2015 (8) TMI 183 - HC - Income Tax

Registration under Section 12AA declined - Whether the educational society run by the particular community is debarred for registration under Section 12AA even if it is carrying out charitable activities which benefit the community at large including persons belonging to other religion? - Held that - Memorandum of Association and the objective of the trust have not been into consideration in a proper perspective. A perusal of the same would go on to show that the purpose of association apart from the imparting of education to the children of a particular religion was also to provide sound education to persons belonging to other communities regardless of caste, creed, colour or distinction of any kind in order to produce enlightened and responsible citizens for the country. The object also further provided that each child was to discover and develop his/her potential as an individual by encouraging enquiry and creativity and to provide a well rounded education and high academic standard and to develop responsible citizenship in the students and to encourage appreciation of national and cultural heritage. A perusal of the information supplied in the reply to the show cause notice would go on to show that less than 10% of the students of a particular community were studying in the last year and for the earlier period, the percentage was even less. In such circumstances, the reasoning given that the appellant was only imparting education to a particular religion, sect or group was not based on any sound footing. The objects of the society have already been reproduced above which go on to show that society was to provide sound education to persons regardless of caste, creed, colour or distinction of any kind and help the children to and discover and develop potential as well as individuals by providing a well-rounded education. The charitable purpose under Section 2(15) of the Act provides for relief of the poor pertaining to education and the advancement of any other object of general public utility. The purpose to provide education to the children would fall very much within the charitable purpose and predominant purpose of the appellant has to be seen. See Commissioner of Income-Tax Vs. Jodhpur Chartered Accountants Society 2002 (4) TMI 28 - RAJASTHAN High Court and Ahmedabad Rana Caste Association Vs. CIT 1971 (9) TMI 8 - SUPREME Court - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for registration under Section 12AA of the Income Tax Act, 1961.
2. Interpretation of charitable activities under Sections 11 and 12 of the Act.
3. Applicability of Section 13(1)(b) concerning benefits to a particular religious community.
4. Examination of the objectives and activities of the appellant society.

Detailed Analysis:

1. Eligibility for Registration under Section 12AA of the Income Tax Act, 1961:
The appellant society, registered with the Registrar of Societies since 1976, filed for registration as a charitable institution under Section 12AA on 30.10.2012. The CIT declined the registration on the grounds that the society was created for the benefit of a particular religious community, invoking Section 13(1)(b) of the Act. The Tribunal upheld this decision, emphasizing that the education was primarily for the Christian community, which was contrary to the law. The High Court found this reasoning unjustified, noting that the society's objectives included providing education to all communities, not just Christians.

2. Interpretation of Charitable Activities under Sections 11 and 12 of the Act:
The appellant argued that their activities fell under the charitable purpose as defined in Section 2(15) of the Act, which includes education and the advancement of any other object of general public utility. The High Court agreed, stating that the society's purpose to provide education to children, regardless of caste, creed, or religion, aligned with the charitable purposes outlined in the Act.

3. Applicability of Section 13(1)(b) Concerning Benefits to a Particular Religious Community:
The authorities initially denied registration based on Section 13(1)(b), which restricts benefits to institutions serving a particular religious community. However, the High Court found that less than 10% of the students were Christians, indicating that the society was not exclusively benefiting a particular religious community. The Court cited the Supreme Court's judgment in Commissioner of Income Tax Vs. Dawoodi Bohara Jamat, which held that institutions imparting religious education could still qualify for charitable status if their activities also served the broader public.

4. Examination of the Objectives and Activities of the Appellant Society:
The High Court scrutinized the Memorandum of Association and found that the society's objectives included managing a school to provide sound education to all children, promoting responsible citizenship, and encouraging national integration. The Court noted that the society's activities were genuine and aligned with its stated objectives, fulfilling the requirements under Section 12AA for registration. The Court also referenced similar cases, such as Commissioner of Income-Tax Vs. Jodhpur Chartered Accountants Society, to support its decision.

Conclusion:
The High Court concluded that the appellant society's predominant purpose was charitable, encompassing education for all communities. The Court allowed the appeal, directing the respondent authority to issue the required registration under Section 12AA, thereby answering the substantial question of law in favor of the appellant and against the revenue.