Income Tax Provisions relating to Religious Trusts

The Income Tax Act makes a distinction between Trusts for charitable purposes and those for religious purposes, though both are entitled to exemption under section 11 of the Act. The creation of religious charitable trusts is governed by the personal laws of the religion. The administration of these religious trusts can either be left to the trustees as per the dictates of the religious names or it can be regulated to a greater or lesser degree by statute such as the Bombay Public Trusts Act, 1950. In case of Hindu, the personal provisions relating the religious trusts have not been codified and are found dispersed in various religious books and epics.

Religious purpose not defined in Income Tax Act, 1961

Religious Trust has not been defined under the Income Tax Act. The creation of religious trust is governed by the personal laws of the religion. But in general connotation, it can be deemed as the Trusts which are involved in the activities of promotion or particular belief. The administration of these religious trusts can either be left to the trustees as per the dictates of the religious names or it can be regulated to a greater or lessee degree by statute such as the Bombay Public Trusts Act, 1950.

While unlike the words ‘charitable purpose’ have been defined in section 2(15) of the Act, there is no definition of ‘religious purpose’ under the Act. Religious purposes’ are necessarily associated with religion. A religion is certainly a matter of faith with individuals or communities and it is not necessarily theistic. “Religious purpose” includes the advancement, support or propagation of a religion and its tenets.  A trust made for any of these purposes is said to be a religious trust. The creation of Religious Trust is governed by the personal laws of the religion. But in general connotation, it can be deemed as the Trusts which are involved in the activities of promoting religion or particular belief.

But in reality, most of the Religious Trusts also promote the charitable causes as well e.g. education, medical facility, providing food the poor etc. and such types of Trust are called Charitable & Religious Trust.

The income of a Religious trust or institution is entitled to exemption even though it may be for the benefit of a particular religious community or caste. The exemption under section 11 is, however, confined to public religious trusts only; any income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public is not exemption.

All religions, in a sense, teach the philosophy of life. It is generally accepted that a Trust created for imparting teachings on moral and spiritual up liftment and for showing a way of life, would be a charitable Trust even if the teachings are based on scriptures of a particular religion.

Religious Activity

The term religious activity is not defined in the Income Tax Act. The litmus test is however, that the religious purpose must be public in nature. Therefore, a temple or a mosque may be established by a trust and expenditure on construction, reconstruction or maintenance of such temple or a mosque would be religious purpose, if the members of that faith or religion have access as a matter of right to the religious place or place of worship.

What is ‘religious’ or ‘charitable purpose’

While dealing with what is ‘religious’ or ‘charitable purpose’ it is observed by the Supreme Court in the case of Ramchandra Shukla v. Shree Mahadeoji AIR 1970 SC 458, that there is no line of demarcation in the Hindu system between religion and charity. Indeed, charity is regarded as part of religion. While discussing this aspect, the Supreme Court has further observed as under (at page 464) :

‘Hindu piety found expression in gifts to idols to religious institutions and for all purposes considered meritorious in the Hindu social and religious system. Therefore, although courts in India have for a long time adopted the technical meaning of charitable trusts and charitable purposes which the courts in England have placed upon the term ‘charity’ in the Statute of Elizabeth, and, therefore, all purposes which according to English law are charitable will be charitable under Hindu law, the Hindu concept of charity is so comprehensive that there are other purposes in addition which are recognised as charitable purposes. Hence, what are purely religious purposes and what religious purposes will be charitable purposes must be decided according to Hindu notions and Hindu law.

As observed by Mukherjea in Hindu Law and Religious and Charitable Trusts, Second Edn., page 11, there is no line of demarcation in the Hindu system between religion and charity. Indeed, charity is regarded as part of religion, for, gifts both for religious and charitable purposes are impelled by the desire to acquire religious merit. According to Pandit Prannath Saraswati, these fell under two heads, Istha and Purta. The former meant sacrifices, and sacrificial gifts and the latter meant charities. Among the Istha acts are Vedic sacrifices, gifts to the priests at the time of such sacrifices, preservations of vedas, religious austerity, rectitude, vaisvadev sacrifices and hospitality. Among the Purta acts are construction and maintenance of temples, tanks, wells, planting of groves, gifts of food, dharamshalas, places for drinking water, relief of the sick, and promotion of education and hearing. (cf. Pandit Prannath Saraswati’s Hindu Law of Endowments, 1897, pages 26-27). Istha and Purta are in fact registered as the common duties of the twice born class. (cf. Pandit Saraswati, page 27).’

No writing is necessary to create an endowment

No writing is necessary to create an endowment nor a trust is required for that purpose. No ‘religious ceremony’ such as Sankalp, Samarpan, Pranapratishta or Kumbhabhishekam etc., is necessary to establish a religious endowment. A clear and unequivocal manifestation of the intention to create a trust and vesting of property with the trustee is enough to constitute dedication. Reference in this connection may be made to the decision of the Supreme Court in Ramachandra Shukla v. Shree Mahadeoji  AIR 1970 SC 458

Trusts can be broadly classified into two categories, viz.,

(i) Public,

(ii) Private.

However, there may be trusts which are a blend of both and are known as Public-cumPrivate Trusts. Public trust: A public trust is one which benefits the public at large or some considerable portion of it. A public trust can be of two types, viz.,

(a) Public charitable trust,

(b) public religious trust.

Essentials of religious and charitable trust under Hindu law
There are four essential requirements for creating a valid religious or charitable trust under Hindu Law:—

(i)   Valid religious and charitable purpose of the trust as per     the norms of Hindu Law.

(ii)  Capability of the author of the trust to create such a trust.

(iii) The purpose and property of the trust must be indicated with sufficient precision.

(iv) The trust must not violate any law of the country.

A Charitable Trust must always be public, but a Religious Trust may be private or public. Section 13(1)(a) excludes from exemption a private religious Trust, which does not ensure for the benefit of the public. Thus a Trust for a private family deity to which the public or a particular class has no access, is taxable.

A religious trust, as was held may be private or public, but a charitable trust must always be public. – [CIT v. M. Jamal Mohamad Sahib (1941) 9 ITR 375 (Mad) (FB)]

Religious endowment

A religious endowment is one, which has as its object the establishment, maintenance or worship of an idol or deity or any object or purpose subservient to religion. A religious trust, as was held by the Full Bench of the Madras High Court in CIT v. M. Jamal Mohamad Sahib (1941) 9 ITR 375 (Mad) (FB) may be private or public but a charitable trust must always be public.

Essentials of a valid Endowment

Essentials of a valid edowments are:

(i) The dedication must be complete,

(ii) The subject matter must be specific,

(iii) The object must be definite,

(iv) The settler must have the capacity to make the endowment.

Dedication

Dedication of property is essential for the creation of an endowment. A dedication consists of the following two elements :

(i) Sankalpa or the formula of resolve, or an intention to dedicate properties. And

(ii) Utsarga or renunciation.

A religious endowment must be held to be private or public, according as the beneficiaries thereunder are specific persons or sections thereof. When property is dedicated for the worship of a family idol, it is private and not a public endowment. But where the beneficiaries are not members of a family or a specified individual, then, the endowment can only be regarded as public, intended to benefit the general body of worshipers. This distinction between a private and a public endowment was best explained by the Supreme Court in Deoki Nandan v. Murlidhar AIR 1957 SC 133

It was held that where idols were installed not within the precincts of residential quarters, but in a private building constructed for that very purpose on a vacant site and where some of the idols were permanently installed on a pedestal within the temple precincts, that is more consistent with the endowment being public rather than private. – [Deoki Nandan v. V. Murlidhar & Ors. AIR 14 1957 SC 133]

Dedication in favour of a Hindu deity is not a gift within the meaning of section 122 of the Transfer of Property Act, 1881

It was held that a dedication in favour of a Hindu deity is not a gift within the meaning of section 122 of the Transfer of Property Act, 1881, and, therefore, the provisions regarding acceptance by donee etc., as contained in the said Act have no application to such a dedication. However, the essentials of a Hindu religious endowment are the following: (i) property in respect of which the endowment is made must be designated with precision. (ii) the object or purpose of dedication should be clearly indicated. (iii) the founder must effectively divest himself of all beneficial interest in the endowed property. – [Ram Kumar Ram Chandra & Co. v. CIT (1965) 58 ITR 721 (All)]

Further, a Constitution Bench of the Supreme Court in Tilkayat Shri Govindlalji Maharaj etc. vs. State of Rajasthan & Ors. [AIR 1963 SC 1638], held that where evidence in regard to the foundation of the temple is not clearly available, the answers to the questions namely, are the members of the public entitled to take part in offering service and taking darshan in the temple, are the members of the public entitled to take part in the festivals and ceremonies arranged in the temple and are their offerings accepted as a matter of right will 15 establish the character of the temple.

Therefore, according to the above mentioned decision, the participation of members of the public in the darshan in the temple and in the daily acts of worship or in the celebrations of festive occasions are to be very important factors in determining the character of the temple.

In Dhaneshwarbuwa Guru Purshottambuwa v. The Charity Commissioner, State of Bombay, AIR 1976 SC 871 a serious question, arose as to whether, Shri Vithal Rukhamai Sansthan founded by Sukharam Moharaj at Amalner was a private Devasthan or a public religious trust. It was found on evidence that everybody could not perform puja without the permission of the Pujari. The origin of the endowment was obscure and no direct evidence was available. The Supreme Court, however, held that it is not always possible to have all the features of a public trust in a given case. Even some of the tests laid down by it may, in a given case, be sufficient to enable the court to come to a conclusion about the character of the trust. Their Lordships further held and observed that the simple fact that the public is not and may not be allowed to the inner most sanctum where the deity is installed except under special circumstances and with special permission, would not lead to the conclusion that the temple is a private temple. Even in acknowledged public temples any and everybody cannot perform puja in the sense in which the head Pujari daily performs at various stages. Their Lordships pointed out that when the origin of an endowment is obscure and no direct oral evidence is available, the court will have to resolve the controversy about the character of the trust on documentary evidence for which the trust was created, the consistent manner in which the property has been dealt with or managed by those in charge, the manner in which the property has long been used by the public, the contribution of the public, to all intents and purposes, as a matter of right without the least interference or restriction from the temple authorities, to foster maintenance of the worship, the accretion to the trust property by way of grants from the State of gifts from outsiders inconsistent with the private nature of the trust, the nature of devolution of the property, which are all important elements in determination of the question, whether a property is a private or a public endowment.

Establishment of a religious trust or endowment

The Madras High Court observed in Ramanathan Chettiar v. Palaniappa Chettiar (1965) 58 ITR 721 (All)  that there are three modes in which a voluntary transfer of property in favour of a temple can be validly and effectually made:

(i) Dedication of property directly to the deity, which would not need compliance with the provisions of the Transfer of Property Act, 1882.

(ii) Transfer of property by way of gift to the trustee of a temple complying with the provisions of Section 123 of the Transfer of Property Act, 1882.

(iii)  Creation of a trust.

Temple management

Temples in course of time do get organized by having a body to regulate their management either by way of society or a trust, even where there is no formal trust at the time, when the temple was constructed. Any income of such temple may be treated as having religious character. Although, tax exemption is possible only if it is registered under section 12A of the Act.

True character of particular temple whether public or private in nature

The true character of the particular temple is decided on the basis of various circumstances. In those cases, the courts have to address themselves to various questions such as:

(i) Is the temple built in such imposing manner that it may prima facie appear to be a public temple?

(ii)   Are the members of the public entitled to worship in that temple as of right?

(iii)  Are the temple expenses met from the contributions made by the public?

(iv) Whether the sevas and unsevas conducted in the temple are those usually conducted in public  temples?

(v)  Has the management as well as the devotees been treating that temple as a public temple?”

Taking these above-mentioned points into consideration, the trial court as well as the High Court proceeded to determine the nature of the temples as to whether they were public or private in nature.

Private religious trust

If the temple or a religious deity is in the private premises and access / worship is available only to a family then the religious purpose would be private in nature. In other words, when property is dedicated for the worship of a family idol, it is private and not a public endowment.

Trust created by members of family for upkeep of temples

Not public trust but only a private family trust – the fact that members of the public are allowed to get entry into the temples or the temple was declared as a public temple cannot lead to the conclusion that trust is a public trust – Not entitled to exemption under section 11. – [Kizhakke Kovilakam Trust v. ACIT 256 ITR 238 (Ker)]

TEMPLE IN PRIVATE PREMISE – access available only to a family – then the religious purpose would be private in nature.

However, section 10(23BBA) gives an exemption for any statutory body created by the Centre or State to provide administration for public temples, gurdwaras, wafts, churches, synagogues, agiaries or other places of public religious worship as held in Jagannath Temple Managing Committee v. CIT (2008) 299 ITR 56 (Ori). This decision, however, would not be applicable in a normal case of temple, so that registration and compliance with regulations in sections 11 to 13 cannot be avoided. In such a case, registration under section 12A is required.

Public religious trust

But where the beneficiaries are not members of a family or a specified individual, then, the endowment can only be regarded as public, intended to benefit the general body of worshipers.

Temple/Mosque established by trust – would be public in nature – if the members of that religion have access as a matter of right to the religious place or place of worship.

Public Trusts for Religious Purposes

The income of religious trusts is exempt from tax under section 11 subject to the fulfilment of certain conditions. However, any profit or gain of a business carried on by such trust shall not be exempt unless the business is incidental to the attainment of the objectives of the trust/institution and separate books of accounts are maintained by such trust/institutions in respect of such business.

“PUBLIC WORSHIP”

It was held that public worship by itself may be a charitable object (public religious) but there are other objects like marriages and dramas not connected with public worship, the trust will not be eligible for exemption. – [Orchira Temple Administration v. State of Kerala (1988) 171 ITR 429 (Ker)]

“PUBLIC TEMPLE”

A public temple is one where a considerable portion of the public or a section thereof has a beneficial interest. A gift for the purpose of such a temple must therefore benefit the public. The main characteristics for a public temple is that it is intended for the use of the public at large or a specified class who are entitled to the right of the worshipping of the idol.

This distinction between a private and a public endowment was best explained by the Supreme Court in Deoki Nandan v. Murlidhar AIR 1957 SC 133. The Hon’ble Supreme Court in Deoki Nandan v. Murlidhar (AIR 1957 SC 133), for the purpose of expatiating …..arguments on the question of distinction between a public Trust and a private Trust…… argued that the distinction between a private Trust and a public Trust is that in the former, the beneficiaries are specific individuals, whereas, in the latter, they are general public or a class thereof. In the former, the beneficiaries are persons who are ascertained or capable of being ascertained and in the latter, they constitute a body which is not capable of ascertainment.

Whether a particular temple is a public temple or not is always a question of fact to be decided on the basis of various circumstances.

The question whether a particular temple is a public temple or not is always a question of fact to be decided on the basis of various circumstances. The circumstance that the public or a section thereof have been regularly worshipping in the temple as a matter of course and they can take part in the festivals and ceremonies conducted in that temple apparently as a matter of right is a strong piece of evidence to establish the public character of the temple. In general, the origin of the temple, the manner in which its affairs are managed, the nature and extent of gifts received by it, right exercised by the devotees in regard to worship therein, the consciousness of the manager and the consciousness of the devotees themselves as to the character of the temple are factors that go to establish whether a temple is a public temple or private temple. These principles were laid down by the Supreme Court in Goswami Shri Mahalaxmi Valreji v. Ranchhoddas Kalidas AIR 1970 SC 2025, 2031.

Public temple is one where a considerable portion of the public or a section thereof has a beneficial interest It was held that a public temple is one where a considerable portion of the public or a section thereof has a beneficial interest. A gift for the purpose of such a temple must therefore benefit the public. Considered from any point of view, that is, whether it be from the comprehensive interpretation that is given by the Hindu jurists for the word “charity”, or whether it be on the narrower interpretation of that word under the English law, any contributions for repairs to places of worship will be one made for a charitable purpose. – [Ramsaroop Dasji v. S. P. Sahi, 1959 AIR 942, 1959 SCR Supl. (2) 503 (SC)]

Donation of land by members of the public to the institution and location of  the temple at a place freely accessible and convenient to the public were circumstances which indicated that the trust was of a public nature.

In Parichchan Das v. Bihar State Board of Religious Trust and Others, their Lordships of the Supreme Court again reiterated that there can be no simple or conclusive factual test to determine the character of a trust. The totality of circumstances and their effect must be considered. The court pointed out that the fact that members of the public were permitted to go to the temple without any hindrance might not be a circumstance which by itself would conclusively establish that the temple was a public temple in the absence of an element of right in the user of the temple by the public. Conversely, the Court pointed out that the free use of the properties of the temple by the Mahant at a time when he was the sole manager of the temple and its properties would not necessarily lead to the inference that the temple was not a public temple. But the Court pointed out that the donation of lands by members of the public to the institution and the location of the temple at a place freely accessible and convenient to the public are important circumstances determining whether it was private or public temple. – [Parichchan Das v. Bihar State Board of Religious Trust and Others, AIR 1980 SC 514]

In Smt. Sarjoo & Others v. Pandit Ayodhya Prasad & Others, the Allahabad High Court was concerned with a case where the evidence disclosed that the Pandas had treated the temple as family property dividing the offerings among themselves by turns, they performed the Pooja and festivals in the temple, they had made the repairs and reconstruction from time to time, they managed all its affairs, they defrayed the expenses of its maintenance and paid for consumption of electric energy, they appropriated the offerings after spending them on the maintenance of temple, and that they did not employ any Pujari. On these facts the Court held the temple to be a private endowment even when it was found that the public were allowed to worship in the temple and to perform the Shringar. – [Smt. Sarjoo & Others v. Pandit Ayodhya Prasad & Others AIR 1979 All 74]

Modes in which a voluntary transfer of property in favour of a temple can be validly and effectively made.

There are three modes in which a voluntary transfer of property in favour of a temple can be validly and effectively made:—

(i) Dedication of property directly to a deity, which would not need compliance with the provisions of the Transfer of Property Act;

(ii) Transfer of property by way of gift to the Trustees of a temple and complying with provisions of Section 123 of Transfer of Property Act; and

(iii)  Creation of a Trust.

[Ramanathan Chettiar v. Palaniappa Chettiar ILR (1945) Mad. 500], and Official Trustee of West Bengal v. CIT (1968) 67 ITR 218 (Cal.)]

All that a dedication in favour of a Hindu deity is not a gift within the meaning of section 122 of the Transfer of Property Act, 1881, and, therefore, the provisions regarding acceptance by donee etc., as contained in the said Act have no application to such a dedication. However, the essentials of a Hindu religious endowment are the following:

(i)    property in respect of which the endowment is made must be designated with precision.

(ii)   the object or purpose of dedication should be clearly indicated.

(iii)  the founder must effectively divest himself of all beneficial interest in the endowed property.   – [Ram Kumar Ram Chandra & Co. v. CIT AIR 1966 All 100 : (1965) 58 ITR 721 (All)]

It was held that the dedication of any property for the worship of an idol or deity would be considered a public religious endowment of the nature of a temple if there was evidence to show that the members of the public were freely allowed/admitted to use the religious worship as a matter of right. – [CIT v. Girdharram Hariram Bhagat (1985) 154 ITR 10 (Guj.)]

It was held that charitable gifts during the holy month of Ramzan could not be construed as religious gifts unless given for religious purposes. – [CGT v. Meco-Tronics (P) Ltd. (2000) 242 ITR 542 (Mad)]

Charitable institution established for both charitable and religious purposes – when expenditure on religious activities including salary to preachers engaged to spread the teachings of Lord Jesus exceeds 5% of the total income, it is hit by Section 80 G(5)(ii) read with section 80G (5B) – CIT rightly rejected registration.  – [Church of Christ Social Society v. ICT (ITAT, Visakh) 67 DT 330]

KEY NOTE:—

The conditions for exemption of Public Religious Trusts under sections 11, 12 & 13 are the same as those for Public Charitable Trusts. A trust solely for religious purposes is exempt in its own rights under section 11 through donation to such trust would not qualify for deduction under section 80G.

Anonymous Donations

Anonymous donations are basically the donations where the person receiving the donations does not maintain any record of the person giving the donation.

“ANONYMOUS DONATION” means any voluntary contribution referred to in section 2(24)(iia) where the recipient does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. So far, particulars or details required to be maintained by the trust/fund/institution have not been prescribed.

Treatment of Anonymous Donations

Anonymous Donations as its name suggests are the donations which have been received but without the identification of the person who has given. The Any Trust which is WHOLLY RELIGIOUS TRUST shall not be covered under section 115BBC which means wholly religious trust could receive anonymous donation up to any limit and that would always be considered as the normal donations for them.

However in the case of Charitable trust, Anonymous Donations which might be received towards the free donation or as a donation towards corpus but in both the cases, it would be taxable. Anonymous Donations would be taxable @ Flat 30% u/s 115BBC (and no exemption under section 11 & 12). But any amount received up to the HIGHER of the following limit would not be taxable at the rate of 30% but it shall be taxable normally:

(i) 5% of Total Donations; OR

(ii) Rs. 1,00,000/-

Amount received only above this Limit would be covered by Section 115BBC and will be taxable @30%.

Trust established “Wholly for Religious purpose” (no charitable purpose) – Anonymous donations shall not be taxable under section 115BBC [Section 115BBC(2)(a)]

Where donations are received by trust established “Wholly for Religious” purpose (no charitable purpose), the provisions of Section 115BBC will not apply to Trusts or Institutions established wholly for religious purposes.

For Example – donations given by devotees to trust owning a temple.

If a temple does not registered under section 12A

As per Section 115 BBC(2)(a) of the Income Tax, 1961, if all receipts are Temple Box collection, such anonymous donations shall not be taxable under section 115BBC.

However in case such religious/charitable trust also runs a school/medical institution/educational institution, etc. and the donations are received with specific direction that they are for such school/institution then such donations shall be taxable under section 115BBC.

Exemption granted by section 11 is confined to public religious trusts and does not extend to private religious trusts Religious purposes would include the advancement, support or propagation of a religion and its tenets. So, a trust made for any of these purposes is said to be a religious trust. However, sections 11, 12 and 13 make a distinction between charitable and religious trusts. A charitable trust must always be public, but a religious trust may be private or public. Exemption not allowed to private religious trust for that part of income which does not enure for the benefit of public.

The exemption granted by section 11 is confined to public religious trusts and does not extend to private religious trusts, which do not enure for the public benefit. This is made clear by section 13(1)(a) which provides that nothing contained in section 11 shall operate to exempt any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public.

It was held that where the assessee trust formed with objects of wholly and exclusively for religious purpose, provisions of Section 115BBC could not be invoked. – [Bhagwan Shree Laxmi Narain v. ITO (2014) 50 taxmann.com 23 (ITAT Delhi)]

Donations made to the Temple, Mosque, Gurdwara, Church, etc.

Notified under section 80G(2)(b) shall only qualify for deductions under section 80G of the Act. Donation made to ordinary religious entities are not eligible for any deduction under section 80G of the Act.

Income derived from property held under trust wholly for charitable or religious purposes

The word ‘wholly’ referred in the section refers to the object and not to the property held under trust, further the word wholly cannot be treated equivalent to the word mainly, further it would not be sufficient if some of the objects are charitable or religious in nature. – [Dwarkadas Bhimji v CIT (1948) 16 ITR 160 (Bom)]

Where some of the objects of the trust are not of a public charitable nature

Once it is found that some of the objects of the trust are not of a public charitable nature and the trustees have a discretion in spending the amount over those objects, it cannot be said that the property held under trust is held wholly for religious and charitable purposes and the assessee would not be entitled to claim any benefit under Section 4(3)(i) of the Indian Income-tax Act, 1922. – [East India Industries (Madras) Private Ltd. v. CIT (1967) 65 ITR 611 (SC)]

Complete or Partial dedication

A property may be dedicated entirely to a religious or charitable institution or to a deity. This is an instance of complete dedication. As was observed by the Supreme Court in Dasarathrama Reddi v. Subba Rao (1957) 12 MLJ (SC) 175  where a dedication is complete, trust in favour of a public religious or charitable purpose is created.

The decision of the Supreme Court in CIT v. P. Krishna Warriar (1964) 53 ITR 176, 184 (SC) is the leading authority on the question of partial dedication. There are four cases of property being held in part only for charitable or religious purposes:

(i) The whole property may be dedicated to an idol or settled upon charitable trusts, subject to a portion of the income being given to the Shebait or to the grantor’s heirs or other persons.

(ii) The heirs may take the property beneficially but subject to a charge in favour of charity or an idol.

(iii) The owner of the property may retain the property for himself but grant the community or section of the community a beneficial interest therein by way of easement or otherwise.

(iv) The property may be held upon trust to apply a specified part of the income to charitable purposes and the balance of income to non-charitable purposes.

Trust whose objects are partly charitable and partly religious

[Mixture of Charitable and Religious Objects]

Although section 2(15) of the Act defines only “charitable purpose” and “religious purpose” has not been defined under the Act, still the exemption from tax contained in sections 11 and 12 of the Act would be applicable to the trusts established for religious purposes.

The expression “charitable purpose” also includes “religious purpose”. Such was the view expressed by the Bombay High Court in C.G.T. v. H.H. Sir Shahaji and the Chhatrapati Maharajasaheb of Kolhapur (1965) 58 ITR 140 (Bom)

The Madras High Court in the case of S.M.N. Thangaswamy Chettiar and Anr. v. CIT (1965) 57 ITR 546 (Mad) had observed that the use of the phrase “religious or charitable purposes” in section 4(3) of the 1922 Act corresponding to section 11 of the Act is due more or less to historical reasons and not because of any intention on the part of the Legislature to have a dichotomy between religious and charitable purposes, the latter meaning only secular charitable purposes.

In the case of Social Service Centre, the Assessing Officer found that the trust was mainly engaged in religious activities and he refused exemption because the expenditure was incurred by way of donation to a Diocese and for construction of a church. Their lordships of the Andhra Pradesh High Court held that since religious and charitable activities went together under section 11 of the Act, which uses the words “charitable or religious”, expenditure on religious activities could not be denied exemption. – [CIT v. Social Service Centre (2001) 250 ITR 39 (AP)]

Held religious activity

Maintaining gaushalas and attending to other animals and birds

It was held that the assessee’s Trust fulfills the characteristics of a charitable and religious trust. – [Director of Income Tax (Exemption) v. Bombay Pangrapole Trust (2015) 126 DTR 149 (Bom)]

Feeding of Brahmins on specified religious occasions

Feeding of Brahmins on specified religious occasions was held to be religious activity in CIT v. Ahmedabad Rana Caste Association 140 ITR 1 (SC). However, one needs to distinguish between a religious activity and an act of charity on a particular religious day. If the act in itself is a charitable one, then it would not become religious merely because it was performed on a particular religious occasion, as held in the decisions. – [CIT v. Girdharram Hariram Bhagat (1985) 154 ITR 10 (Guj)]

Supply of fodder to animals and cattle

Supply of fodder to animals and cattle would amount to charitable or religious purpose. – [Vallabhdas Karsondas Natha v. CIT (1947) 15 ITR 32 (Bom), CIT v. Swastik Textile Trading Co. (P) Ltd. (1977) CTR 618 (1978) 113 ITR 852 (Guj)]

Provision of dinner to Brahmins on specified occasions is religious purpose. – [CIT v. Ahmedabad Rana Caste Association [1973] 88 ITR 354 (Guj.), CIT v. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC)]

The Gujarat High Court in CIT v. Barkate Safiyah Society (1995) 213 ITR 492 observed that in some cases religious activity could also be charitable. For example, donation or Khairat on religious occasions or even supply of fodder to animal and cattle may have both elements of charity and religion.

Held not religious activity

Supporting prayer halls places of worship is not for religious purpose. – [CIT v. Shree Public Charitable Trust, TS-182-HC-2015-Kar]

Preaching and propagating the philosophy of meditation as a means of attainment of physical, mental and spiritual health is not religious activity. – [CIT v. Shree Public Charitable Trust, TS-182-HC-2015-Kar]

Charities undertaken during religious occasions like Ramzan do not become religious solely on this account. – [CGT v. Mecotronics (P) Ltd. (2000) 242 ITR 542 (Mad.)]

Acts to promote unity and brotherhood and bring complete development on all aspects of life of members of a particular community were considered as charitable object. The Courts also held that economic, physical, intellectual as well as spiritual well-being would be a charitable purpose. – [CIT v. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC)]

It was held that the object to impart education and promotion of study and practice Jain religion amongst students of ashrams, gurukuls, etc. and also amongst all persons without distinction of sex, caste, creed, place or religion was not a religious object but a charitable one. – [CIT v. Kusumgar, (K.H.) (1988) 169 ITR 370 (Bom)]

Reciting prayers is a religious object but renovation of public hall for purposes of settlor will lose benefit. – [Court Receiver v. CIT (1964) 54 ITR 189 (Bom.)]

No trust can sell assets without permission of Court

No religious trust – Church, Temple and Waqf Board – has the right to dispose off any immovable property without seeking permission of the court.

It was held that no trust, has prima facie any right to sell, mortgage and exchange property without the prior permission of the court. It was held that no religious trust – Church, Temple and Wakf Board has the right to dispose off any immovable property without seeking permission of the Court. – [Delhi High Court Order dated 04.01.2006]