No section 12A registration if Society formed only for benefit of Christians Community

By | October 8, 2015

Fact that assessee society was formed only for benefit of Christians community definitely could form a ground for denial of its registration

In as much as its income is liable to be excluded for consideration under sub section 11 and 12 where nothing had been brought on record to show that assessee-society had undertaken any charitable project in a wholly impartisan manner that is, devoid of any consideration as to religion, either in terms of people employed or support provided or served thereby; thus, assessee’s appeal for registration as a charitable institution under section 12AA was to be rejected


Buxar Diocesan Society


Commissioner of Income-tax -1, Patna



JULY  20, 2015

Shikesh Jha for the Appellant. Rishi Raj Sinha for the Respondent.


Sanjay Arora, Accountant Member – This is an Appeal by the Assessee agitating the Order u/s.12AA(b)(ii) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 23.05.2012 by the Commissioner of Income Tax-I, Patna (‘CIT’ for short), rejecting the assessee’s appeal for registration as a charitable institution u/s.12AA of the Act.

2. The controversy involved in the instant case is the maintainability or otherwise in law of the denial of registration as envisaged section 12A  r/w s.12AA of the Act to the assessee-society vide the impugned order.

3. The brief facts of the case are that the assessee, a society registered under the Societies Registration Act, 1860, applied for registration u/s.12A(1)(aa) on 25.11.2011. The ld. CIT, i.e., the competent authority under the Act, in view of clauses 3(i), 3(ii) and 3(vii) of the assessee society’s ‘Aims’ and ‘Objects’, as well as the fact that its membership, governed by clause 4 of its Charter, is restricted to Priests incardinated in the Diocese of Buxar and member of the religious order/congregations, held it to be established or formed for the benefit of a particular religious community, i.e., the Christian community, so that section 13(1)(b) of the Act, which reads as under, is attracted and, accordingly, denied registration, leading to the present appeal by the assessee:

’13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof—

(a) ** ** **

(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste.’ [emphasis supplied]

4. We have heard the parties, and perused the material on record.

4.1 The assessee’s case as made before us, was that it is both, i.e., a charitable as well as a religious society (institution). As such, even if the condition of section 13(1)(b) stands satisfied per se, the same would not be applicable in-as-much as it is a composite Trust, bearing both a charitable as well as a religious character. That is, the same would not disqualify it u/s.13(1)(b) of the Act, which is applicable only to a charitable trust/institution and, consequently, operate to deny it registration u/s.12AA of the Act. Toward the same, it relies on the decision in the case of CIT v. Barkete Saifiyah Society [1995] 213 ITR 492 (Guj), besides others by the Tribunal.

The first thing, therefore, that we ought to and, thus, consider is the character of the assessee-society and, toward which we may reproduce its ‘Object’ clause, as under:

‘ The objects for which the Society is established is to perform works of charity, social, moral, spiritual and corporal which include education, relief to the poor, medical relief through health care and any other objects of general utility and to that end:

i. To establish churches, convents, presbyteries and other religious. educational and charitable institutions of its choice for the service and welfare of the people in general and of Christians in particular and to provide for their support, maintenance and development for carrying out the purposes of the society.
ii. To provide for the proper Christian education and vocational training of the children and youth of the Christian Community and to the extent possible also of other scholars who resort to its institutions, and for that purpose to establish, administer and maintain schools, colleges, and other educational and vocational and professional-training institutions.
iii. To organize and support education and training of children and adults, both formal and non-formal, and thereby to promote a healthy human, cultural, social, political and economic environment in society.
iv. To render medical assistance to the needy through public health centers, health care centers, hospitals and dispensaries.
v. To establish homes and welfare centers for the aged, sick and destitute and conduct and promote social welfare programmes for the needy irrespective of their caste creed, race or social status.
vi. To educate, maintain and support at the discretion of the Governing Body those engaged for the works of the Society in its own institutions or other institutions and to provide such personnel with residential accommodation, and equip them suitably with necessary facilities for their work and study and to maintain them during the period of training either free of cost or for a consideration.
vii. To provide for the training and formation of priests; religious and lay persons for the more effective service of the Christian Community and of the people at large especially those belonging to the weaker sections of the society.
viii. To diffuse useful knowledge and information, human values and ideals through the medium of newspapers, films, journal, bulletins, audio visuals and other means of communication.
ix. To organize, promote, contribute and assist in social, economic, and cultural programmes aimed at promotion of social, religious, cultural and economic life and welfare of all persons and especially of the weaker sections of the Society.
x. To initiate, promote, and support projects and programmes aimed at preservation and promotion of a healthy secular, human and ecological environment.
xi. To render assistance to victims of natural calamities such as earthquakes, famine, floods, fire, epidemics, etc., irrespective of caste or creed.
xii. To promote, alter, extend, modify or terminate any social and development services to promote the establishment of a just, fair, and caring social order and for the alleviation and eradication of poverty.
xiii. To organize conferences, meetings, seminars, fees, etc., for promoting and furthering the aims of the society.
xiv. To collaborate with the government and voluntary agencies in the development, promotion and execution of charitable social economic and humanitarian.
xv. To establish, promote, or assist in the establishment and promotion of other societies and voluntary organizations with the same or similar charitable objectives as the society.
xvi. To collaborate with and assist other voluntary agencies in formulation and preparation of development projects and programmes and help in implementation and evaluation of the same.
xvii. To cooperate with national and international societies/ agencies for furthering tile attainment of the charitable objects of the Society.
xvii. To do all things that may be incidental, conducive, expedient or necessary for the better attainment of the purposes of the society. [emphasis, ours]

It is well settled that for the purpose of ascertaining or determining the nature or the character of a trust/institution, it is the predominant object or purpose governing its formation or establishment that is to be seen (refer: Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)). We are unable to, on both a cursory and even a careful reading of the same, see as to how the assessee could be said to be a religious institution or society, or even partly so. In fact, each of the defining elements of a ‘charitable purpose’, i.e., for which it is established, as stated in its preamble, find mention in the definition of the term ‘charitable purpose’, inclusively defined u/s.2(15) of the Act, i.e., as obtaining at the relevant time. The Hon’ble Courts have explained ‘religious purpose’ to be one relating to religion, which would encompass objects relating to observance of rituals or ceremonies, propagation of tenets of the religion and other allied activities of the religious community. There is nothing in the object clause to suggest propagation of Christianity or the Christian religion, much less expressed in a manner so as to bestow upon it a religious character, but only to serve the said community in particular. Even if we were to consider the three object clauses which stand singled out and impugned by the ld. CIT, the same nowhere speak of or advert to any object of a religious purpose but only of a charitable purpose. Discussing each of the said clauses afore-referred, the first, Clause 3(i), speaks of establishment of different institutions for the service and welfare of the people, i.e., states of the establishment of different institutions through the modality or instrumentality of which it intends to operate for the welfare of the society or serve the people. Clause 3(ii) speaks of educational and vocational training through the establishment and administration of different types of educational institutions, including professional training institute, i.e., concerns education. Clause 3(vii) speaks of training of different functionaries for the service of the community at large and especially people belonging to the weaker sections of the society. None of these or the other clauses of the object clause of its Memorandum could be regarded as religious, if we are not to include charity, education, medical relief, relief to the poor, or otherwise being of social, moral or spiritual service/benefit to the community at large as being a religious purpose. The same would then be of no consequence in-as-much as charitable and religious purposes would become completely intermingled or intertwined, obliterating their definite purport and independent existence, which gets rendered as of no relevance or avail. True, one can discern a sprinkling or undertone of a religious purpose, as where the object clause/s speaks of establishment of a Church, Presbytery or other religious institution. Firstly, however, the same is again only for the ‘service’ and ‘welfare’ of the people, and in that sense charitable in nature. Again, being of moral or spiritual service, or the moral or spiritual upliftment of the people – which would though assume a religious color; there being admittedly areas of overlap between charitable and religious purposes, would definitely qualify to be regarded as a work of a charitable nature. To the extent the two coincide, the assessee-society would only be considered as being of a charitable nature, i.e., including within its field areas which could also be regarded as religious. As afore-stated, it is in any case the principal or the predominant object or purpose that the institution is formed to serve, which would define its character and which we find as charitable in all its different facets. We, accordingly, find little scope for the application of the decision in the case ofBarkete Saifiyah Society (supra) in the facts and circumstances of the case. The said decision in fact cannot be said to represent the correct law, as clarified in CIT v. Dawoodi Bohra Jamat [2014] 364 ITR 31 (SC). It was held by the Apex Court that s. 13(1)(b) is equally applicable to a composite trust, and what is intended is to exclude from exemption of s. 11 is a trust which is established for the benefit of any particular religious community or caste (pg. 51, p.45).

4.2 Though subsumed in its argument, so that it does not lie in its mouth to contend to the contrary, we may yet consider, next, the validity of the charge on the assessee of it being formed for the benefit of a particular religious community, attracting section 13(1)(b) of the Act. We find the said intent to permeate the assessee’s objects, nay, Charter. The assessee-society; its name; condition of its membership; its objects, all read in conjunction and in harmony, clearly bring out the intent to serve the Christian community in preference to others, who are though not excluded, i.e., to the Christian community as being the intended beneficiary. It is nobody’s case that s. 13(1)(b) implies, or that the said provision mandates a total exclusion of all other categories, i.e., other than the preferred religious community. The word ‘only’ cannot be imported in s. 13(1)(b), i.e., prior to the words ‘for the benefit’ therein. Casus omissus cannot be lightly inferred (refer:Padmasundara Rao (Decd.) v. State of Tamil Nadu [2002] 255 ITR 147 (SC)). Then, again, what prevents a trust/institution, expressly for the benefit of a particular religious community, in-as-much as it seeks to protect, serve and promote its interest, cater only thereto. That is, it cannot be said to violate the terms or the mandate of its charter when it, through its projects, programs or other undertakings, serve only the interest of the said particular community, even as other communities are not excluded. People drawn from a cross-section of the society, affiliated by a bond of religion, as its beneficiaries would not adversely impact or detract from its public character (Ahmedabad Rana Caste Association v. CIT[1971] 82 ITR 704 (SC)). The word ‘only’ thus is not required in its Memorandum, and the words ‘in particular’ serve the desired purpose well. Its membership inures only to and the management vests only in a restricted category of Christians, i.e., belonging to a particular religious Order. It is to serve the said community, which is only a particular religious community, that the assessee-society is formed and is being administered. Further, it could be that, in reality, the society runs a school, for example, the majority students of which are non-christians. That, to our mind, would be besides the point. What is of relevance, and paramount, is that the assessee-society has the relevant power or mandate per its charter. That it may not exercise it, or may choose not to, is another matter (refer: Delhi Stock Exchange Association Ltd. v. CIT [1997] 225 ITR 235 (SC)). It is fully open for the assessee society to either not admit non-christians or admit them in a minority in-as-much as it is expressed to work for the benefit of the Christians in particular. The expression, ‘in particular’ in this context came for the consideration by the Apex Court in CIT v. Kamla Town Trust [1996] 217 ITR 699 (SC). In the facts of that case the object of the trust included construction of houses for workmen in general and, in particular, for the workmen, staff and other employees of the settlor company. The Hon’ble Court observed that though the provision relating to workmen in general did constitute a charitable object, the words ‘in particular for the workmen of the company’ negatived its public character, so that the trust could not be considered to have been established wholly for charitable purposes. What, we may again clarify, we are concerned with is the intent as expressed in the Charter, i.e., in terms of the primary purpose and the predominant object for which the institution is established, including the manner of its administration, so as to determine if it reveals a clear mandate to undertake charitable works with a view to benefit a particular religious community or not, a finding of fact, i.e., principally, the answer to which in the present case is an emphatic yes.

4.3 We may finally consider the issue as to if the assessee could be denied registration in view of attraction of section 13(1)(b) of the Act, i.e., considering that the same is expressed to preclude sections 11 and 12 of the Act. We consider it as so in-as-much as the same forms an abiding or defining feature of the applicant, in which case to what effect or purpose, one may ask, is the registration, i.e., if not toward grant of exemption u/ss. 11 and 12 of the Act, as observed by the tribunal in International School of Human Resources and Social Welfare Society (in ITA Nos. 72/Pat/2011 & 99/Pat/2012 dated 20.07.2015):

‘What, we are unable to comprehend, effect or purpose the registration would have where, notwithstanding the same, no benefit u/ss. 11 and 12 can be allowed in view of an abiding feature of the applicant’s constitution or its’ inherent nature.’

This aspect of the matter stands also gets support from the decision in the case of Dawoodi Bohra Jamat (supra), wherein the Hon’ble Court considered applicability or otherwise of s. 13(1)(b) as a valid ground while considering the issue of registration u/s. 12AA of the Act in-as-much as registration is a pre-requisite for availing the benefit of ss. 11 & 12 (pg. 41). In the facts of the case, we have found the assessee society to be formed for the benefit of the Christians community and which therefore definitely could form a ground for denial of its registration in-as-much as its income is liable to be excluded for consideration u/ss. 11 and 12 of the Act. Nothing has been brought on record to exhibit, or otherwise any case made out of, the assessee-society undertaking any (charitable) project in a wholly impartisan manner, i.e., devoid of any consideration as to religion, either in terms of the people employed; provided support (refer Cl. 3(vi)), or served thereby.

4.4 We, accordingly, in view of the foregoing, find little merit in the assessee’s case.

5. In the result, the assessee’s appeal is dismissed.

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