1. These appeals of the revenue relate to the assessment years 1978-79 to 1984-85 and arises out of the orders of the Deputy Commissioner of Income-tax (Appeals), Range-III, Bangalore. The aforesaid appeals involve a common issue and are, therefore, heard together and disposed of by a common consolidated order for the sake of convenience. In all the aforesaid appeals the main ground taken by the revenue is that, on the facts and in the circumstances of the case, the DCIT(A) erred in directing the Income-tax Officer to treat the assessee as a charitable institution and, therefore, granting exemption under Sections 11 and 12 of the IT Act. The assessee has filed returns of income for all the assessment years in question on 30-9-1986. The reasons given by the ITO in refusing to treat the assessee as a charitable institution under Section 2(15) of the IT Act and his refusal to grant exemption to the assessee under Sections 11 and 12 of the IT Act are contained in the assessment order passed by him for the assessment year 1984-85. The DCIT(A) also has given detailed reasons in allowing exemption to the assessee under Sections 11 & 12 in the order passed by him for the assessment year 1984-85. Therefore, I proceed to decide the appeals on the basis of the order passed by the DCIT(A) for the assessment year 1984-85 which applies to all the previous assessment years in question.
2. In the course of assessment proceedings, the ITO has called for the memorandum of association of the assessee society. The objects of the assessee society, as per the memorandum of association, are as under : (a) to enable the members to live lives of prayer, penance and manual work and to engage in such charitable religious activities as in the spirit of the "Enclosed Carmelite Tradition", (b) to accept donations in cash and kind for the maintenance of the members and the fulfilment of the objects of the Monastery, (c) to do all things as may be incidental or conducive to the attainment of all or any of aforesaid objects.
After perusing the objects of the assessee, as per the memorandum of association, the ITO came to the conclusion that the nature of charitable activity is not spelt out in the memorandum of association of the assessee society and from the language of the memorandum of association it is not possible to ascertain whether the activities are of charitable nature or religious activities. According to the ITO, the only activity is offering of prayers and meditation by the members and this being the main activity and other activities like maintenance of dairy, poultry, hosts, etc. being wholly incidental it cannot be said that the activities come within the purview of Section 2(15) of the IT Act. He, therefore, rejected the claim of exemption made by the assessee under Sections 11 & 12 of the IT Act.
3. The second claim made by the assessee before the ITO is that it is a public religious institution. The ITO examined the rules and regulations of the society and found that the membership is confined to members of the sisterhood and that the Chapter shall have its own right to admit candidates to the monastery and the decisions In this regard are final. In other words, the membership is restricted. The ITO, on the ground that there is neither any contact with the public nor is there any public participation in the activities, held the society cannot be termed as a public religious trust.
4. As against the order of the ITO, the assessee went up in appeal before the DCIT(A) before whom the learned counsel for the assessee filed statement of facts explaining the objects and performance. The statement of facts, as given by the assessee's counsel, are as follows; (a) The carmelite convent is registered under Section 12A of the IT Act as a religious and charitable institution. The main object enshrined in the carmelite traditions is the observance by its members, of lives of prayer, penance and manual work and the engagement in such charitable and religious activities as are in the spirit of the enclosed carmelite traditions.
(b) The carmelite convent is a veritable power house of prayer and penance invigorating and strengthening the likes of all the charitable institutions, churches and the public, in general. Many non-Christians also make use of their activity of prayer and penance by requesting that prayers be said and sacrifices be made on their behalf. Consequently, it can be seen that the observance of prayers and sacrifices are for the benefit of all persons irrespective of nationality, religion, caste or creed. The carmel religious order is established throughout the world and is renowned world-wide for their work of prayer and sacrifice.
(c) The carmelite convent is a public religious institution in that Its activities involve the public, there is contact with the public and further, there is public participation in its activities.
Admittedly, the carmelite nuns live a life of seclusion, away from the material world. However, they do meet people, their activities involve the public and they too have interaction with the general public. Any person wishing to be counselled or wishing to meet the carmelite nuns with a personal request that prayers and sacrifices be made on their behalf is welcome in the Institution. The carmelite nuns meet and converse with the public, listen to their problems and give them counselling/advice. They offer prayers, penance and sacrifices on their behalf. In specific instances they recommend a poor and deserving person to a sister catholic institution for employment purposes or vocational guidance/training. The general public is permitted to offer prayers in the Chapel, subject however, to the observance of the closed carmelite tenets/principles.
Apart from filing the detailed statement of facts mentioned supra, the learned counsel also contended before the DCIT(A) that there is a convent by name Cloistered Carmel, Mangalore and it has applied for exemption under Section 10(23C)(v) of the IT Act and the Board has notified the same under its notification No. S.O. 803 dated 29-2-1984.
He also contended that the assessee's activities are almost the same as that of Cloistered Carmel. If Cloistered Carmel has been given exemption under Section 10(23C)(v) then it amounts that the Cloistered Carmel is doing charitable activities. Since the activities of the assessee are almost the same as that of Cloistered Convent, the counsel argued that the assessee is doing charitable activities. He has also filed before the DCIT(A) a letter from Dr. Alphonsus Mathias of Bangalore wherein he has stated that the assessee "erected as a public religious institution dedicated to prayer, sacrifice and good works for the promotion and welfare of our churches and various charitable works carried out in the Archdiocese of Bangalore irrespective of caste, creed and community." This congregation carried out this unique work of public charity, whereby they fast and make personal sacrifices and offer prayers, so that the various works of charity may be blessed by God". The counsel also produced before the DCIT(A) a letter dated 23-3-1976 by the CIT-I, Bangalore, registering the assessee under Section 12A of the IT Act. After carefully considering the arguments advanced by the learned counsel for the assessee and perusing the objects of the assessee society, as per the memorandum of association, the DC1T(A) directed the ITO to treat the assessee as a charitable institution and also grant exemption to the assessee under Sections 11 & 12 of the IT Act. As against this order of the DCIT(A) the revenue is in appeal before me.
5. The learned departmental representative contended before me that the assessee is a convent belonging to carmelite sect. The nuns in the aforesaid society are kept in seclusion and they have no interaction with the public. Apart from offering prayers the society is engaged in activities like maintenance of dairy,, poultry, hosts, etc. and earn income and this income, according to him, is utilised by the members themselves. He contended that since the benefit enures only to the members and not to the general public the assessee cannot be treated as a charitable institution under Section 2(15) of the IT Act. It may be true that the assessee has constructed a prayer hall and offering prayers for the public but the income generating activity has nothing to do with this activity of prayer house and no exemption can be granted in respect of the income earned by the assessee under Sections 11 & 12 of the IT Act. The learned departmental representative contended that the main activity of the assessee society is maintenance of dairy, poultry, hosts, etc. and not offering of prayers. He, therefore, supported the orders of the ITO.6. The learned counsel for the assessee, on the other hand, drew my attention to the grounds taken by the revenue before the Tribunal and read out to me ground 3(a) wherein the department itself has accepted that the main activity of the assessee are confined to performing of the prayer and meditation by the members. He contended that the definition of'charitable purpose'contained in Section 2(15) is only illustrative and not exhaustive. According to him it is only an inclusive definition. Apart from the 'charitable purposes' mentioned in the aforesaid section, namely, "relief to the poor, education, medical relief and the advancement of any other object of general public utility", there are various other objects which, by their nature, should be judged whether they are charitable or not. For the proposition that the definition of 'charitable purpose' as contained In Section 2(15) is only illustrative and not exhaustive he relied upon the decision of the Andhra Pradesh High Court in the case of Andhra Pradesh State Road Transport Corporation v. CIT [1975] 100 ITR 392 and subsequently confirmed by the Supreme Court in CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1. To counter the argument of the learned departmental representative that the nuns in the assesses society are kept in seclusion he contended that the carmelite nuns meet and converse with the public, listen to their problems and give them counselling/advice. They also offer prayers, penance, sacrifices on their behalf. In some specific instances these nuns also recommend a poor and deserving person to a sister catholic institution for employment purposes or vocational guidance training.
Apart from this, the learned counsel contended that the general public also is permitted to offer prayers in the Chapel. He contended that the nuns by praying for general public involve them in the prayer and the prayer is meant for the benefit of the general public. It is not as if that the nuns are praying for their own benelit. They pray mainly for the needs and sufferings of the general public. He, therefore, contended that since the main object of the assessee society is to offer prayers which has also been admitted by the revenue, the assessee society should be treated as a charitable institution and also as a public religious institution and exemption under Sections 11 & 12 of the IT Act should also be granted.
7.1 have carefully considered the facts and circumstances of the case, the material on record and the arguments advanced by both the parties.
The first and foremost object of the assessee society, as contained in the memorandum of association, is to enable the members to live lives of prayer, penance and manual work and to engage in such charitable religious activities as in the spirit of the enclosed carmelite tradition. From the aforesaid object contained in the memorandum of association, it cannot be disputed that the main object of the association is to offer prayer. For this purpose the assessee society has constructed a prayer tower where the general public is permitted to offer prayers. It is also seen that the carmelite nuns meet and converse with the public, listen to their problems and give them counselling. From this it can be concluded that though the nuns are kept in seclusion they have also interaction with the public and they involve the public while offering prayers. Incidentally, the assessee society is also engaged in the activities of maintaining dairy, poultry, hosts, etc. for earning income which income, of course, enures to the benefit of the members only. The fact that the income earned by the assessee society from the afpresaid activities enures to the benefit of the members only indicates that the society has no profit motive. The definition of "charitable purpose" as contained earlier to 1-4-1984 is as follows: charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit The fact that the main object of the society is offering prayers to the public shows that it is for the general public utility. When it is accepted that the main object of the assessee society is for general public utility then the next limb of the definition which is to be examined is whether it involves any activity for profit. From the facts on record it is clear that though the assessee is engaged in the activities of maintaining dairy, poultry, hosts, etc., the income earned by the assessee from the aforesaid activities enures to the benefit of the members only. Probably for the maintenance of the nuns this activity is being carried on. It is not the case of the department that the income is earned with a profit motive. Since there is no profit motive in earning the income by the assessee society it can safely be concluded that the assessee society is a charitable institution and also a public religious institution. It can also be concluded that the assessee society is entitled to exemption under Sections 11 and 12 of the IT Act, 196.1. This view of mine is supported by the decision of the Andhra Pradesh High Court in Andhra Pradesh State Road Transport Corpn's case (supra) which has been subsequently confirmed by the Supreme Court in the decision in Andhra Pradesh State Road Transport Corpn's case (supra). I, therefore, fully agree with the order passed by the DCIT(A) and the appeals filed by the revenue are dismissed.