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Facts
The assessee, a charitable trust running educational institutions (madrasas), filed an appeal against the CIT(E)'s order rejecting its application for exemption under section 12AB. The rejection was based on the premise that the trust was religious and not charitable, citing photographs of students from a particular community.
Held
The Tribunal held that the establishment of madrasas for religious education qualifies as a charitable purpose under section 2(15) of the Income Tax Act. The mere fact that the trust activities involved members of a particular community or assistance to the needy for religious activities does not divest it of its charitable character.
Key Issues
Whether a trust running madrasas for educational purposes, with activities involving a specific community, can be denied exemption under Section 12AB/12A on the grounds of being a religious trust.
Sections Cited
12AB, 2(15), 12A
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI AMITABH SHUKLA
आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय श्री मनु कुमार धिरर ,न्याधयक सदस्य एवं माननीय श्री अमिताभ शुक्ला, लेखा सदस्य के सिक्ष BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1082/Chny/2025 Assessment Years: - Mifthaahul Jannah Educational and The Commissioner of Income Tax, Charitable Trust, (Exemptions), No.1, M.K.M, compound, 1st Street, Chennai. Noyyal Street, Tirupur, Tamil Nadu-641 604. [PAN: AAETM7514P] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr.J.Saravanan, Advocate प्रत्यर्थी की ओर से /Revenue by : Mr.Bipin C.N, CIT सुनवाई की तारीख/Date of Hearing : 17.06.2025 घोषणा की तारीख /Date of Pronouncement : 19.06.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / EXM / F / EXM45 / 2024-25 / 1069139880(1) dated 26.09.2024 of the Learned Commissioner of Income Tax (Exemptions), [herein after “CIT(E), Chennai. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time.
2.0 It has been noted that there is a delay of 138 days in the case, in filing of this appeal before the tribunal. In its affidavit the assesse has pleaded that the assesse could not notice the order of the Ld.CIT(E ), Chennai dated 26.09.2024 and which came to notice only when preparations were underway for filing of return for AY-25-26 in April-2025. The assesse submitted that there will not be case of any non-compliance now. We have considered the justification put forth by the assesse and we are satisfied with their adequacy. We are also conscious of the fact that no litigant gains by intentionally delaying its own matters. The Ld. DR argued that against the coronation of the delay stating that the assessee does not have any justified grounds for the same. We do not find sufficient force in the argument of the Ld.DR. We have noted that no litigant benefits by non-prosecution its case. Accordingly, we hereby condone the delay and proceed to adjudicate this appeal.
3.0 The only issue raised by the assessee through its grounds of appeal is regarding the rejection of its application for grant of exemption u/s 12AB by the Ld.CIT(E ), Chennai. The Ld. Counsel submitted that the Ld.CIT(E ), has rejected its application on the premise that the assessee trust assumes the character of a religious trust since it is running madrasas. Another argument taken for rejection was that photographs of its students made available during the proceedings
Page - 2 - of 5 showed that the activities of the trust were limited to members of particular community. In support of its contentions, the Ld.Counsel relied, inter-alia, upon the decision of Hon’ble Supreme Court in the case of Dawoodi bohara Jamat 43 taxman.com 243 SC.
4.0 Per contra, the Ld.DR relied upon the order of lower authorities.
5.0 We have heard rival submissions in the light of material available on records. The para 4.1 of the order of the Ld.CIT(E ) clearly alludes that the application of assessee has been rejected on the premise of the assessee trust being a religious and hence not a charitable trust. In support of this hypothesis, reliance has been placed upon some photographic evidence indicating trust activities partaken by members of specific communities. The conclusion drawn qua photographic evidence has been found to be totally devoid of any substance and merits. No exclusion can be made on the basis of certain dress or clothes. Merely because some members were found to be dressed in a particular way alluding towards any particular community would not take away the basic charitable cause of the appellant assessee.
Page - 3 - of 5 6.0 As regards the controversy regarding running madrasa, we have noted that the Hon’ble Supreme Court in the case of Dawoodi bohara Jamat 43 taxman.com 243 SC has finally laid rest to the controversy by observing as under:- .”…. Further, establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15) of the Act. The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The House of Lords in Barralet v. IR 54 TC 446, has observed that "the study and dissemination of ethical principles and the cultivation of rational religious sentiment" would fall in the category of educational purposes. The Madarsa as a Mohommedan institution of teaching does not confine instruction to only dissipation of religious teachings but also contributes to the holistic education of an individual. Therefore, it cannot be said that the object (d) would embody a restrictive purpose of religious activities only. Similarly, assistance by the respondent-trust to the needy and poor for religious activities would not divest the trust of its altruist character….”
7.0 We have noted that the facts of the present case are identical to those decided by the Hon’ble Apex Court in its above cited decision. The Revenue could not point any distinguishment and facts qua the madrasa controversy. Accordingly, in respectful compliance to the order of the Hon’ble Apex Court, we hold that the assessee trust cannot be classified as a religious trust and therefore cannot be denied the exemption u/s 12A on this point. We are also of the considered view that no exemption could be denied merely because some pictures depicted members of a particular community taking part in activities of the trust. Accordingly, we set aside the impugned order of the Ld.CIT(E ) and direct
Page - 4 - of 5 him to readjudicate the matter and grant the appellant assessee requested exemption u/s 12A in accordance with law. Accordingly, all the grounds of appeal raised by the assessee are allowed. 8.0 In the result, the appeal of the assessee is allowed. Order pronounced on 19th , June-2025 at Chennai. Sd/- Sd/- (मनु कुमार धिरर) (अधमताभ शुक्ला) (MANU KUMAR GIRI) (AMITABH SHUKLA) न्याधयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 19th , June-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF
Page - 5 - of 5