Exemption - Requisites to fall within exempting provisions of s10(1)(f) - Society devoted its income to subsidising educational institution in foreign country - in conjunction with similar bodies, society exercised control over said institution but without participating in administration thereof - Society held exempt from tax under s10(1)(f) - Decisions on that section reviewed.
Against assessments for normal tax for the years 1974 to 1979 appellant society lodged objection that it was exempt from tax by virtue of the provisions of s10(1)(f) of the Act. The objection was overruled and the society appealed to the Special Court.
Appellant society was established in South Africa during 1917 by immigrants from A, a small village in India which has a substantially Muslim population. Clause 1 of the society's 1917 trust deed, as amended in 1972, states the society's objects to be the collection of money
'for the benefit of the descendents of any of the Muslim residents, past, present or futurs, of A, India, by means of imparting religious education through the Madressa B at A, India, and by means of granting scholarships both for religious and secular education in India and elsewhere...'
From the evidence led before the Special Court it appeared that a Madressa is a religious primary school and the Madressa B referrd to in the trust deed is a comparatively new building which replaced its 16th century predecessor. Some 400 boys and girls, mainly from A, receive, in separate sessions, primary religious education in that part of the Madressa B known as the Maktab, while higher religious education is given in anoather part known as the Darul Uloom, which comprises a large building and hostel together with dining hall and teachers' living quarters etc. The Darul Uloom has some 23 teachers and lectureres for its more than 300 students, some of whom come from South Africa and other countries outside India. The religious education imparted through both the Maktab and the Darul Uloom is free of charge as a religious service to Islam. Students pay no fees.
The Madressa B complex is financed by societies similar to that of appellant and situate in various parts of the world. Apellant society's income derives from rentals and dividends. In conformity with its trust deed, it sends as much of its income as the Exchange Control Authorities permit towards financing the Madressa B, its buildings, functions and teachers. During the period in issue appellant made to Madressa B, towards maintenance etc, annual payments together aggregating R39 317 and by way of loans and bursaries R720. Appellant takes no part in the administration of the Madressa B. Such administration is done by a local committee of seven in A. That committee is, however, under the control of the contributing societies who prescribe overall policy and periodically send representatives to A to see that the administration is being satisfactorily conducted and in coformity with prescribed policy.
Section 10(1)(f) of the Act provides that there shall be exempt from tax
'the receipts and accruals of all ecclesiastical, charitable and educational institutions of a public character, whether or not supported wholly or partly by grants from the public revenue.'Appellant does not claim to be a charitable instititution within the meaning of the section. For the Commissioner it was, in effect, conceded that appellant is an 'institution' and 'of a public character'. It was, however, submitted for the Commissioner that to qualify for the exemption provided by the section an institution must actively apply itself directly in the implementation and application of the particular ecclesiastical, charitable or educational activities in issue; that appellant does no more than make contribution towards such activities; and that appellant's association with those activities is too remote to bring it within the ambit of the aforesaid exemption.
Held
(i) That the criteria for exemption submitted by the Commissioner are unduly stringent and ignore the fact that the committee of seven in A is under the control of the contributing societies, including appellant.
(ii) That to fall within the exemption provided by s10(1)(f) it suffices if an institution takes part in the management and control of the educatioal activities for which it was formed.
(iii) That appellant society is an educational institution and falls within the exemption provided by s10(1)(f) of the Act.
Appeal accordingly allowed and assessments set aside.
In delivering the judgment of the Court the President, Melamet J, said:
The appellant society comes to appeal against the assessments of normal tax raised by the Commissioner for Inland Revenue on its income for the years ended 28 February 1974 to 1979.
The appellant society was formed in 1917 and according to its trust deed, as it then read, the objects of the society were:
'... the collection of moneys and the like to be applied solely and in such manner as the members may think proper to the benefit of the Madressa Islamia of Jooma Musjid A in India, but such Madressa shall have no rigt whatsoever to interfere with the working or otherwise of the Society.'...
Click for the top of this file or SA saga introduction or Berman J's judgment or OUP's US tax-exemption.