In the ITAT
v.
Income-tax Officer, Ward 2(2),
R.C. Sharma,
Accountant Member
IT Appeal
No. 158 (
[Assessment year
2002-03]
June 1, 2006
Section 11, read with sections 2(15) and 13, of
the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income
from property held under - Assessment year 2002-03 - Whether in order to serve
a charitable purpose, it is not necessary that object of assessee-trust should
be to benefit whole of mankind or all persons living in a Country or State; it
will be more than sufficient if its intention is to benefit a section of public
as distinguished from specified individuals - Held, yes - Whether where Trust
established before commencement of Act for benefit of a particular religious
community, bar under section 13(1)(b) would not be applicable, and trust will
be entitled to exemption in respect of its entire income - Held, yes
Words and phrases :
‘object of general public utility’ as occurring in section 2(15) of the
Income-tax Act, 1961
Facts
The assessee-trust was incorporated on 11-8-1960. In its return of income for the assessment year 2002-03, the assessee claimed deduction of expenditure incurred by it towards earthquake relief. The Assessing Officer disallowed the said claim under section 13(1)(b) on the ground that the assessee’s charitable nature of activities was limited to the benefit of a small religious community. On appeal, the assessee contended that since it was created before the commencement of the Act, the provisions of section 13(1)(b) could not be made applicable to its case. The Commissioner (Appeals) declined to entertain the said plea on ground that the same was not taken before the Assessing Officer, and upheld the applicability of section 13.
On second appeal :
Held
An object of public utility need not be an object
in which the whole of the public is interested, it is sufficient if the
well-defined section of public benefits by the object. The expression ‘object
of general public utility’ as appearing in section 2(15), is not restricted to
objects beneficial to the whole mankind. An object beneficial to a section of
the public is an object of general public utility. To serve a charitable
purpose, it is not necessary that the object should be to benefit the whole of
mankind or even all persons living in a particular country or province. It is
sufficient if the intention is to benefit a section of the public as distinguished
from specified individuals. Furthermore, an object which is beneficial to a
section of the public is an object of general public utility. In order to serve
a charitable purpose, it is not necessary that the object of the assessee-trust
should be to benefit the whole of mankind or all persons in a Country or State.
It will be more than sufficient if the intention is to be benefit
a section of the public as distinguished from specified individual. The section
of the community sought to be benefited must be sufficiently definite and/or
identifiable by some common quality of public or impersonal nature. The
personal element or personal relationship which takes a group out of a section
of the community for charitable purpose is of the nature which is to be found
in cases where the nexus between them is their personal relationship to a
single propositus or to several propositi.
Therefore, there was no merit in the conclusion of the lower authorities to the
effect that since the assessee was created for the benefit of particular
community, which was a small community, benefit of
section 11 should be denied. [
With regard to non-application of the provisions of section
13(1)(b), the assessee was incorporated prior
to the coming into force of the Act. The provisions of section 13(1)(b) were, therefore, not applicable to the assessee.
Documentary evidence with regard to incorporation of the assessee on 11-8-1960, was very much before the Assessing Officer. The legal
issue even though raised for the first time before the Commissioner (Appeals)
was liable to be accepted in view of the verdict of the Supreme Court in the
case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383
wherein it was held that where additional ground raises a purely legal plea
which goes to the very root of the matter, the same deserves to be admitted.
Whether the provisions of section 13(1)(b) were
applicable to the assessee, was purely a legal issue. As the entire facts
relating to incorporation of the assessee were already on record, there was no
merit in the action of the Commissioner (Appeals) for declining to accept the
legal ground and to adjudicate the same. In the assessment order itself, it had
been clearly mentioned that the assessee was incorporated in SY 2016. That fact
was also mentioned in the copy of memorandum and articles of trust submitted to
the Assessing Officer. The Assessing Officer had not controverted
that fact which was already on record. Therefore, there was no merit in the
action of the lower authorities for declining the exemption claimed under
section 11, by invoking the provisions of section 13(1)(b).
[
The Madhya Pradesh High Court in the case of CIT v. Shri Maheshwari Agrawal Marwari Panchayat [1982] 136 ITR 556/10 Taxman 183 has held that
where trust established before the commencement of the Act for the benefit of a
particular religious community, bar under section 13(1)(b)
would not be applicable, and the trust will be entitled to exemption in respect
of its entire income. [
In the result, the appeal was to be allowed.
Cases Referred to
National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) (para 6) and CIT v. Shri Maheshwari Agrawal Marwari Panchayat [1982] 136 ITR 556/10 Taxman 183 (MP) (para 7).
G.R. Sanghavi for the Appellant.
D.R. Adhia for the Respondent.