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Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE
Before: SHRI GEORGE GEORGE K & SHRI INTURI RAMA RAO
IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE
BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
ITA No.1044/Bang/2015 (Assessment year: 2010-11)
Income-tax Officer (Exemption), Ward-3, Bangalore. Vs. Sri Shirdi Sai Samaj, … Appellant No.377, Sri Shirdi Sai Baba Mandir Road, Someshwarapura, Halasuru, Bangalore-560008. … Respondent PAN: AAATS 5023 R AND Cross Objn.No.213/Bang/2015 (In ITA No.1044/Bang/2015) (Assessment year: 2010-11) (By the assessee) Revenue by : Shri Sunil Kumar Agarwala, JCIT(DR) Assessee by : Shri Ashok A Kulkarni, Advocate
Date of hearing : 07/04/2016 Date of pronouncement : 11/05/2016 O R D E R Per INTURI RAMA RAO, AM :
This is an appeal filed by the revenue directed against the order of the CIT(A)-V, Bangalore, dated 10/09/2014 for the assessment year 2010-11.
ITA No.1044/Bang/2015 Page 2 of 9 2. The revenue raised the following grounds of appeal:
The learned CIT(A) erred in holding that 11 5BBC is not attracted to the donations received by the appellant trust by way of pooja and hundi collections. 2. The learned CIT(A) erred in holding that assessee trust falls in the exceptional categories under clause (b) of sub- section (2) of section 11 5BBC 3. The learned CIT(A) erred in holding that the assessee is a public charitable trust and amended section 11 5BBC is not applicable 4. The learned CIT(A) failed to hold that granting of recognition u/s 80G(5)(vi) will be applicable only to charitable institutions and not for religious institutions 5. The learned CIT(A) failed to hold that the assessee trust is having registration u/s 12AA and also recognition u/s 80G(5)(vi), Section 115BBC is attracted.
Briefly, facts of the case are that the respondent-assessee is a charitable society. It was set up with the mixed objects of religious and charitable activities. Return of income for the assessment year 2010-11 was filed on 18/10/2010 declaring ‘nil’ income. After processing the return of income under the provisions of sec.143(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] the case was selected for scrutiny assessment and finally the assessment was completed u/s 143(3) vide order dated 27/3/2013 accepting the returned total income. However, the Assessing Officer [AO] treated Hundi collections of Rs.1,45,26,125/-, Pooja collections of Rs.30,02,409/- and donations of Rs.4,17,890/- as anonymous
ITA No.1044/Bang/2015 Page 3 of 9 donations within the meaning of provisions of sec.115BBC of the Act.
Being aggrieved by this order, an appeal was filed before the the CIT(A) who vide impugned order held that the above amounts cannot be treated as anonymous donations within the meaning and ambit of the provisions of sec.115BBC of the Act, as the case of the respondent-assessee-society fell within exceptions carved out by sub-sec.(2) of the said section and granted relief. The order of the CIT(A) reads as under:
“10. In case where the trust is created or established for religious and charitable purposes and/or is engaged in both religious and charitable activities as per the objects memorandum of association, for the purpose of application of section 115BBC one has to consider the exclusion provision contained in sub-section (2) of section 115BBC, which is reproduced here under for ready reference: "(2) The provisions of sub-section (1) shall not apply to any anonymous donation received by:- a) any trust or institution created or established wholly for religious purposes: b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution."
10.2 A plain reading of clause (a) of sub-section (2) reproduced above, clearly shows that in case of the trust or
ITA No.1044/Bang/2015 Page 4 of 9 institution with wholly religious purpose, person can receive anonymous donations on behalf of such trust or institution and such donations will not attract taxation under sub-section (1) of section 115BBC. This is irrespective of the fact that such incomes in the form of anonymous donations to religious trust is applied to or spent for non-religious or charitable purpose such as relief to the poor medical etc. It is a different matter that such religious trust may not be eligible for approval u/s.80G(5) by virtue of failing to adhere to the conditions laid down in the said provisions. 10.3 Further, as per clause (b) of sub-section (2) of S. 115BBC, in case of any trust or institution created or established wholly for religious and charitable purpose i.e. mixed purposes, the anonymous donation received by such trust or institution shall also be excluded from taxation. It is only such anonymous donation which is made by the donor with a specific direction that such donation is for a university or for other educational institution or any hospital or other medical institution run by such trust or institution, receiving the donation, that the exemption or exclusion from taxation u/s.115BBC(1) shall not be available. The Assessing Officer's view (para 9, page 8 of the assessment order) that "as per the provisions of section 115BBC(2), any contribution/donation with a specific direction shall not be treated as anonymous donations" is contrary to the literal interpretation of the clause (b) of sub- section (2) of section 115BBC, as also the intent of legislation. Such unreasonable and illogical interpretation deserves to be rejected. 10.4 The legislative intent of the provisions of section 115BBC to tax anonymous donations by charitable trust has been explained in CBDT circular no. 14/2006 dated 28/12/06. Relevant paragraph of the memorandum explaining the amendments brought in by Finance Act 2006 is reproduced below:
"25. Taxation of anonymous donations received by wholly charitable trusts or institutions including non- profit educational or medical institutions.
ITA No.1044/Bang/2015 Page 5 of 9 25.1 Income of wholly charitable or religious trusts or institutions as well as partly charitable or religious trusts or institutions is exempt from income-tax under sections 11 and 12, subject to the fulfilment, inter alia, of certain conditions, of application of income and investment in specified modes. Similarly, income of any university or other educational institution referred to in sub-clause (iliad) or sub- clause (via) or any hospital or other medical institution referred to in sub- clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10, is exempt from income-tax subject to the fulfilment of conditions specified in the said clause. 25.2 With a view to prevent channelisation of unaccounted money to these institutions by way of anonymous donations, a new section 115BBC has been inserted to provide that any income of a wholly charitable trust or institution by way of anonymous donation shall be included in its total income and taxed at the rate of 30 per cent. Anonymous donation made to wholly charitable and religious trusts or institutions, i.e. mixed purpose trusts or institutions shall be taxed only if it is for any university or other educational institution or any hospital or other medical institution run by them. Anonymous donation to wholly religious trusts or institutions will not be taxed."
10.5 In the instant appeal, there is no case made out by the Assessing Officer that the Hundi collections and puja collections received by the trusts from the donors and devotees of Shri Sal Baba Temple at Halasuru Bengaluru has been made with any direction, that such donation is for any University or other educational institution or medical institution run by the appellant trust. In fact, during the relevant year the appellant trust did not run any educational institution or hospital or medical institution, and no such facts have been recorded by the Assessing Officer.
ITA No.1044/Bang/2015 Page 6 of 9 11. In view of the above discussion, it is held that section 115BBC is not attracted to the amounts received by the appellant trust by way of puja collections and hundi collections in the Sai Baba Temple, as the assessee falls in the exceptional categories under clause (b) of sub-section (2) of section 115BBC. The appellant society has mix of religious and charitable purpose and the pooja donations or donations into the hundi boxes could not be said to be anonymous donation, made for any university or educational institution or medical institution run by the appellant. The action of the Assessing Officer of taxing Rs.166,31,213/- treated it as anonymous donation u/s 115BBC and taxing @30%, is held to be unsustainable, and hence cancelled. Grounds of appeal on this issue are allowed.”
Being aggrieved, revenue is in appeal before us and the assessee-society has come up in cross objections contending that the CIT(A) ought to have held the assessee-society as charitable organization.
We heard the rival submissions and perused material on record. The issue in the present appeal is whether the provisions of sec.115BBC have no application to Hundi collections of Rs.1,45,26,125/-, Pooja collections of Rs.30,02,409/- and donations of Rs.4,17,890/-. The relevant provisions of sec.115BBC are extracted below:
“115BBC. (1) Where the total income of an assessee, being a person in receipt of income on behalf of any university or other educational institution referred to in sub-clause (iiiad) or sub- clause (vi) or any hospital or other institution referred to in sub- clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10 or any trust or institution referred to in section 11, includes any income by way
ITA No.1044/Bang/2015 Page 7 of 9 of any anonymous donation, the income-tax payable shall be the aggregate of— (i) the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of the higher of the following, namely:— (A) five per cent of the total donations received by the assessee; or (B) one lakh rupees, and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received.] (2) The provisions of sub-section (1) shall not apply to any anonymous donation received by— (a) any trust or institution created or established wholly for religious purposes; (b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution. (3) For the purposes of this section, "anonymous donation" means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed.
The said provisions are explained by the CBDT vide circular No14/2006 dated 28/12/2016: "25. Taxation of anonymous donations received by wholly charitable trusts or institutions including non-profit educational or medical institutions.
ITA No.1044/Bang/2015 Page 8 of 9 25.1 Income of wholly charitable or religious trusts or institutions as well as partly charitable or religious trusts or institutions is exempt from income-tax under sections 11 and 12, subject to the fulfilment, inter alia, of certain conditions, of application of income and investment in specified modes. Similarly, income of any university or other educational institution referred to in sub-clause (iliad) or sub- clause (via) or any hospital or other medical institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10, is exempt from income-tax subject to the fulfilment of conditions specified in the said clause. 25.2 With a view to prevent channelisation of unaccounted money to these institutions by way of anonymous donations, a new section 115BBC has been inserted to provide that any income of a wholly charitable trust or institution by way of anonymous donation shall be included in its total income and taxed at the rate of 30 per cent. Anonymous donation made to wholly charitable and religious trusts or institutions, i.e. mixed purpose trusts or institutions shall be taxed only if it is for any university or other educational institution or any hospital or other medical institution run by them. Anonymous donation to wholly religious trusts or institutions will not be taxed." From the above, it is very clear that anonymous donations made to the wholly charitable and religious trust, institution with a specific direction that donations is for any university or educational institution or any hospital or other medical institution run by them can only be treated as anonymous donations. Anonymous donations made to religious trust will not come within the purview of the provisions of sec.115BBC of the Act. Thus, the order of the CIT(A) is in consonance with the plan provisions of the Act. We do not intend to interfere with the order passed by
ITA No.1044/Bang/2015 Page 9 of 9 the CIT(A). Hence, the appeal filed by the revenue is dismissed. The cross objections filed by the assessee-society is dismissed as not pressed.
Order pronounced in the open court on this 11th day of May, 2016
sd/- sd/- (GEORGE GEORGE K) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Place : Bangalore D a t e d : 11/05/2016 srinivasulu,sps Copy to : 1 Appellant 2 Respondent 3 CIT(A)-II Bangalore 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order Assistant Registrar Income-tax Appellate Tribunal Bangalore