2018 (1) TMI 1757 - AT - Income Tax

Tribunal Upholds Tax Exemption for Christian Society Under Section 11, Citing Precedent and Lack of New Evidence

The Appellate Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to grant the assessee, a society promoting Christian religious ... Benefits of exemption u/s 11 - claim denied by the AO because the assessee society is involved in promotion of the religious activities of a particular community, i.e., Christianity - HELD THAT:- The ITAT in assessee’s own case Indian Evangelical Team [2012 (9) TMI 1198 - ITAT DELHI] (A.Y. 2009- 10) wherein held in the AYs 2007-08 & 2008-09, though the AO denied exemption u/s 11 of the Act, the ld. CIT(A) allowed the claim of the assessee in the AY 2007-08, the ITAT vide their order [2011 (12) TMI 750 - ITAT DELHI] upheld the findings of ld. CIT(A), granting exemption u/s 11 of the Act. CIT(A) in the impugned order followed this order of the ITAT for the AY 2008-09 in allowing exemption u/s 11 of the Act. In view of the foregoing, especially when the Revenue have not placed any material before us, controverting the aforesaid findings of the ld. CIT(A) nor brought to our notice any contrary decision., so as to enable us to take a different view in the matter while claim of the assessee for exemption has consistently been allowed in the preceding years, we are not inclined to interfere. Decided in favour of the assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether exemption under section 11 of the Income Tax Act can be denied to an assessee-society on the ground of alleged violation of section 13(1)(b) for promoting religious activities of a particular community. 2. Whether the trust/ society falls within the scope of a 'religious trust' such that the restrictions in section 13(1)(b) do not apply, and consequently whether the assessee remains eligible for exemption under section 11. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Denial of exemption under section 11 for alleged contravention of section 13(1)(b) Legal framework: Section 11 provides exemption for income applied for charitable or religious purposes; section 13(1)(b) denies exemption where funds of a trust are used for the benefit of specified persons or for private benefit. The interplay requires examination of whether activities or application of funds constitute proscribed private benefit or are valid religious/charitable application. Precedent treatment: The Tribunal referred to a series of prior adjudications in the assessee's own case where exemption under section 11 was allowed for multiple assessment years despite AO's denials on grounds of section 13(1)(b). The AO relied on decisions (referred to by the AO) which were cited in the record but the Tribunal noted the Revenue did not place before it any material that would overturn the consistent favourable findings. Interpretation and reasoning: The Tribunal analyzed the consistent history of allowances of section 11 exemption in materially identical circumstances across many assessment years (listed AYs). It emphasized that the Revenue failed to produce contrary material or binding contrary decisions that would justify departing from the earlier consistent findings. The Tribunal treated the AO's reliance on certain higher court decisions as insufficient in the absence of an argument or material demonstrating their applicability to the present facts. Ratio vs. Obiter: Ratio - where the revenue authority persists in denying exemption on section 13(1)(b) grounds despite a long line of consistent appellate findings in identical factual matrix and absent any contrary material, the Tribunal will not interfere with the appellate allowance of exemption. Obiter - general observations on the AO's reliance on external case law without demonstrating its applicability. Conclusion: The Tribunal dismissed the Revenue's appeal on this issue, upholding the CIT(A)'s allowance of section 11 exemption because the Revenue failed to controvert the consistent prior findings in the assessee's favour and did not bring contrary material to enable a different view. Issue 2 - Characterization as a religious trust and applicability of section 13(1)(b) Legal framework: The determination whether an entity is a religious trust implicates whether its activities fall within the ambit of legitimate religious purpose exempt under section 11, and whether the prohibition in section 13(1)(b) - designed to prevent private benefit - is attracted. This requires factual assessment of objects and application of funds. Precedent treatment: The Tribunal relied upon its own prior decisions in the assessee's case for multiple assessment years upholding the characterization and allowance of exemption. The AO cited higher court authorities purportedly supporting denial, but the Tribunal noted there was no material shown to distinguish the factual matrix or demonstrate the higher authorities' applicability. Interpretation and reasoning: The Tribunal treated the question of whether the society promotes the religious activities of a particular community (and thereby falls outside protection) as a question already adjudicated consistently in the assessee's favour. Given the repeated allowance of exemption for identical circumstances, and absence of any new or distinguishing evidence or binding adverse precedent presented by Revenue, the Tribunal accepted the CIT(A)'s conclusion that the trust qualifies as a religious trust for the purposes of section 11 and is not disqualified under section 13(1)(b). Ratio vs. Obiter: Ratio - where earlier tribunal and appellate orders have repeatedly held that the trust's activities amount to religious purpose and do not attract section 13(1)(b), subsequent identical assessments will be treated consistently unless the Revenue adduces new material or applicable contrary precedent. Obiter - remarks on the nature of promotion of activities of a particular community vis-à-vis section 13(1)(b) absent detailed fact parsing in the instant order. Conclusion: The Tribunal upheld the CIT(A)'s finding that the trust is a religious trust and that section 13(1)(b) did not operate to deny exemption under section 11 for the assessment year under appeal; accordingly the appeal by Revenue was dismissed. Cross-reference The Tribunal's conclusions on both issues are interdependent: the decision to uphold exemption under section 11 rests both on the characterization of the assessee as a religious trust (Issue 2) and on the absence of any new material or binding adverse precedent to displace the long line of prior favorable determinations (Issue 1). The Tribunal expressly relied on its prior appellate orders in the assessee's own case and the Revenue's failure to produce contrary material as determinative.