2018 (3) TMI 1903 - AT - Income Tax

Eligibility of exemption u/s 11 - assessee society/ trust based its activities on the basis of a religious calling - Whether merely because the society or trust draws its inspiration for certain charitable activities from religious tenets as long as charitable activities of the society are not confined to the benefits of any particular community it is entitled for exemption u/s 11 ? - HELD THAT - Undisputedly the assessee society is a charitable society registered u/s 12AA of the Act w.e.f 01.10.1987. It is also not in dispute that in the earlier years the assessee society has been continuously getting exemption u/s 11 of the Act and since then it has not amended its aims and object. It is also not in dispute that the main source of income of the society is foreign donation. Application of income of the assessee trust tabulated shows that the primary object of the assessee society is to run the school college and orphanage and has applied major portion of its income on the same. There is no material or data on record to prove if the assessee society under the garb of running school and colleges applied for affiliation with ICSE and UGC has converted Indians into Christianity particularly when from the aims and objects of the assessee society it is apparently clear that it is imparting education and providing help to the orphans without any discrimination on the basis of religion caste and creed. So far as question of having Theology as a subject in the school and college curriculum is concerned we are constrained to hold that imparting religious education along with our recognized education is part of the Indian heritage and any society/trust cannot be barred from claiming exemption u/s 11 of the Act merely because of the fact that it is imparting Theological courses to its students. Many institutions being run by different minorities and religious trust in India are invariably imparting religious education along with recognized curriculum to make the students better Indian. AO has categorically held that It is not denied that the society is trying to help the poorest sections of society; but it is taking advantage of their poverty; assessee society is reaching them with the motive to bring them in the vineyard of Lord. The motive is not amelioration of poorest section of Indian community but to attain personal goals of serving Lord which in present context means conversion of unreached people. This goes to prove that when education is being imparted to the lowest strata of the society at school or college level without having any single instance of forced conversion pointed out by the AO the entire findings of the AO are based upon conjectures and surmises. When the assessee society is expanding its horizon to impart the school and college education to the needy students it cannot be deprived from claiming exemption u/s 11. As donors might have donated money to the assessee society in the belief that they were propagating and promoting Christianity but the assessee society has confined its activities to the aims and objects laid down in the Memorandum of Association and the assessee society is imparting secular education and as such provisions contained u/.s 13(1)(b) are not attracted and found the assessee society eligible for exemption u/s 11 of the Act. So we find no illegality or perversity in the findings returned by the ld. CIT (A) hence both the appeals filed by the Revenue is hereby dismissed.

Summary

Issues Involved:
1. Interpretation of provisions under section 11 and 13 of the Income-tax Act, 1961 regarding exemption for charitable societies.
2. Assessment of the applicability of exemption for a charitable society based on its activities and source of income.

Analysis:
1. The case involved a charitable society registered under section 12AA of the Income-tax Act, 1961, seeking exemption under section 11. The Revenue challenged the orders passed by the CIT(A) granting the exemption for the assessment years 2009-10 and 2011-12. The main contention was whether the society's activities, inspired by religious tenets, qualified for exemption under section 11. The Revenue argued that the society's activities were not charitable as per section 2(15) of the Act, as it allegedly applied its income to benefit a particular community, invoking section 13(1)(b) to withdraw the exemption.

2. The Tribunal analyzed the facts and found that the society primarily focused on running schools, colleges, and orphanages, applying a significant portion of its income to these charitable activities. The society's main source of income was foreign donations. The Tribunal noted that the society had continuously received exemption under section 11 in previous years and had not changed its objectives. The Tribunal also highlighted that the society's activities did not discriminate based on religion, caste, or creed.

3. The Assessing Officer (AO) had raised concerns about the society's motive to evangelize through its educational institutions. However, the Tribunal observed that imparting religious education alongside regular curriculum was a common practice in India and did not disqualify a society from claiming exemption under section 11. The Tribunal emphasized that the society's activities were focused on education and social welfare without any evidence of forced conversions.

4. The Tribunal further addressed the AO's findings based on conjectures and lack of concrete evidence regarding the society's alleged conversion activities. The Tribunal also considered the society's past eligibility for exemption and its consistent aims and objectives. Relying on precedents and legal principles, the Tribunal upheld the CIT(A)'s decision to grant exemption under section 11, dismissing the Revenue's appeals.

5. In conclusion, the Tribunal found no legal flaws in the CIT(A)'s reasoning and upheld the exemption for the charitable society under section 11 of the Income-tax Act, 1961. The judgment emphasized the importance of assessing a society's activities in line with its stated objectives and ensuring compliance with relevant provisions to determine eligibility for tax exemption.