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Facts
The assessee, Sri Venkateswara Swamy Devasthanam, filed appeals against CIT(A) orders for AYs 2013-14 & 2016-17 with a 160-day delay, which was attributed to High Court proceedings where the court directed that this period not be counted for limitation. The original assessment involved an addition of Rs. 6,96,63,345/- as unexplained money (hundi collections) under Section 69A. The assessee claimed exemption under Section 10(23BBA) and Sections 11 & 12, arguing it is a state government-managed temple not required to file an ITR or audit report (Form 10B). The CIT(A) deleted the addition under Section 69A but denied the Sections 11 & 12 exemption.
Held
The Tribunal condoned the delay, accepting the High Court's directive. It held that Section 10(23BBA) exempts only the administrative body/authority managing the trusts, not the temples themselves, thus denying exemption to the assessee temple under this section. The Tribunal also confirmed that the assessee was not eligible for exemptions under Sections 11 and 12 due to non-filing of income tax returns and audit reports (Form 10B). Regarding hundi collections, the Tribunal affirmed that these are not anonymous donations under Section 115BBC(1) for religious trusts and should be assessed on a commercial basis (surplus after expenditure under Sections 56 & 57), rather than taxing the entire donation.
Key Issues
Whether the delay in filing the appeal should be condoned; whether the assessee temple is exempt under Section 10(23BBA) and Sections 11 & 12 of the Income Tax Act; and whether hundi collections should be treated as anonymous donations taxable under Section 115BBC.
Sections Cited
10(23BBA), 11, 12, 69A, 115BBC, 147, 148, 142(1), 143(3), 144, 144B, 139, 119(2)(b), 251(1)(a), 56, 57, 149, 148A, 12AA, 10(23C), 80G
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Income Tax Appellate Tribunal, Hyderabad ‘ DB-B ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha, G.
ORDER
Per Vijay Pal Rao, Vice President These appeals filed by the assessee are directed against two separate orders, both dated 19/02/2024 of the learned CIT (A)-NFAC Delhi, for the A.Ys. 2013-14 & 2016-17.
There is a delay of 160 days in filing the present appeals. The assessee has filed an application for condonation of delay. The learned AR of the assessee has submitted that during the pendency of the appeal before the learned CIT (A), the assessee filed a writ petition before the Hon'ble High Court for issuing directions to the learned CIT (A) and the Hon'ble High Court was pleased to give directions to the learned CIT (A)
Page 1 of 37 accordingly. Thereafter, the assessee challenged the impugned order in the Writ Petition No.18335/2024 before the Hon'ble High Court. However, since the proper remedy was to file the appeal before the Tribunal, therefore, the Hon'ble High Court has allowed the assessee to avail the statutory remedy of filing appeal and also made it clear that the time consumed before the Hon'ble High Court shall not be counted for the purpose of the limitation before the Tribunal vide order dated 09/09/2024. Therefore, the delay of 160 days in filing the present appeal may be condoned and the appeal of the assessee be admitted for adjudication on merits.
3. On the other hand, the learned DR has objected to the condonation of delay in filing the present appeals.
We have considered the rival submissions as well as carefully perused the contents of the application for condonation of delay which are reproduced in para 5 to 7 of the order as under:
4. We further note that vide order dated 9/9/2024 in Writ Petition No.23368/2024, the Hon'ble High Court has observed in para 2 and as under:
“2. This petition assails order dated 19/02/2024 passed by the Appellate Authority. Admittedly, the petitioner has a remedy of appeal before the ITAT. In view of the statutory remedy available, we are not inclined to entertain this petition. It is made clear that the time consumed before this Court shall not be counted for the purpose of limitation before the Tribunal. The petitioner shall avail the statutory remedy available to him in accordance with law.
With the aforesaid, the Writ Petition is disposed of. There shall be no order as to costs. Interlocutory applications, if any pending, shall stand closed”.
Accordingly, when the time consumed before the Hon'ble High Court is excluded for the purpose of limitation in filing the appeal before this Tribunal as observed by the Hon'ble High Court, then the appeal of the assessee is found to be within the period of limitation and admitted for adjudication on merits.
The assessee has raised common grounds of appeals in these 2 appeals except the quantum of addition. The grounds raised by the assessee for the ay 2013-14 are reproduced as under:
Page 3 of 37 Page 4 of 37 Page 5 of 37 Page 6 of 37 Page 7 of 37 Page 8 of 37 Page 9 of 37 Page 10 of 37 Page 11 of 37 Page 12 of 37 Page 13 of 37 Page 14 of 37 6.1 The learned AR of the assessee has submitted that the learned CIT (A) has partly allowed the appeal of the assessee, however, the claim of exemption u/s 11 and 12 of the Act was denied on the ground that the assessee did not file the return of income as well as the audit report in Form-10B. He has thus, contended that the issue in these appeals arises that the assessee was not required to file the return of income when the case of the assessee is covered u/s 10(23BBA) of the I.T. Act, 1961. The 2nd issue raised by the assessee is regarding the donation received by the assessee in the shape of hundi i.e. a donation received in the donation box placed at Devasthanam and therefore, the same Page 15 of 37 cannot be treated as anonymous donation to be taxed u/s 115BBC of the Act.
As regard the first issue, the learned AR submitted that the provisions of section 10(23BBA) of the Act are applicable in the case of the assessee and therefore, the income is exempt from tax. The learned AR of the assessee has submitted that the assessee temple is managed by Endowment Commissioner as per the provisions of the Endowment Act and therefore, Endowment Temples are not liable to tax as per section 10(23BBA) of the Act. He has further submitted that the Endowment run temple is nothing but a state government created body under the Endowment Act of the State and hence, not liable to income tax. He has further submitted that it is like an educational institution run by the Govt. in contrast with an educational institution which is registered body of individual(s) in accordance with the instrument of its creation. Since the Endowment Temples are run by the Govt. according to the Telangana Charitable and Hindu Religious and Institutions and Endowment Act, 1987, therefore, maintenance of the temples are as prescribed by the Endowment Act including the financial deficiencies which are made good by the State Govt. by way of grant and surplus, if any, spent according to the Endowment Act. The temples are administered by Govt. Officer called Executive Officer and there are no election, no general body members or meeting, no audit by the C.A. Thus, the Telangana Govt.de-facto represents all the Endowment Temples which cannot be equated with other Trusts and Societies created by the body of individuals. He has referred to section 7 of the Endowment Act and submitted that the Commissioner shall Page 16 of 37 be a corporate sole and shall have perpetual succession and common seal and may sue or be sued in his corporate name as per section 8(1) of the Endowment Act. The administration of the charitable and Hindu Religious Institutions and Endowment is under general superintendence and control of the Commissioner. The learned AR has contended that the management and control of the Endowment Temple is rested in the Govt and not liable to income tax as per section 10(23BBA) of the Act. The end use of the funds of the Endowment Temples are at the disposal of the Govt, which it does in accordance with the Endowment Act. The Endowment Temples are liable to pay the govt. amount from the income derived by it and such contribution is required to be made annually to the endowment administration fund for actual expenditure incurred towards such services as may be prescribed u/s 65 of the Endowment Act. He has further submitted that a common good fund is created under the Endowment Act which shall be vested in the committee constituted by the Govt. and shall be administered in such manner as may be prescribed. Thus, the income of the assessee temple is exempt u/s 10(23BBA) of the Act.
On the other hand, the learned DR has submitted that the provisions of section 10(23BBA) of the I.T. Act are applicable only in respect of the income of the body/authority/ establishment constituted/appointed by the Central/State Govt for the administration of any one or more of the public religious or charitable trust or endowments including Math/Temples/ Gurdwara/Waqf/Churches etc., or other placed of public religious worship. Therefore, the income of such body which is constituted Page 17 of 37 by the Central or State govt, to administer interalia Endowment Temples is exempt u/s 10(23BBA) and not the income of the temple itself. He has referred to the provisions of section 10(23BBA) and submitted that it is specifically made clear under the said proviso that nothing in this clause shall constitute to exempt from tax incomed of any Trust/Endowment or Society referred to therein. Thus, the learned DR has submitted that the provisions of section 10(23BBA) of the Act are not applicable to the temple itself/endowment temples. In support of his contention, he has relied upon the judgment of the Hon'ble Madras High Court in the case of M/s. Sri Amirthakadeswaraswamy Devasthanam Dharumapauram Adheenam vs. ACIT in W.P. Nos.29312 & 29315 of 2019 & WMP.Nos.29115 & 29111 of 2019 & 2325 of 2020 WP.No.29312 of 2019 dated 18/02/2021 and submitted that the Hon'ble High Court has held that the exemption is extended to those bodies or authorities set up under the Central/State Govt. or provincial Acts that are entrusted with the administration of public religious and charitable trust/endowment that included within their ambit viz., Temples/Math/Waqf/Churches/ Synagogue/Agiaries and other placed of public religious worship. The Hon'ble High Court has further observed that these overseeing authorities are constituted only to administer or manage the affairs of religious and charitable endowments vested in them and do not engage in any commercial activities and therefore, any income that may arise or accrue to them would not bear the nature of the taxable income for the purpose of income tax Act. Thus, the learned DR has submitted that the assessee Page 18 of 37 temple is not entitled for the benefit of section 10(23BBA) of the I.T. Act, 1961 and liable to tax.
We have considered the rival contentions as well as the relevant material available on record. The assessee temple is managed by the Endowment Commissioner, an authority appointed by the State Govt. under the Endowment Act (Telangana Charitable and Hindu Religious Institutions Endowment Act, 1987). The assessee temple has not filed any return of income and claimed that it is exempt u/s 10(23BBA) of the Act on the strength that the assessee temple is managed/administered by the Govt. through the authority appointed under the Endowment Act and therefore, the de facto representation of Endowment Temples including the assessee is by the State Govt. The A.O has rejected the claim of the assessee and assessed the donations received under Hundi (Box collection) as anonymous donation u/s 69A r.w.s. 115BBC of the Act.
9.1 On appeal, the CIT (A) has deleted the addition u/s 69A, however, since the assessee has not filed any return of income, therefore, the claim of exemption u/s 11(1) of the Act was denied and consequently, the entire receipts/income of the assessee was taxed in normal course. So far as the claim of deduction/exemption u/s 11(1) of the Act is concerned, since the assessee has neither filed any return of income nor any audit report, therefore, the assessee cannot claim the benefit of section 11 & 12 of the Act without satisfying the mandatory conditions provided u/s 11 of the I.T. Act. The learned CIT (A) has given his findings in para 5.1 to 5.9 as under:
Page 19 of 37 Page 20 of 37 Page 21 of 37 Page 22 of 37 Page 23 of 37 Page 24 of 37 Page 25 of 37 Page 26 of 37 Page 27 of 37 Page 28 of 37 Page 29 of 37 Page 30 of 37 9.2 The assessee has not brought anything on record to show that in the absence of the return of income as well as satisfactions of other conditions provided u/s 11 of the I.T. Act, the benefit of section 11 & 12 is available to the assessee. Accordingly, we do not find any error or illegality in the findings of the learned CIT (A) to the extent that the assessee is not eligible for the benefit of section 11 & 12 of the I.T. Act.
The next issue raised by the assessee is regarding the applicability of section 115BBC of the I.T. Act, 1961 treating the donation received under Hundi collection (donation box collection) as anonymous donation liable to be taxed on gross basis. The learned AR of the assessee has submitted that an identical issue has been considered by the Hon'ble Bombay High Court in the case of CIT vs. Sai Baba Sansthan Trust judgment dated 08/10/2024 in INCOME TAX APPEAL NO. 598 OF 2024 and others wherein the Hon'ble High Court has held that the assessee is entitled to claim the benefit of section 115BBC(2)(b) of the Act.
On the other hand, the learned DR has submitted that when the assessee has not filed any return of income, nor the audit report in Form 10B, then the assessee cannot claim the Page 31 of 37 benefit off exception u/s 115BBC of the Act. He has relied upon the orders of the authorities below.
We have considered the rival contentions as well as the relevant material available on record. The learned CIT (A) has confirmed the addition and assessment of the donation received by the assessee under Hundi (Donation Box Collection). The assessee has claimed the benefit of Section 115BBC(2) of the Act with the support of the judgment of the Hon’ble Bombay High Court in the case of CIT (Exemption) vs. Shree Sai Baba Sansthan Trust – Shirdi (Supra). There is no dispute that the assessee is a Trust established wholly for religious and charitable purpose and therefore, as per sub-section (2) of Section 115BBC, the provisions of sub-section (1) shall not apply to the anonymous donation received by the assessee. However, this section provides only the rate of tax applicable on the anonymous donation received by the assessee and in case the said anonymous donation is not liable to tax as per sub-sec (1) of Section 115BBC of the Act, then the same will be assessed under the normal provisions of the Act and on commercial basis. In other words, instead of assessing the entire donation, only the surplus after deducting the expenditure incurred by the assessee will be taxed as income of the assessee. Thus, the A.O is directed to assess the income of the assessee in terms of section 56 & 57 of the I.T. Act instead of the entire donations.
The other contention of the assessee before the Tribunal is only on the applicability of 10(23BBA) of the Act. For Page 32 of 37 ready reference, the provisions of sec 10(23BBA) of the Act are quoted as under: “Section 10(23BBA) in The Income Tax Act, 1961 (23BBA)any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force: Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein;”.
13.1 Thus, the provisions of section 10(23BBA) contemplate that any income of any body or authority established/constituted/appointed by or under any Central, State or Provincial Act for administration of one or more public religious or charitable trusts or endowments or societies for religious or charitable purpose will not form part of the total income. This provision exempts the income of the administrative body or authority constituted or appointed by the Central Govt. or State Govt. under the respective Acts for the administration of the religious or charitable Trust or Endowment and therefore, there is a distinction between the public religious or charitable trust or endowments and the administrative body or authority constituted or appointed by the Central or State Govt, under the respective Act. In the case in hand, no doubt the administration of the assessee temple is given to the Administrator appointed by the State Govt. under the Telangana Charitable & Hindi Religious Institutions Endowment Act, 1987, in short, “Endowment Act”.
Page 33 of 37 Therefore, the income of the said administrative body or authority is exempted under section 10(23BBA) of the Act and not the income of the temple or trust which is administered by the said authority. The proviso to this section makes it clear that nothing in this clause shall be construed to exempt from the tax income of any Trust/Endowment or Society referred to in the said clause. Therefore, the Legislature has made it clear without any ambiguity that only the income of the authority appointed for administering the temple/trust or endowment or society as referred in the said clause is exempt and not the income of the Trust/Endowment or Society itself. The Hon’ble Madras High Court in the case of Sri Amrithakadeswaraswamy Devasthanam Dharumapuram Adheenam vs. ACIT (Supra) has considered this issue in Para 12 to 17 and Para 37 as under: “12. The provisions of Section 10(23BBA) of the IT Act are extracted below: Section 10(23BBA) any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, agiaries or other place of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force. Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein;]’ 13. Sub-clause 10(23BBA) was inserted by insertion, the memorandum explaining its objects states as follows: Exemption from income-tax in the case of statutory bodies or authorities for the administration of public religious or charitable trusts or endowments, etc. Section 9 of the Wakfs Act, 1954 provides for the establishment of the Board of Wakfs for each State for the general superintendence of all wakfs in that State. Section 8A of the Wakfs Act provides for the establishment of the Central Wakf Council for the purpose of advising the Central Page 34 of 37 Government on matters concerning the working of State Wakf Boards and due administration of the wakfs. In the cases of public religious or charitable trusts or endowments of other communities, there are similar bodies set up under enactments in force in different States. These bodies or authorities set up by or under the Central, State or Provincial Acts are entrusted with the administration of public religious or charitable trusts within their jurisdiction. These public religious or charitable trusts also cover temples, maths, wakfs, churches, synagogues, agiaries and other places of public religious worship, other religious and charitable endowments, as also societies formed for religious or charitable purposes under the Societies Registration Act, 1860. Such bodies or authorities are at times in receipt of income during the course of administration of such public religious or charitable trusts or institutions. Since these bodies or authorities are not engaged in any commercial activity, it is proposed to insert a new clause (23BBA) in section 10 in order to grant exemption in respect of income arising to anybody or authority established, constituted or appointed under any enactment for the administration of such public religious or charitable trusts or endowments or societies for religious or charitable purposes. It is however, being made clear that the exemption would not apply to the income of such trust, endowment or society.
The proposed provision will take effect retrospectively from 1st April, 1962 i.e. from the commencement of the Income-tax Act, 1961.
14. The grant of exemption is with specific reference to the hierarchy under the Wakf Act that has constituted Board of Wakfs in each State for the general superintendence of all Wakfs in that State. Overseeing them all is the Central Wakf Council, which also advices the Central Government on all matters concerning the working of the State Wakf Boards. The existence of similar hierarchies in other communities has been recognized.
An exemption was thus extended to those bodies or authorities set up under a Central, State or Provincial Act, that are entrusted with the administration of public religious and charitable trusts and endowments that include within their ambit temples, maths, wakfs, churches, synagogues, agiaries and other places of public religious worship and religious and W.P. Nos.29312 & 29315 of 2019 charitable endowments as also societies formed under the Societies Registration Act for dispensation of religious and charitable purposes.
Since the overseeing authorities are constituted only to administer or manage the affairs of the religious and charitable endowments vested in them, and do not engage in any commercial activity, it was felt that any income that may arise or accrue to them would not bear the nature of taxable income for the purposes of the Income Tax Act. Thus, the body/authority Page 35 of 37 constituted under the Central, State or Provincial Act, and vested with the administration of a public religious or charitable trust encompassing places of worship, stood exempted from the application of the IT Act. It was made clear in the proviso to Section 10(23BBA) that the exemption did not extend to the constituents of that body/authority whose income is liable to tax, in accordance with law.
A three tier structure is envisaged, a Central, State or Provincial enactment (tier) (i)), a body or authority set up under aforesaid Central, State or Provincial enactment in the nature of a public religious or charitable trust (tier) (ii)) and temples, maths, wakfs, churches, synagogues, agiaries and other places of public religious worship, religious and charitable endowments and societies (tier (iii)). The grant of exemption is conditional upon the existence of the structure as contemplated above and is directed towards the entity in the second tier, explicitly excluding all places of public religious worship and charities constituted under them, from the benefit of exemption. ………………18……………to……………………..36…………..
W.P.No.29315 of 2019 relating to Vaithyanathaswamy Devasthanam is allowed, but it is made clear that the individual constituent temples, endowments and charities are liable to tax in the light of the proviso to Section 10(23BBA). It is open to the income–tax authorities to proceed accordingly qua the constituents of the devasthanam, in accordance with law. W.P.No.29312 of 2019 relating to Sri Amirthakadeswarasamy Devasthanam is dismissed.”
12.2 Accordingly, the provisions of sec 10(23BBA) of the Act are applicable only on the income of the body or authority established, constituted or appointed by the State Govt. or the Central Govt. under the Central or State or Provincial Act for administration of public religious or charitable trust or endowments and not on the income of the Endowment i.e. Mosque/Temples/Church/Gurudwara etc., The amount paid to the administrative authority or body as constituted under the Act is certainly a statutory obligation on the part of the temple to pay such amount as per the provisions of the Act and to that extent, the same will be excluded from the income of the assessee temple for the purpose of computation of total income. Even otherwise, Page 36 of 37 the public religious trusts or temples are eligible for registration u/s 12A or 12AA of the I.T. Act, 1961 and consequently, the benefit of sections 11 and 12 of the Act and therefore, the provisions of section 10(23BBA) are not applicable to these Trusts/Temples. Respectfully following the judgment of the Hon’ble Madras High Court in the case of Sri Amirthakadeswaraswamy Devasthanam Dharumapouram Adheenam vs. ACIT (Supra), we hold that the provisions of section 10(23BBA) are not applicable on the income of the assessee temple but this provision is applicable only on the income of the administrative body or authority constituted/appointed under the Endowment Act.
In the result, both the appeals filed by the assessee are partly allowed.