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2015 (9) TMI 558 - HC - Income TaxScope of Section 115 BBC on trust - Registration under Section 12A denied - receipt of anonymous donations - whether the case of the Assessee is clearly hit by the provision of Section 115BBC? - the case of the Assessee is not of public religious trust but a case of spiritual organization as held by AO - Penalty proceedings under Section 271(1)(c) were directed to be initiated separately - ITAT allowing the Assessee s appeal concluded that the Revenue had wrongly applied Section 115 BBC of the Act to the case of the Assessee and accepting that the Assessee-Trust was carrying out various religious activities Held that - 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 1954 (4) TMI 29 - SUPREME COURT 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 AY 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. No legal infirmity in the conclusion of the ITAT that for the purpose of Section 115 BBC (2) (a) anonymous donations received by the Assessee would qualify for deduction and it cannot be included in its assessable income. - Decided against revenue.
Issues Involved: Application of Section 115BBC of the Income Tax Act, 1961; Classification of the Trust's activities as religious or spiritual; Taxability of anonymous donations; Interpretation of charitable and religious purposes.
Detailed Analysis: 1. Application of Section 115BBC of the Income Tax Act, 1961: The Revenue's appeal under Section 260A of the Income Tax Act, 1961, challenges the ITAT's order which exempted the Assessee-Trust from the provisions of Section 115BBC. The Assessee-Trust had received Rs. 5,28,84,204 in donations, out of which Rs. 27,25,306 were considered anonymous. The Assessing Officer (AO) invoked Section 115BBC, treating these as taxable anonymous donations, arguing that the Trust is a spiritual organization and not a public religious trust. The ITAT, however, concluded that the Trust's activities were religious in nature, thus exempting it from Section 115BBC. 2. Classification of the Trust's Activities as Religious or Spiritual: The AO and CIT (A) held that the Trust was engaged in spreading spirituality rather than religious activities, based on the Trust Deed's objects. The CIT (A) referenced Circular No. 14 and Section 2(24)(iia) of the Act, asserting that the Trust's activities did not qualify as wholly religious. The ITAT, however, disagreed, interpreting the Trust's objectives, including spiritual lectures and aiding the needy, as religious activities. The ITAT referenced the Supreme Court's decision in Commissioner of Income-Tax v. Dawoodi Bohra Jamat, which recognized overlapping charitable and religious purposes. 3. Taxability of Anonymous Donations: The central question was whether the Trust's anonymous donations were taxable under Section 115BBC. The ITAT held that the Trust's activities, such as spiritual education, organizing Samagams, and distributing free medicines and clothes, were religious. The ITAT emphasized that the Trust's broader objectives, including aiding the poor and needy, were consistent with religious activities, thus qualifying the Trust for exemption under Section 115BBC. 4. Interpretation of Charitable and Religious Purposes: The Supreme Court's precedents in Commissioner of Income-Tax v. Dawoodi Bohra Jamat, The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar, Ratilal Panachand Gandhi v. The State of Bombay, and Sastri Yagnapurushadji v. Muldas Bhudardas Vaishya were instrumental in interpreting the Trust's activities. These cases established that religious activities under Hindu faith are broad and can include charitable acts. The ITAT's interpretation aligned with these rulings, recognizing the Trust's activities as religious. Conclusion: The Court found no legal infirmity in the ITAT's conclusion that the Trust's anonymous donations qualified for deduction under Section 115BBC (2)(a). The activities of the Trust, viewed in the context of its objectives and broader Hindu religious practices, were deemed religious. Consequently, the appeal was dismissed, affirming the ITAT's decision that the Trust's anonymous donations were exempt from tax under Section 115BBC.
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