Charitable Institutions: Art Thou Truly Charitable?

Adv Sherry Samuel Oommen: This article is authored by Adv Sherry Samuel Oommen. Adv Oommen, who specializes in constitution, tax and corporate laws has also cleared the final exams of the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India and the Institute of Company Secretaries of India. He has also completed his Masters Degree in Commerce, apart from obtaining a Post Graduate Diploma in Business and Corporate Laws from Symbiosis Pune. The views expressly are personal and should not be construed as a legal [e-mail].

- Adv Sherry Samuel Oommen

The taxability of income of Religious and charitable institutions in the country has been a subject matter of persistent litigation. Section 12 of the Income-tax Act, 1961 ("the Act") exempts the income of property held under a Trust or income of a Charitable or Religious trust derived from investments. Further, this section exempts the income of such a trust derived from voluntary contributions in respect of such charitable or religious institutions.

It would not be inapposite to state that the provisions governing exemption for charities, for instance, section 12 of the Act, have been a subject matter of frequent abuse and misuse. In a recent judgment, the Madras High Court in the case of CIT Vs MAC Public Charitable Trust [2022] 144 Taxmann.com 54 lifted the corporate veil to deny the Respondent Trust, the exemption under section 12 of the Act. In this case, the Court pertinently observed as follows: