WHETHER REFERENCE TO RELIGION SHOULD LOSE EXEMPTION?


Q: Is mere reference to religion make it a religious trust?


A: Section 13(1) (a) would not allow exemption for any trust or institution with the object of private religious purposes, which does not ensure for the public. Section 13(1) (a) would not permit exemption, if it is for the benefit of any particular religious community or caste, unless the trust or institution is established before the commencement of Income Tax Act, 1961. However, it is not uncommon for trusts and institutions sponsored by a religious community or caste organization managed by such religious or caste to establish charitable trusts and institution for the public, but making a reference to the religion or caste or invoking the respective gods as a preamble and by making reference to religion or caste even in some objects in their documentation. Should such reference forfeit exemption?


This was the issue posed in Addl. Director of Income-tax (Exemption) v. Islamic Research Foundation (2013) 21 ITR (Trib.) 588 (Mumbai). It was held in this case, that mere reference to the God or religion need not lose the benefit of exemption, if the activities are for public benefit. There was a reference in the objects “ to propagate the Islamic faith ” but it was actually undertaking public activities including promotion of communal harmony, peace conferences, awareness and message of Islam, so as to remove hatred against Islam, promoting concept of justice, human rights, moral values and peace, progress, unity, organizing meetings of eminent men like judges and other dignitaries including Sri Sri Ravishankar, founder of Art of Living, so that it was actively engaged in charitable activities actively promoting brotherhood among people of all faiths. Its activities involved incurring of expenditure of about Rs.5 crores during the year. It was from these facts, it was found that this trust need not be treated as being vulnerable with reference to section 13 (1) (a) and (b). A number of decisions both ways were considered either in support of the view or for distinguishing them. It was also found that the trust has been exempt for past several years, so that even on the principle of consistency, denial of exemption was not justified following Radhaswami Satsang v. CIT (1992) 193 ITR 321 (SC).


The decision in this case is that, it is the activities which are more relevant than the objects themselves. In such cases, the documents which have so far been found as not warranting refusal of exemption are more rigidly scanned, so that any reference to the ideals, which inspired them to render public service are often misunderstood as confined to narrower religious purposes. The objects need not be understood in a narrow sense.


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