2015 (5) TMI 1013 - AT - Income Tax

Registration under section 12AA denied - maintenance of the temple - Held that - We are of the opinion that the maintenance expenses incurred for the building relate to the charitable activities and not the religious activities. Since learned counsel for the assessee has submitted that food is distributed to the needy which is called as Mahaprasadam and the distribution of the food to the poor people is not a religious expenditure. The temple is open to everybody without caste and creed and the temple does not show partiality to a particular religion. The temple is the place where people gather for distributing alms and donations which are given to the poor and the needy who have gathered there. The maintenance of the temple cannot be regarded for religious purpose and is for the benefit of the general public. Hence we direct the Director of Income-tax (Exemptions) to grant registration under section 12AA of the Income-tax Act 1961 to the assessee-trusts. - Decided in favour of assessee

Summary

Issues:
- Denial of registration under section 12AA of the Income-tax Act, 1961 to four different assessee-trusts based on mixed religious and charitable objects.

Analysis:
The judgment involves four appeals by different assessee-trusts against the denial of registration under section 12AA of the Income-tax Act, 1961 by the Director of Income-tax (Exemptions), Hyderabad. The Director rejected the applications citing mixed religious and charitable objects in the trust deeds, which, as per the Director, disqualified the trusts from exemption under section 11 of the Act. The Director emphasized that trusts with mixed objectives, i.e., both charitable and religious, formed after April 1, 1962, do not qualify as public religious or charitable trusts. The decision was supported by references to various legal precedents, including judgments by the Supreme Court and High Courts. The Director highlighted that trusts must demonstrate income application wholly for charitable or religious purposes to be eligible for registration under section 12AA of the Act.

The assessee-trusts challenged the Director's decision before the Tribunal, arguing that their activities were solely charitable and not religious. They contended that the Director erred in denying registration based on mixed activities. The assessee-trusts relied on legal precedents to support their claims, emphasizing that expenses related to building maintenance, free food distribution, and temple maintenance were for charitable purposes and not solely religious. They argued that the temple activities, including food distribution to the needy, were not exclusively religious and benefited the general public without religious bias.

After hearing both parties and reviewing the evidence, the Tribunal disagreed with the Director's assessment. The Tribunal noted that section 12A does not prohibit charitable institutions with mixed objects from seeking registration. Citing relevant legal cases, the Tribunal emphasized that maintenance expenses for the temple were charitable in nature, benefiting the general public without religious discrimination. The Tribunal found that the distribution of food to the needy and temple maintenance did not solely serve religious purposes but contributed to charitable activities accessible to all, irrespective of religion. Consequently, the Tribunal directed the Director of Income-tax (Exemptions) to grant registration under section 12AA of the Income-tax Act, 1961 to the assessee-trusts, allowing the appeals and overturning the denial of registration.

In conclusion, the Tribunal's judgment clarified that trusts with mixed charitable and religious objects can qualify for registration under section 12AA if they demonstrate that their activities primarily serve charitable purposes accessible to all, irrespective of religious affiliations. The judgment underscores the distinction between religious and charitable activities in determining eligibility for registration under the Income-tax Act, emphasizing the importance of benefiting the general public through charitable endeavors to qualify for tax exemptions.