2014 (9) TMI 81 - AT - Income Tax

Nature of the activity carried on by Trust - Religious or Charitable - Interpretation of law Applicability of section 115BBC general public utility - charitable purpose u/s 2(15) - Held that - The AO was of the view that the assessee is falling within the scope of general public utility - the tax authorities have completely misdirected themselves in considering the issue - since the assessee was engaged in spiritual lectures which according to their understanding of the context in which the explanation was offered was mistakenly and erroneously considered to be a bar to the assessee in claiming that the rigors of sec. 115BBC were not attracted - The conclusion has been arrived at by the tax authorities, the tax authorities have proceeded on a very narrow and incorrect understanding in holding that the assessee trust was engaged in spreading spirituality and since section115BBC only exempts religious trust, a trust imparting spiritual knowledge was consequently not contemplated as an exception by the Legislature as much as it consequently is barred to claim exemption vis- -vis the anonymous donation. The objects of ameliorating their miseries, providing night shelter, self-help capability, knowledge distribution of food medicines etc coupled with solace in the name of God cannot be outrightly rejected and merely because the assessee is not limiting itself to disbursing food medicine, providing shelter etc and is also giving lectures on spirituality was not the kind of assessee contemplated under section 115BBC who was to be visited by the rigours of the said section. Lectures/discourses on the teachings of the prevalent and predominant religions of the country are claimed to have been given as would be found from the written submissions extracted in the impugned order which have also been reproduced from the impugned order in the present proceedings - during these lectures voluntary donations by the attendees have been made which constitutes the anonymous donations - the voluntary donations exigible to tax on the understanding that the assessee trust was not fulfilling the requirements of a public religious trust - the objects of the trust and the context in which spiritual lectures espousing the philosophy i.e. the spirituality of the major and predominant religions of the country needs to considered in the light of the well-accepted and well-known fact that all the major religions of the world with one voice eulogise the importance of taking care of the old, infirm, disabled, visited by misfortune etc. on account of some natural or man-made calamity, widowed, orphaned etc. and these discussions/lectures are not divorced from religion as mankind is exhorted in the name of God and saints to take care of the weak and the needy - the Revenue has incorrectly applied section 115BBC to the facts of the assessee s case thus, the objects of the trust have been considered vis- -vis the relevant provision along with the Circular No.-14 and relying upon Cit, Ujjain vs M/s Dawoodi Bohara Jamat 2014 (3) TMI 652 - SUPREME COURT , the claim of the assessee deserves to be allowed Decided in favour of Assessee.

Issues Involved:
1. Legality and factual correctness of the CIT(A)'s order.
2. Validity of the addition of Rs. 27,25,306/- as anonymous donations.
3. Consideration of the assessee's representations and submissions by the CIT(A).
4. Classification of the assessee's activities as religious or spiritual.
5. Applicability of Section 115BBC to the assessee.
6. Accuracy of tax and interest calculation.

Detailed Analysis:

1. Legality and Factual Correctness of the CIT(A)'s Order:
The assessee appealed against the CIT(A)'s order dated 03.09.2012, arguing that it was based on incorrect interpretations of law and facts. The Tribunal examined the CIT(A)'s findings and concluded that the CIT(A) misdirected himself by not properly considering the objects of the trust and the context in which spiritual lectures were given. The Tribunal found that the CIT(A) incorrectly concluded that the trust was engaged in spreading spirituality rather than religious activities, leading to the wrongful application of Section 115BBC.

2. Validity of the Addition of Rs. 27,25,306/- as Anonymous Donations:
The Assessing Officer (AO) added Rs. 27,25,306/- as anonymous donations under Section 115BBC, as the assessee failed to provide details for this amount. The Tribunal noted that the AO had accepted that the assessee fell within the scope of "general public utility." The Tribunal held that the AO's conclusion that the assessee was not a public religious trust but a spiritual organization was incorrect. The Tribunal emphasized that the objects of the trust included charitable activities and the provision of spiritual lectures, which should not attract the rigors of Section 115BBC.

3. Consideration of the Assessee's Representations and Submissions by the CIT(A):
The assessee argued that the CIT(A) did not pass a speaking order on its representations and submissions. The Tribunal found that the CIT(A) failed to adequately address the assessee's arguments and did not properly consider the objects of the trust and the context of the spiritual lectures provided.

4. Classification of the Assessee's Activities as Religious or Spiritual:
The Tribunal examined the objects of the trust, which included providing food, shelter, medical aid, and spiritual lectures to the needy and destitute. The Tribunal held that the assessee's activities were both religious and charitable in nature, as the spiritual lectures were aimed at providing psychological comfort and hope to the target groups, which included the old, infirm, and destitute. The Tribunal concluded that spiritualism cannot be divorced from religion and that the assessee's activities fell within the scope of a public religious trust.

5. Applicability of Section 115BBC to the Assessee:
The Tribunal analyzed Section 115BBC and the relevant Circular No.14 of 2006. It held that the section exempts anonymous donations received by trusts established wholly for religious purposes or for both religious and charitable purposes. The Tribunal found that the assessee's trust met these criteria, as its objects were charitable and religious, and the spiritual lectures were part of its religious activities. Therefore, the Tribunal concluded that Section 115BBC was wrongly applied to the assessee.

6. Accuracy of Tax and Interest Calculation:
The assessee contended that the tax and interest calculation was incorrect. The Tribunal did not specifically address this issue, as it concluded that the anonymous donations were not taxable under Section 115BBC, rendering the tax and interest calculation moot.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the CIT(A) and AO incorrectly applied Section 115BBC. The Tribunal emphasized that the assessee's trust was engaged in both religious and charitable activities, including spiritual lectures, which should not attract the provisions of Section 115BBC. The Tribunal's decision was based on a detailed analysis of the objects of the trust, the relevant legal provisions, and the facts of the case.

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