S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 1/38 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. S.B. CIVIL WRIT PETITION NO.5060/2006 Umaid Charitable Trust. versus The Union of India and ors. PRESENT HON'BLE Dr.JUSTICE VINEET KOTHARI Mr.Mahendra Gargeiya, for the petitioner. Mr.K.K. Bissa, for respondents REPORTABLE DATE OF JUDGMENT : 2nd May, 2008. JUDGMENT 1. This writ petition has been filed by the petitioner Umaid Charitable Trust, Pali being aggrieved by the order passed by the Commissioner of Income Tax-I, Jodhpur dated 16.12.2004 refusing to renew the registration of exemption of the petitioner – Trust by the impugned order passed under Section 80G(5(vi) of the Income Tax S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 2/38 Act, 1961. According to the said order, exemption certificate granted to the petitioner Trust under Section 80G of the Act by order dated 20.3.2002 was effective for a period from 1.4.2001 to 31.3.2004 and the petitioner – Trust by application for renewal of said exemption on the prescribed from No.10G on 23.8.2004. However, the learned Commissioner found that in income and expenditure statement of the trust for the period ended on 31.3.2004, the trust had spent a sum of Rs.20,000/- for repairing and colouring of Lord Vishnu's temple out of its total income for the said previous year of Rs.26,727/- and therefore since the petitioner – Trust had incurred expenditure exceeding 5% of its total income of that year on a particular religion, according to the learned Commissioner, the said Trust was not entitled to renewal of exemption under section 80G of the Act as per provisions of Section 80G(5)(B) of the Act and therefore, following the decision of Hon'ble Supreme Court in the case of Upper Ganges Sugar Mills reported in (1997) 227 ITR 578 (SC), the learned Commissioner rejected the said application for renewal. 2. The petitioner approached this Court by way of present writ petition being aggrieved of the said order. S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 3/38 3. Mr. Mahendra Gargeiya learned counsel for the petitioner urged that petitioner – trust is wholly a charitable trust and the object clause of the said trust-deed clearly shows that said trust had undertaken activities of charitable nature and it is not meant for any particular religion and therefore, the learned CIT (A) has erred in rejecting the application for renewal of exemption under Section 80G of the Income Tax Act. He submits that said expenditure of Rs.20,000/- was by way of donation to another trust which carried out repair and renovation of Lord Vishnu's temple. He also raised the contention that the said expenditure was out of accumulated fund of the said trust carried forward from last year and therefore, the conditions of Section 80G(5) of the Act were not violated by the petitioner – trust. He relied upon the various judgments in support of his contention. 4. On the side opposite, Mr. K.K. Bissa, appearing for the respondent Income Tax Department urged that since the petitioner – trust had spent more than 5% of its total income for the previous year ending on 31.3.2004 for repair and renovation work of temple of a S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 4/38 particular region i.e. Hindu religion, the petitioner Trust had violated the condition of renewal and therefore, the learned Commissioner was justified in passing the impugned order. He relied upon the judgment of Hon'ble Supreme Court in Upper Ganges Case (supra) along with two decision of this Court, reference to which will be made hereinafter. 5. That before considering the various judgments on this aspect of the matter, it would be appropriate to reproduce the relevant provisions of Section 80G of the Act to the extent the same are relevant for the controversy involved in the present case. “Deduction in respect of donations to certain funds, charitable institutions, etc. 80G. (1)............. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a)(i) to (iiihj) (iv) any other fund or any institution to which this section applies; or S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 5/38 (v) to (viii)(a) to (d) (3)......... (4)......... (5)This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills the following conditions, namely:- (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of Sections 11 and 12 or clause (23AA) or clause (23C) of section 10: Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if- S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 6/38 (a) the institution or fund maintains separate books of account in respect of such business; (b) the donations made to the institutions or fund are not used by it, directly or indirectly, for the purposes of such business; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not used, directly or indirectly, for the purposes of such business; (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purposes other than a charitable purposes. S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 7/38 (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; and S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 8/38 (vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf; Provided that any approval shall have effect for such assessment year or years, not exceeding (five) assessment years, as may be specified in the approval. (5A) Where a deduction under this section is claimed and allowed for any assessment year in respect of any sum specified in sub-section (2), the sum in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year. (5B) Notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 9/38 of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. 5C..... (i)......... (ii)...... (iii).......... (iv)..... (v).... Explanation 1:........... Explanation 2:............. (i) ......... (ii)......... Explanation 3:- In this section “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature.” Explanation 4:......... Explanatin 5:............. S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 10/38 6. The learned counsel for the petitioner also relied upon Rule 11AA of the Income Tax Rules, 1962 particularly Sub-Rule 4 to 6 of the said Rule 11AA, which are reproduced hereunder: “Requirements for approval of an institution or fund under Section 80G. (1)........... (2)............ (3).......... (4) Where the Commissioner is satisfied that all the conditions laid down in clause (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid. (5) Where the Commissioner is satisfied that one or more of the conditions laid down in clauses (i) to (v) of Sub- section 5 of section 80G are not fulfilled, he shall reject S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 11/38 the application for approval, after recording the reasons for such rejection in writing: Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard. (6) The time limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the date on which such application was made: Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded”. 7. Now a scrutiny of relevant case laws on the controversy involved in the present case is considered expedient at this stage. From the side of the assessee – petitioner, following case laws are relied upon which are noticed with relevant extract from the same as below: S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 12/38 8. In Addl. CIT, Gujarat V. Surat Art Silk Cloth manufactures Association (1980) 121 ITR 1 (SC), the Hon'ble Apex Court held that where the main or primary objects are distributive, each and every objects must be charitable in order that the trust or institution may be upheld as a valid charity. But if primary and dominant purpose of the trust is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. It was observed that the primary and dominant purpose in the present case was promotion of commerce and trade in art silk etc., was an object of public utility not involving the carrying on of any activity for profit within the meaning of s.2(15); and that the assessee was entitled to exemption. 9. In CIT, Bombay City – V, Bombay v. K.H. Kusumgar (1988) 169 ITR 370 (Bom), the Bombay High Court observed that where the object of a charitable trust was, inter alia, imparting of education and encouragement and promotion of the study and practice of the Shewatamber Jain Murtipujak religion amongst students of ashrams, boarding – houses, gurukuls, vidyalayas, pathshalas and S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 13/38 shravikashramas and also amongst all persons without distinction of sex, caste, creed, place or religion, a gift of immovable property made to such charitable trust could not be said to be for a purpose the whole or substantially the whole of which was of a religious nature and the gift would be entitled to exemption under s.5(1)(v) of the Gift Tax Act. 10. In Tirumala Tirupati devasthanam v. Chief CIT and anr. (2001) 251 ITR 849 (A.P.), the petitioner institution maintained 10 temples and 22 educational institutions, peer home and bala mandir specified in Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987. The petitioner provided free food, free accommodation, free transport to the pilgrims irrespective of caste and religion on the simple declaration of faith in the Lord. The Hon'ble High Court, while allowing the writ petition and setting aside the order of the Commissioner of not granting exemption to the petitioner and directing him to consider the application do novo in light of Hon'ble Court's order, held that “Section 80G of the Income Tax Act, 1861, provides for deduction in respect of donations to certain funds and institutions. It applies to donations to any S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 14/38 institution or fund established in India for charitable purpose and if it fulfills the following conditions, namely the instrument under which the institution is constituted does not or rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose. Sub-section 5 read with Explanation 3 makes it clear that the Commissioner can refuse to grant recognition under section 80G of the Act only in the event of finding that the claimed charitable purpose includes any purpose the whole or substantially the whole of which is of a religious nature.” It was held that in the present case there was no such finding and hence the Commissioner ought not have refused the claim of petitioner. 11. In Sri Ramakrishna Sewa Ashrama V. CIT (2001) 252 ITR 171 (A.P.), the petitioner, a registered society, had many objects including those charitable in nature, to diffuse scientific knowledge on Vedanta and the promotion of science, literature and fine arts. One of the objects was preaching ideals of Hinduism. It was granted approval for deduction under section 80G but its subsequent S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 15/38 applications for approval were rejected by the Commissioner on the ground that preaching of ideals of Hinduism and other religions amounted to an object of religious nature. The Hon'ble High Court, while setting aside the rejection and restoring the matter before Commissioner held that although the aims and objects of the petitioner did not include some purely religious activities, they also included many temporal and secular activities such as to diffuse scientific and technical knowledge on Vedanta and also for promotion of science, literature, find arts, charitable institutions in educational, technical, social and scientific fields to carry on spiritual and cultural works, study of philosophies of different cultures and civilizations, etc. The rejection of Commissioner did not satisfy the requirements of a reasoned decision or speaking order. The Commissioner had to consider the applications of the petitioner under Section 80G and apply his mind to the material placed before him and take a decision by a reasoned order. It was also observed that when the Commissioner grants or refuses to grant approval to an institution under Section 80G, he acts as a quasi-judicial statutory authority: the conclusion reached and the findings recorded by him have to be supported by reasons. S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 16/38 Past Activities of Applicant to be seen 12. In Kirti Chand Tarawati Charitable Trust V. Director of Income Tax (Exemption) and Ors, (1999) 152 CTR (Del) 322, the Delhi High Court observed that “for the purpose of construing the purpose of the trust, one need not remain necessarily confined to the objects of the trust and set out in the deed of declaration. The real purpose of the establishment of the trust has to be found out and spelled out. 'Purpose' means that which one sets before him to accomplish or attend, an intention or aim, object, plan, project; the term is synonymous with the ends sogut and an object to attain, an intention, etc. Purpose must obviously be construed as a real purpose and not a purpose as it outwardly appears to be. Any other interpretation would permit a fraud being played on the law permitting exemption from taxation. If the argument of counsel of petitioner were to be accepted then a trust may be established with a purpose as set out in the deed of declaration which appears to be highly charitable but the trust may in fact be engaged in such activities which cannot even remotely be called charitable, and yet the donations made to it would enjoy exemption. The authority conferred S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 17/38 with the power to grant exemption is not debarred from finding out the real purpose as distinguished from the ostensible purpose and if it may find that the purpose of the trust was other than charitable then nothing debars the authority from denying the approval. The purpose of the establishment – the real purpose as distinguished from the ostensible purpose- is germane to the inquiry, which the CIT has to hold while granting or refusal to grant approval.” 13. In Hiralal Bhagwati v. CIT (2000) 246 ITR 188 (Guj.), it was observed by the Gujarat Court that an object beneficial to a section of the public is an object of “general public utility.” To serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province. The Hon'ble Court further opined that the CIT has to examine the objects of creating the trust as well as an empirical study of the past activities of the appellant has to be done. The CIT has to examine that it is really a charitable trust or institution entitled for registration. S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 18/38 14. In CIT V/s Sh. Jagannath Jew (1977) 107 ITR 9 (SC), the Hon'ble Supreme Court speaking through Krishna Iyer J. held at page 19 as under: “The law is set out thus by B.K. Mukherjea: “The fact that property is ordinarily described as debutter is certainly a piece of evidence in favour of dedication, but not conclusive. In Binod Behari V. Manmatha (1915) 21 CLJ 42 (Cal), Cox. J. observed as follows: “The fact that the property is called debutter is a doubtless evidence in the plaintiff's favour but it does not relieve them of the whole burden of proving that the land was dedicated and is inalienable. Though inconclusive, it carries weight in the light of what we may call the mission of the disposition which is inspired by devotion to “my Thakoor” and animated by a general religious fulfillment. It must be remembered that the donor was not tied down by bigotry to performance of pujas, important though they were. A more cosmic and liberal view of Hinduism informed his soul and so in his declaration of dedication of S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 19/38 Sree Jagannathjee he addressed to the managers many directions of a broadly religious and charitable character. His injunction to feed the poor was Narayana seva, for worship of God through service of man in a land where the divinity in daridra Narayana is conceptually common place and, while it is overtly secular, its motive springs from spiritual sources. It is religion to love the poor. Likewise his insistence on the aviary and the menagerie and throwing open both to the people to see and delight is not a mundane mania but has deeper religious roots. Hinduism worships all creation: " श न अस द पद श च षपद" (Peace be unto all bipeds and even so to all quadrupeds). Indeed, the love of sum-human brethren is high religion. For “He prayeth best, who loveth best All things both grat and small For the dear God who loveth us. He made and loveth all.” (Coleridge, in Ancient Mariner) S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 20/38 From the Buddha and Mahavira to St. Francis ofAssissi and Gandhiji, compassion for living creatures is a profound religious motivation. The sublime mind of Mullick was obviously in religious sympathy with fellow beings of the lower order when he showed this tenderness to birds and beasts and shared it with the public. The art gallery too had link with religion in its wider connotation although it is plainer to regard it as a gesture of aesthetics and charitable disposition. God is Truth. Truth is beauty, beauty is Truth. A thing of beauty is a joy for ever. In fact for a highly elevated Indian mind, this conceptual nexus is not far-fetched. The garden and the love of flowers strike a psychic chord at once beautiful and religiously mystical, as any reader of Wordsworth or other great poet in English or Sanskrit will agree. The point is that the multiform dispositions had been united by a spiritual thirst and if read in their integrality, could be designated religious-cum-charitable. In sum, the primary intendment was to dedicate as debutter and to direct fulfilment of uplifting religious and para-religious purposes, the focus being on S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 21/38 worship of Sree Jagannathjee and the fall-out some subsidiary, yet significant, charitable items. The finer note struck by the felt necessities of his soul was divinised and humanised, the central object being Sree Jagannathjee, the Lord of the Universe.” 15. In CIT, Gujarat v. Swastik Textile Trading Company Pvt. Ltd. (1978) 113 ITR 853 (Guj.), the Gujarat high Court observed that compassion for living creatures, although it motivates all true religion, is also practical spirituality as it has an elevating moral influence, fostering a deep sense of fellow feeling and fraternity. Such acts not only fulfill our cherished human values but they equally promote public goods and welfare and are, therefore, dominantly religio-charitable, it was further held that the Tribunal was right in holding that the donations to the trust could be deducted. The Hon'ble Court, while quiting CIT V. Shri Jagannath Jew (1977) 107 ITR 9 (SC), where the amounts spent for religious and charitable purposes such as feeding of poor were excluded from the total income, observed on page 865, “it is religion to love the poor.” S.B. CIVIL WRIT PETITION NO.5060/2006 -UMAID CHARITABLE TRUST V/S THE UNION OF INDIA .: JUDGMENT DTD. 2.5.2008 22/38 16. In S.P. Mittal v. UIO, AIR 1983 SC 1, the Hon'ble Supreme Court discussed the definition of religion. It was observed by Chinappa Reddy J. in para 12 at page 5 that “Constitution views religion, as comparising thought, expression, belief, faith or worship, as involving the conscience and as something which may be professed, parcticed and propagated and which is any man's attribute in the same manner as race, sex, language, residence etc. We also see that economic, financial, political or other secular activity may be associated with religious practice though such activity is not covered by the guarantee of freedom of conscience and the right freely to profess, practice and propagate religion. So, the Constitution considers religion