2019 (7) TMI 673 - HC - Income Tax

Exemption u/s 10(23BBA) - erroneous filling of returns for A.Y. 2014-15 and 2015-16 - petitioner is a registered temple coming under the scope of HR CE Act - Whether erroneous filing of returns ought not to have been processed and likewise by referring to these assessment years and the tax determined, withdrawing a sum of ₹ 10 lakh from the account of the petitioner-temple, is illegal, arbitrary, beyond the Act and unconstitutional? - HELD THAT - The petitioner firstly is an institution under HR CE Act. Secondly, the petitioner satisfies the requirement of Section 10(23BBA) of the Act. Therefore, is not under obligation to file return under the Act. Even if the tax is paid erroneously, the respondents, de hors the statutory exemption, firstly could not have determined the total receipts received from the petitioner as income for the particular year and demand tax. Such determination of demand of income tax is contrary to Article 265 of Constitution and Section 10(23BBA) of Act. The said position remains undisputed. The entitlement of petitioner in fact and law is not disputed by the respondents. On the other hand, without joining the issue with the petitioner, for the sake of resolving an issue, the factual and statutory position are fairly stated by the respondents. Therefore, the petitioner prays for appropriate orders. With the above observations and by accepting the stand taken in the statement filed by the respondents, the writ petition could have been disposed of. Such course keeps alive the issue of refund of tax collected without authority from the petitioner. Therefore, this Court by keeping in view the character, scope and admission of the petitioner vis- -vis HR CE Act and exemption in Section 10(23BBA) declares that the determination of income of petitioner for the assessment years 2014-15 and 2015-16 is illegal, contrary to the statutory exemption and violation of Article 265 of Constitution of India. Consequent thereto the petitioner is entitled for refund of the tax already collected from the petitioner institution. For the said purpose of securing refund of tax collected, the petitioner is given liberty, by enclosing a copy of this judgment, within two months from today to apply to second respondent under Section 264 of the Act for passing a consequential order keeping in view the above declaration, including refund of income tax recovered from the petitioner.

Summary

Issues:
1. Interpretation of Section 10(23BBA) of the Income Tax Act, 1961.
2. Applicability of statutory exemption under Section 10(23BBA) to a religious institution.
3. Validity of tax demands raised on a temple under the Act.
4. Authority to determine income tax liability of religious institutions.
5. Entitlement to refund of tax collected erroneously.

Analysis:

Issue 1: Interpretation of Section 10(23BBA) of the Income Tax Act, 1961
The case involves the interpretation of Section 10(23BBA) of the Income Tax Act, 1961, which provides for exemption from income tax for bodies established for public religious or charitable purposes. The petitioner, a temple under the Madras Hindu Religious & Charitable Endowments Act, claims entitlement to this exemption.

Issue 2: Applicability of statutory exemption under Section 10(23BBA) to a religious institution
The petitioner asserts that as an institution under the Madras Hindu Religious & Charitable Endowments Act, it satisfies the requirements of Section 10(23BBA) and should be granted unconditional exemption from income tax. The respondents acknowledge the petitioner's eligibility for this exemption.

Issue 3: Validity of tax demands raised on a temple under the Act
The petitioner challenges the tax demands raised for assessment years 2014-15 and 2015-16, contending that erroneous filing of returns should not have led to tax liabilities. The court finds the determination of income and tax demands to be illegal, contrary to statutory exemption, and in violation of constitutional provisions.

Issue 4: Authority to determine income tax liability of religious institutions
The court emphasizes that the respondents erred in determining tax liabilities for the petitioner, a registered temple under the Madras Hindu Religious & Charitable Endowments Act, entitled to statutory exemption under Section 10(23BBA). The court declares the tax collection from the petitioner as unauthorized and orders a refund.

Issue 5: Entitlement to refund of tax collected erroneously
Based on the admission of the respondents and the petitioner's eligibility for exemption under Section 10(23BBA), the court directs the refund of tax collected from the petitioner institution. The petitioner is granted liberty to apply for a refund under Section 264 of the Act within two months, and the second respondent is instructed to process the refund promptly.

This judgment clarifies the statutory provisions governing tax exemptions for religious institutions and underscores the importance of adhering to legal requirements when determining tax liabilities for such entities.