IN THE ITAT
v.
INCOME-TAX OFFICER, WARD 2(2),
R. C. SHARMA, ACCOUNTANT MEMBER
IT APPEAL NO. 158 (RTJ) of 2006
[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 would be more than sufficient if its intention is to benefit a section of public as distinguished from specified individuals - Held, yes – Asessee was a charitable trust on 11-8-1960 for benefit of a small religious community - By invoking provisions of section 13(1)(b), Assessing Officer denied benefit of section 11 to assessee - Whether since assessee was incorporated prior to coming into force of Act, provisions of section 13(1)(b) could not be applied to its case so as to deny benefit of section 11 - 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 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, 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 job 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 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 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 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 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 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 held that
in respect of a 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. [