinds. (n) To publish books, monographs, periodicals, journals, pamphlets,souvenirs without any motive to earn profit whatsoever. (o) To render assistance and/or grant aid to recognized public charitabletrusts or institutions. (p) To do any other act for the advancement of general public utility notinvolving the carrying on of any activity for profit. (q) Generally to do all such other things as are incidental or conclusive tothe attainment of the above objects. other place as 1s notified by the Central Government in the official gazetteto be of historic archeological or artistic 1mportance or to be a place ofpublic worship of renown throughout any stage or states. (m) To protect and give help for the improvement and protection of animalsand birds of all kinds. (n) To publish books, monographs, periodicals, journals, pamphlets,souvenirs without any motive to earn profit whatsoever. (o) To render assistance and/or grant aid to recognized public charitabletrusts or institutions. (p) To do any other act for the advancement of general public utility notinvolving the carrying on of any activity for profit. (q) Generally to do all such other things as are incidental or conclusive tothe attainment of the above objects. The then CIT after scanning the objects of the trust as enumerated 1n thetrust deed hadregistered it under Section 12A of|he Act. It had also beengranted exemption for five years from 1.4.1993 to 31.3.1998 under Section80G of the Act on 269.1996. The assessee filed the return for theassessment year 1997-98 declaring nil income on 28.10.1997 which wasaccepted by the Assessing Officer under Section 143(3) of the Act on21.3.2000. The Assessing Officer had accepted that the assessee respondentwas a charitable trust and its income was exempted under Sections 11 and12 of the Act. The CIT had invoked revisional jurisdiction under section 263of the Act holding the said assessment order to be erroneous and prejudicialto the interest of the revenue. 10.It would be apposite to refer to the grounds on which CIT hadsought to invoke Section 263 of the Act. The Tribunal in para 3 of its orderhad summarized the same as under:- “() The AO had passed the assessment order withoutexamining the books of account, which lay impounded in theoffice of the CIT at Rohtak. (11) The claim for exemption under section 80G had beenrejected vide order dated 23.11.2000 as it was found that theassessee did not produce books of account before the AO till18.5.1998 when the said AO sent a report to the CIT who hadasked for such a report to verify the assessee’s claim undersection SOG. (111) Books for the previous year ending 31 March 1997relevant to AY 1997-98 had not been written till 18.5.1998 andthese were produced for the first time on 13[th]July 1998 before the predecessor CIT who impounded the same, (iv) The AO had passed the order without examining the booksof account and an order passed in a hurry and without makingrequisite enquiries was erroneous and prejudicial to theinterests of revenue. (v) That the trustee Shri Shambhu Dayal Shastri and his witeSmt.Asharfi Devi who had been co-opted as a trustee by thehusband were living in the trust premises, eating the food of thetrust and even the other trustee Smt. Manyushree, who was thesole settler of the trust was living in the trust premises andeating food offered by the trust. (v1) That Shri Shmbhu Dayal Shastri alias Swami SudershanaAcharyaji set up a managing committee for the trust whichincluded two of his sons who too were enjoying all the benefitsof the trust. (vil) That the trust had purchased an air conditioned luxury carfor the use of the Swamiji and the other trustees were alsoenjoying personal benefits from the society/trust. (vill) That the trust was the handiwork of the Swamiji, who wasmanaging the entire show and Smt.Manyushree had settled thetrust by a trust deed on 2[nd]June 1989 by dedicating an amountof|L3000/- and by appointing as the sole trustee Shri ShambuDayal Shastri alias Swami Sudernancharya Ji Maharaj, (v1) That Shri Shmbhu Dayal Shastri alias Swami SudershanaAcharyaji set up a managing committee for the trust whichincluded two of his sons who too were enjoying all the benefitsof the trust. (vil) That the trust had purchased an air conditioned luxury carfor the use of the Swamiji and the other trustees were alsoenjoying personal benefits from the society/trust. (vill) That the trust was the handiwork of the Swamiji, who wasmanaging the entire show and Smt.Manyushree had settled thetrust by a trust deed on 2[nd]June 1989 by dedicating an amountof|L3000/- and by appointing as the sole trustee Shri ShambuDayal Shastri alias Swami Sudernancharya Ji Maharaj, (1x) That the assessee trust was running a book shop in thepremises whose receipts were not being disclosed in theaccounts of the trust. It may be mentioned that this is anobservation made by the CIT in para 6 of his order andapparently he visited the trust premises himself withoutdisclosing his identity. According to the CIT, he purchased asmall booklet for <a3/- but he noted as a fact that no piece wasprinted on the booklet and the persons running the bookshopinformed him that they were not issuing any receipts for thearticles sold. It also appears from para 6 of the order of the CITthat on his insistence a kachha receipt dated 9[th]October 2000 was issued although he 1s supposed to have visited the trustpremises and the book shop on 10.11.2000. (x) The sole trustee was given all the powers to collectdonations and to apply the income of the trust for one or moreof its objects,to invest, borrow, sell, open accounts, to appointfurther trustees and members of the managing committee andhe was also given power to dismiss the trustees and to dowhatever he liked with the trust and the trust property. (x1) That Smt.Manjushree was a disciple of Swamiji and settlerof the trust and Smt.Asharfi Devi was the wife of Swamiji andthe board of trustees consisted of hand picked loyal personswho had never performed any duties and who had not beengiven any power either by the trust deed or by a boardresolution or by any rules and regulations of the trust. (x11) The trustees had violated the provisions of law and thiswas duly proved by the fact that 1t was not a public charitabletrust but the individual domain of the Swamiji and the trustproperties were his individual properties, (x11) That clause 4(a) of the trust deed provided that one of theaims of the trust was to publish books, monographs,periodicals,journals, pamphlets, souvenirs without any motiveto earn profit but the trust was publishing all these things andearning huge profits which were unaccounted. (xiv) That the trustees were residing 1n the trust property, eatingfood provided by the trust and enjoying the benefits of achauffeur driven luxury car, which was a trust property and bythis, there was clear violation of the provisions of section 13(1),which prohibited the use of trust property or income by thesettler or any of the trustees directly or indirectly for theirpersonal benefit, (xv) The trust deed revealed that the settler had created a publiccharitable trust for doing charity for the general public butthrough the passage of time, the trust had been converted by thetrustee into a religious trust. (xvi) That facts on record pertaining to relevant assessmentyear revealed that there had been a violation of the provisionsof the section 11(1) (b) since the receipts had been accumulatedand nothing was spent on charity although substantial amountshad been spent in various assessment years on the constructionof a temple, on langar expenses, vehicle maintenance, purchaseof a luxury car etc. That nothing had been spent on relief of thepoor, public charity or on education or medical relief or on anyother object of general public utility. (xv) The trust deed revealed that the settler had created a publiccharitable trust for doing charity for the general public butthrough the passage of time, the trust had been converted by thetrustee into a religious trust. (xvi) That facts on record pertaining to relevant assessmentyear revealed that there had been a violation of the provisionsof the section 11(1) (b) since the receipts had been accumulatedand nothing was spent on charity although substantial amountshad been spent in various assessment years on the constructionof a temple, on langar expenses, vehicle maintenance, purchaseof a luxury car etc. That nothing had been spent on relief of thepoor, public charity or on education or medical relief or on anyother object of general public utility. (xviul) That the trust was on a building and temple constructionSpree on its own land or on unauthorized land and recently thestate Government had demolished some of the unauthorizedconstructions. The aforesaid showed that the trust had no regardfor law and order and it was simply spreading superstition|amongst the public and working against the general publicinterest.’ 11.Each ground was elaborately challenged by the assessee bycountering the allegations 1n the following terms as noticed by the Tribunal in para 5 of its order:- (1) The appellant is a charitable trust and had been grantedregistration under Section 12A of the IT Act, 1961 and as suchthe assessment had to be made in accordance with sections 11And 12 of the said Act. (11) In case the income was applied for charitable purposes andthere had been no violation committed under sections 13(1) and13(2), the exemption had to be granted. (11) One of the grounds taken by the CIT for acting undersection 263 was the impounding of the books of account of theassessee when exemption under Section 80G was beingconsidered whereas it was a matter of record that the booksimpounded were in the possession of the AO and exemptionunder Section 80G was allowed by means of an order dated 26[th] September 1996 and which covered a period of five years 1.e,From 1.4.1993 to 31.3.1998 (page 50 of the paper book).(iv) There was no provision in the IT Act, 1961 forwithdrawing or cancelling the certificate issued under Section80G or the registration certificate issued under section 12A(b).(v) Expending of money on capital account such as foracquiring a building by a charitable institution was to be treatedas application of money for charitable purposes and it couldtherefore be not held that 75% of the gross receipts had notbeen applied for charitable purposes. (v1) The finding of the CIT that Swamiyji had appointed wife aa trustee as also his two sons and that the third trusteeSmt.Manjushree Srivastwa was also a disciple of Swamiji wasno ground to hold that the trust was the “personal property’. Hecould not have appointed them as trustees since it was theBoard of trustees who made such appointments. (vil) The CIT had overlooked the fact that it wasSmt.Manjushree Srivastawa who had settled on the trust a sumof|L3000/- as the corpus and whereby the trust had come intoexistence. (vill) The trust had substantial contributions made to it by themembers of the public for charitable purposes and if the Boardof Trustees 1n their wisdom considered it appropriate to applythe trust funds either for constructing a building or acquiring acar,it could not be treated as a ground to deny exemption and tohold that there was no application of income for charitablepurposes. (1x) There was no material available with the department moreparticularly the commissioner to hold that there had been apurchase of a luxury car for the use of specific persons and itwas vehemently denied that the car purchased was not a luxuryvehicle. (x) It had been completely overlooked by the Commissionerthat a sum oT=a28 lakhs and odd had been spent on langar and ITA No.153 of 2003 (O&M) which was definitely expenditure for charitable purposes, (1x) There was no material available with the department moreparticularly the commissioner to hold that there had been apurchase of a luxury car for the use of specific persons and itwas vehemently denied that the car purchased was not a luxuryvehicle. (x) It had been completely overlooked by the Commissionerthat a sum oT=a28 lakhs and odd had been spent on langar and ITA No.153 of 2003 (O&M) which was definitely expenditure for charitable purposes, (x1) There was no material on record for the CIT to hold thatany benefit had been derived by the persons specified in|Section 13(2) of the IT Act, 1961.| (x11) In the Hindu system, there was no line of demarcationbetween religion and charity since charity was regarded as apart of religion and what were purely religious purposes andthat were charitable purposes was to be decided entirelyaccording to Hindu law and Hindu notions. For instanceconstruction of the Samadhi of a saint was also to beconsidered as a charitable purpose, (x11) There was a distinction between public and privatetemples and the former were generally built or raised by thepublic and the deity installed to enable the members of thepublic or a section thereto to offer worship and in such a casethe temple would clearly be a public temple. Further,if offeringsin a temple were being made by the public in the usual courseand if the expenses of the temple were met by publiccontribution, it was safe to presume that the temple in questionwas a public temple. (xiv) In a given case, there could be an existence of a publicreligious trust and the income arising thereto would be exemptfrom tax. (xv) The order of the AO may be briet/cryptic but this by itselfwas not enough to hold the same to be erroneous and pre-judicial to the interests of revenue inviting attraction of section263.| (xvi) In the case of a charitable trust, one had not to apply theSame parameters, as would be the position when businessincome was to be computed. It was necessary to examine thereceipts and expenditure and if the accounts were audited thenprobably there would be no need to examine the books ofaccount. (xvi1) During the previous year relevant to the assessment year under consideration, the assessee had received total donationsto the tune of ||85 lakhs and odd and out of this onlya1.95lakhs was by means of cheques, the remaining amount havingbeen received 1n cash. (xvill) The year wise details of expenditure and incomebeginning AY 1990-91 and ending with AY 1997-98 showedsubstantial amounts having been spent on the construction of abuilding plus other expenditure for charitable purposes and nodoubt there were surplus in some of the assessment years butthese were within the specified percentage. (x1x) Since the impounded books were lying with the AO theseare purported/deemed to have been examined and under thesecircumstances audited accounts were quite adequate forcompleting the assessment, (xx) In a given case, rejection of the request for exemptionunder section 80G was not at all relevant for purposes ofdeciding whether the activities of a trust were charitable orotherwise. (xx1) As per the notice issued under section 263, purchase of aluxury car or the residence of the Swamiji being 1n the propertybelonging to the trust were not the points raised/indicated. Itwas a fact that the Swamiji was living in a separate propertylocated at Sector 16A Faridabad. (xx11) There was no bookshop in existence during AY 1997-98and observations of the CIT with reference to his informal visitto the premises at the end of 2002 would not be relevant sincethis was in his private capacity and in case the same had to beconsidered as official, then the assessee should have beenconfronted with relevant facts before recording the facts, whichwere adverse. Further,the aforesaid action on the part of theCIT retlected bias and prejudice towards the assessee. There was no evidence with the department for the allegationthat the trustees were eating food belonging to the trust andfurther, action under Section 263 was required to be restricted (xx11) There was no bookshop in existence during AY 1997-98and observations of the CIT with reference to his informal visitto the premises at the end of 2002 would not be relevant sincethis was in his private capacity and in case the same had to beconsidered as official, then the assessee should have beenconfronted with relevant facts before recording the facts, whichwere adverse. Further,the aforesaid action on the part of theCIT retlected bias and prejudice towards the assessee. There was no evidence with the department for the allegationthat the trustees were eating food belonging to the trust andfurther, action under Section 263 was required to be restricted to the allegations made in the notice. (xxi1) That more than 75% of the total income arising duringthe assessment year under consideration had been applied forcharitable purposes and this would be apparent from the copyof the return appended at page I1 of the paper book andinvestment in the construction of a building/acquisition ofimmovable property had to be treated as “application of income.(xxiv) The preconditions to be specified by the CIT beforeexercising powers vested in him under section 263. (a) the order passed by an authority below him must beerroneous and (b) such an order should be prejudicial to the interests ofrevenue, That only if the aforesaid two conditions werecumulatively satisfied then action under Section 263 could betreated to be valid. (xxv) That 1t was not permissible in law for the Commissionerto merely set aside the order without bringing any material onrecord in support of his prima facie opinion and on the mereeround that the AO had not made requisite enquiry. Further,definite findings of error and prejudice to the interests ofrevenue were essential.’ 12.A conjoint reading of Sections Il, 12 and 12A leaves noambiguity that registration under Section 12A of the Act 1s a conditionprecedent for availing the benefit under Sections 11 and 12 of the Act. Atthe time of granting registration to a trust or institution, the CIT 1s required to see whether proper procedure 1s followed and whether the objects arecharitable or not. The assessee was granted registration under Section 12Aof the Act. However, registration under Section 12A of the Act does not entitle an assessee-trust to claim automatic benefit of Sections 1] and 12 ITA No.153 of 2003 (O&M) 12.A conjoint reading of Sections Il, 12 and 12A leaves noambiguity that registration under Section 12A of the Act 1s a conditionprecedent for availing the benefit under Sections 11 and 12 of the Act. Atthe time of granting registration to a trust or institution, the CIT 1s required to see whether proper procedure 1s followed and whether the objects arecharitable or not. The assessee was granted registration under Section 12Aof the Act. However, registration under Section 12A of the Act does not entitle an assessee-trust to claim automatic benefit of Sections 1] and 12 ITA No.153 of 2003 (O&M) which the assessing authority can examine at the time of finalisation ofassessment. The registration does not prevent the Assessing Officer fromconsidering whether the assessee is entitled to the benefits of Sections 1]and 12 of the Act. The Assessing Officer cannot make further probe into theobjects of the trust once registration has been granted under Section 12A ofthe Act. The scope of proceedings for registration and its cancellation aredifferent from assessment proceedings. The power to cancel registrationunder sub section (3) of Section 12ZAA of the Act was conferred on CITonly from |.10.2004 by Finance (No.2) Act, 2004. 13.The assessee had filed audit report alongwith the return. In|response to statutory notices issued by the assessing authority, the assesseehad furnished details/information from time to time as required. TheTribunal had after appreciating the respective submissions of learnedcounsel for the parties, concluded that the assessment was rightly framedunder Section 143(3) of the Act on 21.3.2000. It had also been noticed thatthe donations received by the assessee had been applied for the purpose forwhich the trust had been created which included the construction of thebuilding and other charitable purposes. The reason recorded by CIT in thenotice 1ssued under section 263 of the Act was that the books of account ofthe assessee were impounded on 13.7.1998 during the course of proceedingsfor grant of exemption under Section 80G of the Act and that the assessmentwas finalized without checking the books of account and making dueenquiries. The Tribunal did not accept the aforesaid reason as_ the booksimpounded relating to the assessment year 1997-98 were in the possessionof the Assessing Officer and in such circumstances, it could not be ITA No.153 of 2003 (O&M) ITA No.153 of 2003 (O&M) concluded that the same were not considered/examined by the Assessingofficer while finalizing the assessment. Another ground taken by the CITthat the sole trustee had appointed a managing committee of which ShriShambhu Dayal Shastri was the managing trustee who had appointed histwo sons in the managing committee in violation of Section 13 of the Act.The plea was negated by the Tribunal by holding that the appointment oftrustees or the members of the committee was not within the exclusivepowers of Shambhu Dayal Shastri as the same was done by the trustees. Theplea regarding expenditure having not been incurred for charitable purposeswas not accepted as out of the total receipts of<a86 lacs, the trust hadwcurredL31 lacs for construction of the building and|LT19 lacs tor langarexpenses. Further, other items of expenditure were those which wereincurred by the charitable trust for regular functioning such as salaries,vehicle maintenance and miscellaneous expenses. Besides the aforesaid, thetrust had also spent on various other items amounting to =a5 lacs. Thepurchase of luxury car for=a5 lacs was not accepted. It was recorded thatthe vehicle purchased was for purposes of running the affairs of the trust,There was nothing to substantiate the ground taken by the CIT thatShambhu Dayal Shastri and others were utilizing the trust premises for theirown residential purposes as he was maintaining separate residentialpremises in Faridabad unconnected with the trust. Yet another ground takenby the CIT that on his visit to the premises of the assessee, he had paid43/- for purchase of booklet for which no receipt was issued to him, whichdepicted that the assessee was dealing in profiteering and earning incomeoutside the books of account, was also not accepted as there was no book ITA No.153 of 2003 (O&M) shop in existence during the assessment year 1997-98 whereas the allegedpurchase of booklet was in the year 2002. The certificate under section 80Gof the Act for a period of five years from 1.4.1993 to 31.3.1998 was grantedon 26.9.1996 and nothing was shown by the department that the saidcertificate was cancelled/withdrawn. On the cumulative effect of theaforesaid, the Tribunal had concluded that the assessee was a charitableinstitution and was carrying on activities for charitable purposes. At therelevant time, the assessee trust was required to utilize 75% of its funds forcharitable purposes to take benefit under Sections I1 and 12 of the Act. TheTribunal has recorded that more than 75% of the total income during theassessment year had been applied for charitable purposes as per return. Theamounts invested for the construction of immovable property had to betreated as application of income. The requirement of 75% was enhanced to85% by Finance Act 2002 w.e.f 1.4.2003. Learned counsel for the revenuewas unable to dislodge the finding of facts recorded by the Tribunal. ]4.The contention of the learned counsel for the revenue that theassessee was constructing a temple and had utilized the funds for religiouspurposes only which did not constitute charitable purpose, 1s repelled inview of the judgment of the Apex Court 1n Ramchandra Shukla'sCase(supra), which was followed inBarkate Saifiyah Society'scase (supra). 15,In|Barkate Saifiyah Society'scase (supra), while dealing withsimilar issue with regard to religion and charity, it was held that there wasno line of demarcation between the two. [It was observed as under: “It 1s to be noted that definition of the phrase "charitablepurpose’ 1s inclusive and it covers a wider field than the fieldcovered by the words "religious purpose". Further, 1n some ]4.The contention of the learned counsel for the revenue that theassessee was constructing a temple and had utilized the funds for religiouspurposes only which did not constitute charitable purpose, 1s repelled inview of the judgment of the Apex Court 1n Ramchandra Shukla'sCase(supra), which was followed inBarkate Saifiyah Society'scase (supra). 15,In|Barkate Saifiyah Society'scase (supra), while dealing withsimilar issue with regard to religion and charity, it was held that there wasno line of demarcation between the two. [It was observed as under: “It 1s to be noted that definition of the phrase "charitablepurpose’ 1s inclusive and it covers a wider field than the fieldcovered by the words "religious purpose". Further, 1n some cases, even a religious activity by a particular sect would be acharitable activity; for some, supply of fodder to animals andcattle 1s a religious object, while to others it may be a charitablepurposes, according to Hindu religious activity. Similarly,Khairat under the Mohamedan law would be considered to be areligious activity. The said activities may be for a charitablepurpose to some. Hence, in many cases, both the purposes maybe overlapping. The purposes may have both the elements,charity as well as religious. While dealing with what is "religious" or "charitablepurpose" it 1s observed by the Supreme Court in the case ofRamchandra Shukla v. Shree Mahadeoyi, AIR 1970 SC 458,that there 1s no line of demarcation in the Hindu systembetween religion and charity. Indeed, charity 1s regarded as partof religion. While discussing this aspect, the Supreme Courthas further observed as under (at page 464) : "Hindu piety found expression in gifts to idols to religiousinstitutions and for all purposes considered meritorious inthe Hindu social and religious system. Therefore, althoughcourts in India have for a long time adopted the technicalmeaning of charitable trusts and charitable purposes whichthe courts in England have placed upon the term ‘charity’ inthe Statute of Elizabeth, and, therefore, all purposes whichaccording to English law are charitable will be charitableunder Hindu law, the Hindu concept of charity 1s socomprehensive that there are other purposes in additionwhich are recognised as charitable purposes. Hence, whatare purely religious purposes and what religious purposeswill be charitable purposes must be decided according toHindu notions and Hindu law. As observed by Mukherjea in Hindu Law and Religiousand Charitable Trusts, Second Edn., page 11, there 1s noline of demarcation in the Hindu system between religionand charity. Indeed, charity 1s regarded as part of religion, for, gifts both for religious and charitable purposes areimpelled by the desire to acquire religious merit.According to Pandit Prannath Saraswati, these fell undertwo heads, Istha and Purta. The former meant sacrifices,and sacrificial gifts and the latter meant charities. Amongthe Istha acts are Vedic sacrifices, gifts to the priests at thetime of such sacrifices, preservations of vedas, religiousausterity, rectitude, vaisvadev sacrifices and hospitality.Among the Purta acts are construction and maintenance oftemples, tanks, wells, planting of groves, gifts of food,dharamshalas, places for drinking water, relief of the sick,and promotion of education and hearing. (cf. PanditPrannath Saraswati's Hindu Law of Endowments, 1897,pages 26-27). Istha and Purta are in fact registered as thecommon duties of the twice born class. (cf. PanditSaraswati, page 27)." In view of the aforesaid discussions, it can be saidthat a trust can be either for religious purposes or forcharitable purposes or it can be for both charitable andreligious purposes.” 16,The Apex Court 1n Malayammal's case (supra) had held thatthere was no distinction between religion and charity. It was recorded asunder:- In view of the aforesaid discussions, it can be saidthat a trust can be either for religious purposes or forcharitable purposes or it can be for both charitable andreligious purposes.” 16,The Apex Court 1n Malayammal's case (supra) had held thatthere was no distinction between religion and charity. It was recorded asunder:- “In Hindu system there 1s no line of demarcation betweenreligion and charity. On the other hand, charity 1s regarded as apart of religion. But what are purely religious purposes andwhat religious purposes will be charitable must be entirelydecided according to Hindu Law and Hindu notions.” 17.In|Hiralal Bhagwati'S case (supra), the requirements forregistration of a trust under Section 12A of the Act were emphasized asunder:- “It 1s required to be noted that the registration of a charitabletrust under s. 12A is not an idle or empty formality. This 1sapparent from the tenor of the provisions of s. 12A. It requiresthat not only an application should be filed in the prescribedform, setting out the details of the origin of the trust, but alsothe names and addresses of the trustees and/or managers shouldbe furnished. The CIT has to examine the objects of creation aswell as an empirical study of the past activities of the applicant,The CIT has to examine that it 1s really a charitable trust orinstitution eligible for registration. It 1s required to be notedthat the trust 1s granting benefits to the staff of 16 differentinstitutes, the names of which are appearing at p. 44. The staffworking in these institutes, on becoming members, are gettingthe benefits of the scheme. Thus, the staff members of all theseinstitutes become entitled to get the benefit of the scheme. Theobject beneficial to a section of the public is an object of"general public utility". To serve as a charitable purpose, it 1snot necessary that the object must be to serve the wholemankind or all persons living in a country or province. It 1srequired to be noted that even 1f a section of public is givenbenefit, it cannot be said that it 1s not a trust for charitablepurpose in the interest of public. It 1s not necessary that thepublic at large must get the benefit. It 1s required to be notedthat considering the objects of general public utility, the matteris to be decided.’ Construction of temples alongwith other acts of construction of tanks, wells with flight of steps etc. were held to be charitable acts in the followingterms:- “It will be appropriate to refer to Mayen's Hindu Law andUsage, I1th Edn., at p. 911. Charitable acts are referred to asacts of construction of tanks, wells with flights of steps,temples, planting of groves, the gift of food, Dharmasalas (rest houses) and places for supplying drinking water, the relief ofthe sick, the establishment of processions for the honour ofdeities and so on. Gifts for the promotion of education andknowledge are considered specially meritorious.” This judgment was affirmed by the Apex Court in.Surat City Gymkhana's case (supra). 18,A Division Bench of the Andhra Pradesh High Court in.Social Service Centre's case(supra) had held that construction of a church was apurpose of general public utility. It was further noticed that expenditure onreligious activities was also entitled to exemption. It was indicated asunder:- “We do not find that donation to a church or construction of achurch 1s not a purpose which is not of general public utility.Therefore, the contention of the Department that theexpenditure on religious activities could not be givenexemption cannot be accepted particularly in the context of ourpolity. We are aware that most of the religious and charitableactivities go together in this country. Secondly, if we look at Section 11 which 1s reproduced below itbecomes clear that it is not necessary that an institution whichis dealing in charitable and religious activities should get anotification issued for both the purposes because the wordsused are "charitable or religious"| 19,The question for consideration in Raghunath Das Parihar “We do not find that donation to a church or construction of achurch 1s not a purpose which is not of general public utility.Therefore, the contention of the Department that theexpenditure on religious activities could not be givenexemption cannot be accepted particularly in the context of ourpolity. We are aware that most of the religious and charitableactivities go together in this country. Secondly, if we look at Section 11 which 1s reproduced below itbecomes clear that it is not necessary that an institution whichis dealing in charitable and religious activities should get anotification issued for both the purposes because the wordsused are "charitable or religious"| 19,The question for consideration in Raghunath Das Parihar Dharamshala'S case (Supra) was whether the assessee whose sole object was to run a dharamshala and derive income by way of rent by letting out rooms therein, was carrying on a charitable activity, the Court answering inthe affirmative had recorded as under:- “Applying the tests laid down in Addl. CIT v. Surat Art Silk Cloth Manufactures’ case [1980] 121 ITR 1 (SC) and adoptingthe reasons given in the aforesaid three decisions, we are of theconsidered opinion that on the facts and circumstances of thecase, the assessee 1s a charitable trust and the sole purpose ofthe trust 1s to run a dharmshala, which is an object of generalpublic utility and so when this was the sole object, the incomederived therefrom in the shape of rents from the income of thedharmshala is exempt under Section 11 read with Section 2(15)of the Act. At the risk of repetition, it may be stated that theobject of the trust 1s not to earn profit, but the object of runningthe dharmshala is of general public utility.” 20Whether the amount spent for the construction of temple wouldamount to utilization of the funds within the meaning of Sections 11 and 12of the Act?, the Supreme Court in SRM.M.CLM. Tiruppant Trust v. CLT(1998) 230 ITR 636 where the assessee trust had spent the amount forconstruc