Wednesday, 16 September 2015

Whether anonymous donations received by religious trust would fall within scope of Sec 115BBC and to be added to its income if activity of Trust is spiritual and not religious - NO: High Court

THE issue before the Bench is - Whether anonymous donations received by a religious trust would fall within the scope of Section 115BBC and will be added to its income, if the activity of the trust is 'spiritual' and not 'religious'. NO is the answer.
Facts of the case
The assessee is a registered trust. For the AY in question, the assessee had filed its return accompanied by an audit report, balance sheet, income and expenditure account etc. The case of assessee was picked up for scrutiny, wherein it was found that the assessee had received Rs.5,28,84,204/- by way of donations. While the details of the names and addresses of the donors to the extent of Rs.5,01,588,98 was furnished, the details of donors to the extent of Rs.27,25,306 were not explained. The assessee explained that it was mainly involved in imparting of spiritual education through lectures/samagam delivered by Brahmarishi Kumar Swami Ji and in distribution of medicines and clothes to the needy and destitute. The AO, therefore, proceeded to invoke Section 115BBC and add the aforementioned sum to the income of assessee. It was held by AO that although the legislature had exempted wholly public religious trusts from the provision of Section 115BBC, the case of assessee was not of public religious trust but a case of spiritual organization. Therefore, the case of the assessee was clearly hit by the provision of Section 115BBC. Accordingly, a sum of Rs.27,25,306/- was, therefore, treated as anonymous donations and brought to tax as per Section 115BBC and seperately initiated penalty proceedings u/s 271(1)(c).
On appeal, the CIT(A) confirmed the action of AO. On further appeal, the Tribunal concluded that the AO and CIT had proceeded "on a very narrow and incorrect understanding in holding that the assessee trust was engaged in spreading spirituality and since Section 115BBC only exempts religious trust, a trust allegedly imparting spiritual knowledge was consequently not contemplated as an exception by the Legislature as much as it consequently was barred to claim exemption vis-a-vis the anonymous donation.
Having heard the parties, the High Court held that,
++ the question posed arises in the context of the anonymous donations received by the assessee trust and the view of the AO that such donations would not be exempt within the scope of Section 115BBC since the activity of the trust was 'spiritual' and not 'religious'. In Commissioner of Income-Tax v. Dawoodi Bohra Jamat, the Supreme Court after analysing the objects of the trust in that case held that they were "not indicative of a wholly religious purpose but were collective indicative of both charitable and religious purposes." It was held in the context of that case that "the establishment of Madarsas or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15). What can constitute religious activity in the context of the Hindu religion need not be confined the activities incidental to a place of worship like a temple. The Supreme Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar held that "a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters;
++ it might well be that a Hindu religious institution like the assessee is also engaged in charitable activities which are very much part of religious activity. In carrying on charitable activities along with organising of spiritual lectures, the assessee by no means ceases to be a religious institution. The activities described by the assessee as having been undertaken by it during the A.Y in question can be included in the broad conspectus of Hindu religious activity when viewed in the context of the objects of the trust and its activities in general. For the aforementioned reasons, the Court finds no legal infirmity in the conclusion of the ITAT that for the purpose of Section 115BBC(2)(a), anonymous donations received by assessee would qualify for deduction and it cannot be included in its assessable income.

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