Temple wins income tax exemption under sections 11 and 12A as religious institution

The Telangana HC allowed a writ petition filed by a temple seeking exemption under sections 11 and 12A of the Income Tax Act. The petitioner temple had been granted exemption under section 12A and argued it was entitled to additional exemption under section 11 as a religious institution. The court noted that the petitioner was undisputedly a religious institution and temple with existing section 12A exemption, and records showed minimal previous demands against it. Considering the temple's status as a religious institution exempt from income tax under sections 11 and 12A, the HC set aside the impugned assessment order dated 02.08.2023. The court directed that the pending appeal before the appellate authority be decided on merits in accordance with law, while restraining the revenue from insisting on payment of the disputed demand during the appellate proceedings.

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ISSUES:

Whether a religious institution exempted under Sections 11 and 12A of the Income Tax Act, 1961 is obliged to pay a specified amount as a condition for grant of stay on tax demand under Section 220(6) of the Act.Whether the Income Tax authority exercising jurisdiction under Section 220(6) of the Act is bound by departmental instructions or circulars while deciding stay applications.Whether the impugned order imposing payment conditions for stay of demand is sustainable in law.The scope of discretion vested in the Assessing Officer under Section 220(6) of the Income Tax Act in granting stay of demand during pendency of appeal.

RULINGS / HOLDINGS:

The Court held that the Income Tax authority exercising jurisdiction under Section 220(6) of the Act exercises "quasi judicial power" and is "not bound or confined by departmental instructions," including CBDT circulars, while deciding stay applications.The Court ruled that no statute prescribes a fixed amount to be paid by an assessee challenging an order, and therefore, insisting upon payment of a substantial amount as a condition for stay is not warranted, especially for a religious institution exempt under Sections 11 and 12A.The impugned order directing payment of Rs.1.00 crore and Rs.25 lakhs as condition for stay was set aside, and the matter was remanded for fresh consideration in accordance with law.The appeal pending before the appellate authority was directed to be decided on its own merits without insisting on any payment as a precondition for stay.

RATIONALE:

The Court applied the legal framework under Section 220(6) of the Income Tax Act, 1961, which confers discretion on the Assessing Officer to grant stay of demand during pendency of appeal.The Court relied on the Supreme Court precedent establishing that jurisdiction under Section 220(6) is quasi judicial and not bound by departmental circulars, emphasizing independent application of mind.The decision referenced a recent Division Bench ruling of the same High Court, which reiterated the principles laid down by the Supreme Court in the context of stay applications under Section 220(6).The Court recognized the special status of the petitioner as a religious institution exempt under Sections 11 and 12A, noting the absence of prior demands and the limited source of income, which justified a liberal approach.No doctrinal shift was indicated; rather, the Court reinforced established principles regarding quasi judicial discretion and non-obligation to follow departmental instructions in stay matters.

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