The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that a charitable institution cannot be denied registration under Sections 12A and 80G of the Income Tax Act merely because a majority of its beneficiaries belong to a particular religious community, so long as its charitable activities are open to all sections of society and there is no evidence of discrimination.
The bench of Satbeer Singh Godara (Judicial Member) And Renu Jauhri (Accountant Member) has observed that the charitable purpose defined under Section 2(15) has the widest scope and includes relief of the poor, education, medical relief and advancement of general public utility. It held that these statutory objectives could not be defeated by assumptions based solely on the demographic profile of beneficiaries.
The Commissioner of Income Tax (Exemption) had refused to grant registration under Section 12A and, consequently, denied approval under Section 80G on the ground that the foundation’s activities were allegedly carried out for the benefit of a particular religious community. According to the Revenue, scholarships, medical assistance, relief activities, housing projects and other welfare measures primarily benefited members of one community, thereby attracting the prohibitions contained in Section 13(1)(b) and the “specified violations” under Section 12AB(4).
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The foundation challenged these findings before the Tribunal, contending that its charitable objects expressly contemplated welfare of all persons irrespective of caste, creed or religion and that beneficiaries from different communities had received assistance under its educational, medical and humanitarian programmes. It further pointed out that similar allegations regarding cancellation of its registration had already been rejected by a coordinate bench of the Tribunal in earlier assessment years.
The foundation submitted extensive documentary evidence to demonstrate that its scholarships, educational institutions, medical camps, drinking water facilities, low-cost housing, orphan support, relief for poor families, skill development programmes and Nagrik Vikas Kendra initiatives were not confined to any religious community. It argued that although many beneficiaries belonged to areas where one community formed the majority, the benefits were available to every eligible person and selection was based on objective criteria such as financial need and merit rather than religion.
The assessee also emphasized that its schools admitted students from all communities, scholarships were awarded through public advertisements and application-based processes, and charitable activities were conducted without discrimination. It argued that geographical concentration of beneficiaries could not be equated with religious exclusivity.
After examining the trust deed, the Tribunal observed that the foundation’s principal objects included promoting the overall development of the impoverished irrespective of caste, creed or religion, establishing educational institutions, providing medical facilities, granting financial assistance to the poor, creating shelters, promoting self-employment and undertaking activities for public utility. These objects clearly fell within the statutory definition of “charitable purpose” under Section 2(15) of the Income Tax Act.
The Tribunal found that the schools run by the foundation admitted students from different communities, scholarships were awarded on financial and merit criteria, and humanitarian programmes such as medical relief, drinking water projects, housing assistance and food distribution were available to all weaker sections of society.
A significant observation of the Tribunal was that the mere fact that most beneficiaries belonged to a locality dominated by one religious community did not establish that the trust was created or operated exclusively for that community.
The Tribunal noted that the foundation was not running religious institutions such as madrasas but educational institutions open to everyone. It further observed that charitable programmes naturally benefited the weaker sections residing in the areas where the foundation operated, and demographic realities alone could not justify withdrawal of registration.
According to the Tribunal, once it is established that the charitable institution has never restricted benefits on the basis of religion and its objects are intended for public welfare, exemption cannot be denied merely because beneficiaries from one community numerically predominate.
The ITAT relied upon the Supreme Court’s decision in CIT v. Dawoodi Bohara Jamat, which held that charitable trusts carrying out activities benefiting the public at large do not lose exemption merely because members of a particular community also benefit from such activities. It also referred to decisions of the Gujarat High Court and earlier Tribunal rulings supporting the principle that charitable purpose remains intact where activities are genuinely directed towards public welfare.
The Bench also noted that a coordinate bench had already restored the foundation’s registration for earlier assessment years after rejecting similar allegations made by the Revenue. Since there was no material change either in the trust’s objects or in its manner of functioning, the Revenue could not justify a different conclusion for the present assessment year.
The Tribunal held that the Human Welfare Foundation was entitled to registration under Section 12A as well as approval under Section 80G. It concluded that the Commissioner (Exemption) had erred in treating the predominance of beneficiaries from one religious community as evidence that the trust existed for that community alone.
The Tribunal restored the foundation’s registrations while clarifying that the Assessing Officer would remain free to examine the genuineness of its activities in accordance with law during future assessments. Consequently, the appeals were allowed in favour of the assessee.
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