2011 (4) TMI 564 - AT - Income Tax

Approval u/s 80G(5)(vi) - assessee is a Society, constituted and registered under the Societies Registration Act, 1860, bearing Registration No. 54/1964 dated 29-12-1964 - The assessee, however, contends that it is not undertaking any religious activity, but only charitable activities, which are not directed toward any particular community, religious or otherwise, but are available to all sections of the society, without any preference to any religion or caste - being a minority institution, entitled to the rights and privileges complied under Articles 25 to 30 of the Constitution of India, it is, however, entitled to work particularly for the benefit of the religious community, to further whose interests it is constituted, i.e., the Muslim community, besides backward classes - with regard to the educational activities, however, it cannot be so said and the matter would, therefore, require being restored back to the file of the competent authority to decide the same with regard to the actual activities of the society - Appeal is allowed for statistical purpose

Summary

Issues Involved:
1. Denial of approval under section 80G(5)(vi) of the Income-tax Act, 1961.
2. Whether the Society's activities are directed towards a particular religious community.
3. Interpretation of section 80G(5)(iii) in relation to the Society's charter and actual activities.
4. Relevance of Articles 25 to 30 of the Constitution of India concerning minority institutions.

Detailed Analysis:

1. Denial of Approval under Section 80G(5)(vi):
The appeal concerns the denial of approval under section 80G(5)(vi) by the Commissioner of Income-tax, Calicut. The Society, registered under the Societies Registration Act, 1860, primarily runs educational institutions and orphanages, and its income has been exempt under section 10(23C)(iv) since the assessment year 2002-03. The Society had previously been granted approval under section 80G since 1979, but the latest application for renewal was rejected due to the Society allegedly having mixed objects, i.e., religious and charitable, benefiting a particular religious community.

2. Society's Activities Directed Towards a Particular Religious Community:
The primary contention from the Revenue was based on clause 4(m) of the Society's Rules and Regulations, which includes 'zakath' as a mode of raising funds, a religious obligation in Islam. The Commissioner found that the Society's activities, as reflected in its accounts, were directed towards a specific religious minority. The Society argued that its activities were purely educational and not religious, and that its accounts were maintained as before, with no religious bias.

3. Interpretation of Section 80G(5)(iii):
Section 80G(5)(iii) stipulates that approval is denied if the institution is "expressed to be for the benefit of any particular religious community or caste." The Tribunal noted that the legislative intent is clear that if the institution's charter expresses a preference for a particular community, the prohibition applies, regardless of actual activities. The Tribunal referred to the Supreme Court's decision in CIT v. Palghat Shadi Mahal Trust, which supports this interpretation.

The Tribunal examined the Society's Rules and Regulations, particularly clause 3A, which states that the Society is established by the Muslim community and entitled to rights under Articles 25 to 30 of the Constitution of India. Clause 4(a) emphasizes promoting education among minorities and backward classes. The Tribunal concluded that the Society's charter does express a preference for a particular religious community, thus attracting section 80G(5)(iii).

4. Relevance of Articles 25 to 30 of the Constitution of India:
The Tribunal discussed Articles 25 to 30, which protect religious freedom and minority rights, including the right to establish educational institutions. Article 30 allows minorities to establish and administer educational institutions of their choice. The Tribunal noted that the Society, being a minority institution, is entitled to these rights. However, the Tribunal emphasized that section 80G(5)(iii) must be interpreted strictly, and any preference in the Society's activities towards a particular religious community would disqualify it from approval.

Conclusion:
The Tribunal concluded that:
- The Society is formed for the advancement of all sections of society.
- As a minority institution, it is entitled to work for the benefit of the Muslim community and backward classes.
- The Society's non-educational activities do not attract section 80G(5)(iii).
- The Society's educational activities require further examination regarding their actual execution to determine compliance with section 80G(5)(iii).
- The earlier findings of the Commissioner are vacated, and the matter is remanded for further examination.

The appeal is allowed for statistical purposes.