2022 (5) TMI 1682 - AT - Income Tax

Exemption under Sections 11 and 12A upheld for Trust AY 2014-15; Charitable Status Continues Uninterrupted

Dy. Commissioner of Income-tax (Exemption), Circle-Ghaziabad Versus M/s Yug Nirman Yojna Vistar Trust

Dy. Commissioner of Income-tax (Exemption), Circle-Ghaziabad Versus M/s Yug Nirman Yojna Vistar Trust - TMI ISSUES: Whether the assessee, a trust registered under section 12A of the Income Tax Act, is eligible for exemption under section 11 of the Income Tax Act in respect of income claimed as exempt but assessed as taxable by the Assessing Officer.Whether exemption under section 11 is available to a trust established for religious purposes that also carries out charitable activities benefiting a particular religious community or caste.Whether the continuous registration under section 12A and prior acceptance of exemption claims in other assessment years affect the eligibility for exemption in the disputed assessment year. RULINGS / HOLDINGS: The Court held that the assessee trust is eligible to claim exemption under section 11 of the Income Tax Act for the amount of Rs. 3,16,43,346/-, reversing the Assessing Officer's treatment of the amount as business income. The impugned appellate order allowing exemption was upheld.The Court accepted the legal proposition that 'if a charitable trust is established only for the benefit of any particular religious community, then the provisions of section 11 would not be applicable,' but clarified that 'in the case of a trust or an institution for religious purposes wherein certain activities can be termed as charitable activities for the benefit of any particular religious community or caste, clause (b) would not be applicable.'The Court noted that the registration under section 12A granted by the Commissioner of Income Tax has remained in force continuously since 01.05.2009 and that exemption under section 11 read with section 12A had been allowed in multiple other assessment years on identical facts and circumstances, supporting the assessee's claim of charitable character and exemption eligibility. RATIONALE: The Court applied the statutory framework of sections 11 and 12A of the Income Tax Act, which govern exemption of income of charitable or religious trusts. Section 11 provides exemption for income applied for charitable or religious purposes, while section 12A requires registration for such exemption.The Court relied on the continuous validity of registration under section 12A and consistent prior acceptance of exemption claims by Revenue as indicative of the trust's charitable character and eligibility for exemption.The Court interpreted the scope of section 11 to exclude trusts established solely for the benefit of a particular religious community from exemption, but to include trusts engaged in religious purposes with charitable activities benefiting such community or caste, thus allowing exemption in the present case.No dissenting or differing opinion was recorded. The decision reflects adherence to established principles without doctrinal shift.