Kerala High Court Rules: Income from Public Religious and Charitable Trusts Not Eligible for Tax Exemption under Section 10(23BBA)
Court Clarifies Scope of Section 10(23BBA) of Income Tax Act
Ruling Impacts Religious and Charitable Institutions Across India
By Our Legal Correspondent
New Delhi: December 08, 2025:
The Kerala High Court has delivered a landmark judgment clarifying that income derived from public religious and charitable trusts is not eligible for exemption under Section 10(23BBA) of the Income Tax Act, 1961. The ruling, delivered by Justice Dinesh Kumar Singh, has significant implications for religious institutions, charitable trusts, and their financial management practices across India.
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The court emphasized that the exemption under Section 10(23BBA) applies only to income of statutory bodies or authorities established for regulating or administering religious or charitable institutions, not to the institutions themselves.
Background of the Case
- The Dispute: A public religious trust claimed exemption under Section 10(23BBA) for income generated from its properties and activities.
- Revenue’s Stand: The Income Tax Department rejected the claim, arguing that the exemption applies only to statutory authorities, not to trusts directly.
- Legal Question: Whether income earned by a public religious or charitable trust itself qualifies for exemption under Section 10(23BBA).
- Court’s Intervention: The matter reached the Kerala High Court after conflicting interpretations by lower authorities.
Court’s Observations
Justice Dinesh Kumar Singh made several key points:
- Scope of Section 10(23BBA): The provision exempts income of statutory bodies or authorities created to regulate or administer religious and charitable institutions.
- Trusts Not Covered: Public religious or charitable trusts themselves are not entitled to exemption under this section.
- Legislative Intent: Parliament intended to exempt regulatory authorities, not the institutions generating income.
- Alternative Relief: Trusts may seek exemption under other provisions such as Section 11 (income from property held for charitable or religious purposes), subject to compliance with conditions.
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Implications of the Ruling
- For Religious Institutions: Temples, mosques, churches, and other trusts cannot claim blanket exemption under Section 10(23BBA. They must rely on Section 11 or other applicable provisions.
- For Charitable Trusts: The ruling narrows the scope of exemptions, requiring stricter compliance with registration and reporting norms.
- For Tax Authorities: Provides clarity and strengthens the department’s position in rejecting claims made under Section 10(23BBA) by trusts.
- For Legal Precedent: Sets a binding precedent in Kerala and persuasive authority across other states.
Wider Legal Context
- Section 10(23BBA): Introduced to exempt income of statutory bodies regulating religious and charitable institutions.
- Section 11: Provides exemption for income applied to charitable or religious purposes, subject to registration under Section 12A/12AB.
- Judicial Consistency: Courts have consistently held that exemptions must be interpreted strictly, as they are exceptions to the general rule of taxation.
- Policy Debate: The ruling reignites debate on whether religious institutions should enjoy broad tax exemptions, especially when they generate substantial income.
Industry and Expert Reactions
- Tax Professionals: Welcomed the clarity, noting that many trusts had been misinterpreting Section 10(23BBA).
- Charitable Institutions: Expressed concern that the ruling may increase compliance burdens and reduce available funds for welfare activities.
- Legal Scholars: Pointed out that the judgment reinforces the principle of strict statutory interpretation in tax law.
- Public Opinion: Divided, with some supporting stricter regulation of religious income and others arguing for continued exemptions to support social welfare.
Conclusion
The Kerala High Court’s ruling that income derived from public religious and charitable trusts is not eligible for exemption under Section 10(23BBA) marks a turning point in tax jurisprudence. By clarifying the scope of the provision, the court has ensured that exemptions are limited to statutory regulatory bodies, not the trusts themselves.
This decision will reshape how religious and charitable institutions manage their finances, compelling them to rely on other provisions like Section 11 for tax relief. It also strengthens the government’s ability to regulate income from such institutions, balancing revenue interests with social welfare objectives.
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