Loading judgment…
Facts
The appellant, Shri Krishna Janmashtmi Mahotsav Samiti, a registered charitable trust, filed a NIL return for AY 2014-15. The AO, under Section 143(3), added Rs. 50,54,000, treating donations for Janmashtami Mahotsav as business income taxable under Section 11(4A), based on donor replies. The CIT(A) sustained this addition and initiated penalty proceedings under Section 271(1)(c).
Held
The Tribunal held that the receipts were genuine donations for the trust's religious and cultural objectives, not business income, as donor recognition was for public appraisal without a profit motive. It clarified that the trust's objects being religious/cultural, the trade-barring proviso of Section 2(15) was not applicable, thus deleting the impugned additions.
Key Issues
Whether certain receipts by a charitable trust for organizing religious and cultural events constitute business income under Section 11(4A) or are exempt donations under Sections 11 and 12, and if the trust's activities fall under the 'general public utility' proviso of Section 2(15) barring charitable status.
Sections Cited
12A, 80G, 143(3), 11, 12, 11(4A), 133(6), 2(15), 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWALShri Krishna Janmashtmi
This appeal is preferred by the assessee against the order dated 24.05.2024 of the Ld. National Faceless Appeal Centre (NFAC) (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & assessment order dated 30.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ITO(E) Ward 2(1) New Delhi for AY: 2014-15.
Heard and perused the records. The appellant is a registered public charitable trust under Section 12A and has also been granted approval under Section 80G of the Income-tax Act, 1961. Its principal activities relate to organizing religious and cultural events (notably Janmashtami Mahotsav), establishment of Ashrams, and publication of spiritual and religious literature. As for AY 2014-15, the appellant filed a NIL return claiming exemption under Sections 11 and 12 of the Act. The AO framed assessment under Section 143(3) of the Act on 30.12.2016, making an addition of Rs. 50,54,000, holding it to be business income liable to tax at the maximum marginal rate under Section 11(4A) of the Act.
The addition stems from the AO's interpretation that certain donations received during Janmashtami Mahotsav were actually advertisement or business promotion receipts, based on replies from 5 out of 12 donors under Section 133(6) of the Act. reproduced below:
“Decision : I have considered the submission of the appellant and gone through the AO's observation & decision in assessment year.
It is observed from the submission of the appellant dated 28-03-2018 that the appellant demonstrated the real nature of receipt was donation corpus fund being applied in the construction of Dharmshala and Satsang Hall at Vrindavan for providing shelter to pilgrims. It was also stated in the said submission since the amount was received for specific purpose so the same was wrongly classified as Membership Fees in Balance Sheet.
Again in another submission as above it was stated as - The appellant trust was in receipt of certain donation which according to the assessee was regular donation. However the Assessing Officer (AO) presumed to be Corpus Donation and issued notice u/s 133(6) of the I.T Act to the person who have given donation in the appellant trust Therefore I find the appellant is riddled with contradiction and confusion in as much as it pleaded for settlement of disputed treatment of nature of Donation .
The Assessing Officer (AO), after narrating the objectives of the appellant, has clearly established the nature of donation being not charitable in nature but in the nature of publicity and advertisement i.e in the nature of business activities. I find merit in the said application
In view of above discussion I find no merit in the appellant's contention on this ground in as much as the AO is able to clearly establish the reason for addition and treating the receipts as business income hence taxable income in assessment order and accordingly addition made of Rs. 50,00,000/- by the AO stand confirmed. The ground on this issue is dismissed. Decision: I have considered the submission of the appellant and gone through the AO's observation & decision in assessment order. It is observed from the I.T Act that initiation of this penalty proceeding u/s 271(1)(c) is closely related with the determination of income under section 143(3) of the I.T Act. And since the AO determined the income on account of inability on the part of the appellant to furnish the instruments in writing specifying the nature of donation the AO has to initiate the penalty proceedings u/s 271(1)(c) of the Act. Accordingly, I do not find any infirmity in the initiation of penalty of the AO and find the same was justified in as much as the said initiation being made in accordance with I.T Law. Therefore, this ground is dismissed.”
Ld. Counsel contended that there is mischaracterization of conations. It was contended that the AO erroneously treated all donations as "corpus" and "business income". In fact, the appellant never claimed these as corpus as voluntary contributions received for organizing Janmashtami Mahotsav and associated publicity. These donations were received by cheque, credited to the trust's bank account, and spent towards religious events and trust's objectives.
Ld. DR vehemently contested the issue and submitted that donation had no nexus with the activity of assessee but were received for giving services of business promotion which is business activity only.
At the outset we observe that the objects of trust are admittedly, religious and cultural and not under "advancement of any other object of general public utility" covered by the proviso to Section 2(15) of the Act, which bars charitable status if a trust under "general public utility" undertakes trade. Even assuming applicability, the alleged advertisement donations form far less than 20% of total receipts well within the statutory threshold.
Therefore, no disqualification arises.
Next question to be determined is if disputed receipts were donations towards achieving trust's objectives or business receipts. The assessee had submitted detailed explanations and evidence on 02.03.2024 and 13.03.2024, dated 28.3.2018, which is reproduced in impugned firs appellate order, assessee had also submitted that donations were also invited for getting a dharmshala constructed at Vrindawan and receipt was classified as membership fee for only reason that donor had preferential right to occupy rooms else the amount was received as donations and used specifically for same purpose.
Now admittedly revenue cannot dispute that money received were used to organize Janmashtami Mahotsav, arrange free meals (bhandaras), conduct religious discourses, and pay for publicity material like banners and posters.
Construction of dharmshala is also not disputed. The activities were pursuant to the trust's declared religious/ cultural objects, not commercial exploitation.
The presence of donor names on publicity material, at event or construction sites is merely to acknowledge the contribution and public appraisal. The intention is also to motivate others to make contributions. Any benefit derived by the donor is not commercial in nature. As no profit motive existed in receipts the same did not convert donation into commercial consideration. contradictory claim which we find was merely attempt to be more illustrative and descriptive at first appellate stage. We thus sustain the grounds. The appeal is allowed. Impugned additions is deleted.
Order pronounced in the open court on 17.12.2025