2018 (12) TMI 1257 - AT - Income Tax

Renewal of approval u/s 10(23C) - assessee is one of the temples in the State of Tamil Nadu, which is being managed by Hindu Religious and Charitable Endowments Department of the Government of Tamil Nadu - charitable activities - Held that - In view of Section 10(23C)(v) of the Act, the assessee being a public religious temple / institution is entitled for approval by the Commissioner (Exemption). In fact, the Commissioner (Exemption) granted approval under Section 10(23C)(iv) of the Act by an order dated 03.11.2016 from the assessment year 2016-17 which was subsequently modified by an order dated 28.12.2017 as if the approval was granted under Section 10(23C)(v) of the Act. From the material available on record it appears that the approval under Section 10(23C) of the Act was granted from 08.05.1989 by Notification No.8354. Therefore, the assessee is seeking only renewal of earlier approval. Hence, this Tribunal is of the considered opinion that the Commissioner (Exemption) is not justified in restricting the approval from assessment year 2016-17. The approval ought to have been renewed from the assessment year 2015-16.The Commissioner (Exemption) is directed to grant approval under Section 10(23C)(v) from assessment year 2015-16, so that the approval under Section 10(23C)(v) of the Act can be continued without any break. - Decided in favour of assessee

Summary

Issues Involved:
1. Eligibility for renewal of approval under Section 10(23C)(v) of the Income-tax Act.
2. Status of the temple as an independent taxable unit.
3. Application of provisions of Hindu Religious and Charitable Endowments Act, 1959.
4. Administrative control and financial obligations of the temple.
5. Compliance and enforcement of tax filing requirements for religious institutions.

Issue-wise Detailed Analysis:

1. Eligibility for Renewal of Approval under Section 10(23C)(v) of the Income-tax Act:
The assessee, a Hindu religious temple, had been granted approval under Section 10(23C) since 1989, with subsequent renewals until the assessment year 2014-15. The Commissioner of Income Tax (Exemptions) granted approval from the assessment year 2016-17 but denied it for 2015-16, citing the lack of a timely renewal application. The tribunal held that the CIT (Exemptions) should have renewed the approval from the assessment year 2015-16, considering the CBDT's circular that dispensed with the requirement of periodical renewal of approval. The tribunal directed the CIT (Exemptions) to grant approval from the assessment year 2015-16.

2. Status of the Temple as an Independent Taxable Unit:
The temple, managed by the Hindu Religious and Charitable Endowments Department of the Government of Tamil Nadu, is considered an independent assessable unit under the Income-tax Act. Despite being under government administration, the temple is a separate entity for tax purposes, as clarified by both the counsel for the assessee and the Departmental Representative.

3. Application of Provisions of Hindu Religious and Charitable Endowments Act, 1959:
The tribunal examined the legislative history and provisions of the Hindu Religious and Charitable Endowments Act, 1959, which governs the administration of religious institutions in Tamil Nadu. The Act defines "temple" and "religious institution" and clarifies that such entities are independent assessable units under the Income-tax Act. The tribunal also noted that the temple's funds must be used for purposes outlined in Section 66 of the Act.

4. Administrative Control and Financial Obligations of the Temple:
The Executive Officer of the temple, a government employee, clarified that the temple reimburses the government for salaries and other expenses of the officers appointed by the Hindu Religious and Charitable Endowments Department. The temple contributes 12.5% of its income to the government for these services. Despite this administrative control, the temple remains an independent entity for tax purposes.

5. Compliance and Enforcement of Tax Filing Requirements for Religious Institutions:
The tribunal observed that many temples in Tamil Nadu and Puducherry have not filed their income tax returns, despite being independent taxable units. The tribunal emphasized the need for the income-tax authorities to enforce tax compliance among all religious institutions, including temples, mosques, churches, and other entities. The authorities were directed to ensure that these institutions are brought within the tax net while respecting the religious freedoms guaranteed under the Constitution.

Conclusion:
The tribunal allowed the appeal, directing the Commissioner (Exemptions) to grant approval under Section 10(23C)(v) from the assessment year 2015-16. The tribunal also highlighted the need for tax authorities to enforce compliance among all religious institutions in the state. The order was pronounced on 16th November 2018 at Chennai.