2023 (11) TMI 497 - AT - Income Tax

Assessment of trust - Shirdi Sansthan of Shri Sai Baba - anonymous donations received taxed as per the provisions of section 115BBC - object of trust - whether the assessee existed both for charitable and religious purposes or was it existing solely for charitable purposes? - Main object of the assessee trust had always been to carry out the activities associated with prayers, maintenance of temple and providing facilities to the devotees who come for darshan including food and propagation of the teachings of Shri Sai Baba and upon examining in detail the meaning of the term religious purpose in the context of Income-tax Act, 1961, observed that it cannot be interpreted in a narrow sense to denote furtherance of only a particular religion but the same has to be interpreted inclusively and in a broad sense - as per revenue assessee has spent a miniscule amount of its income towards purely religious purposes and thus the trust has to be acknowledged as a charitable institution as per the provisions of section 80G(5B) - HELD THAT - It is not in doubt that Shri Sai Baba had a large number of devotees and was accorded the status of Saint upon his demise on 15th October 1918. The place i.e. Shirdi from where he left for his heavenly abode was converted into a shrine and thousands of devotees would visit his shrine to pay their respects, spread his teachings and celebrate the festivals etc. His devotees are noted to have originally started a trust namely Shirdi Sansthan of Shri Sai Baba which was registered under the Bombay Public Trusts Act, 1950. The legislative intent behind Section 115BBC(2)(a) (b) is to exclude such trusts/ institutions which inter alia exists for religious purposes and not tax the anonymous donations received by them. The Revenue erred in singling out Shri Sai Baba or Hindu Gods in an Ultra-philosophical manner to say that their worship cannot be said to be religious purpose, as neither Sai Baba nor Hinduism is a religion, but a way of life or spirituality. To put it in another way, if one chooses to subscribe to the Revenue s contention that, then it would mean that since Hinduism is not a religion, worshipping Hindu deities and maintaining temples cannot be regarded as religious purpose for the purposes of Section 115BBC of the Act. In such a scenario, the hundi collections / anonymous donations received by almost all the revered temples of India, without naming any, shall be liable to be taxed u/s 115BBC of the Act. In our considered view, such a proposition put forth by the Revenue is wholly inconceivable, fallacious and untenable. Somewhat identical issue was considered in the case of ITO Vs Sri Shirdi Sai Samaj in 2016 (5) TMI 1034 - ITAT BANGALORE - In this case also, the assessee was both charitable and religious trust inter alia involved in propagating teachings preachings of Sai Baba, pooja offerings, temple worship etc. The AO taxed the hundi collections of the assessee Trust u/s 115BBC of the Act. On appeal this Tribunal is noted to have deleted the impugned addition holding that the assessee trust was existing both for charitable and religious purposes and therefore the anonymous donations received by them was not liable to tax in terms of the exclusion set out in Section 115BBC(2)(b) of the Act. Hence, we countenance the action of Ld. CIT(A) holding that the assessee was existing both for charitable and religious purposes and thus eligible to avail the benefit of exclusion set out in Section 115BBC(2)(b) of the Act. Revenue has primarily laid emphasis on the certificate held by the assessee u/s 80G of the Act to justify their stand that the assessee was only a charitable trust with no religious purpose - Academically speaking, if the objects of any trust is not solely charitable but is mixed purpose, and the Revenue is of the view that such trust cannot be registered u/s 80G of the Act, then it is up to Revenue to take appropriate action in accordance to law regarding the certificate issued u/s 80G of the Act. But, it cannot be the other way round i.e., for the Revenue to argue that because such Trust is registered u/s 80G of the Act, it would nullify the jurisdictional fact that the Trust exists for mixed purpose. For the aforesaid reasons, we also hold that the decisions in the case of Shiv Mandir Devsttan Panch Committee Sanstan 2012 (11) TMI 352 - ITAT NAGPUR and Tarehati Charitable Trust 2018 (7) TMI 2329 - ITAT MUMBAI relied upon by the Revenue is not relevant as they were rendered in the context of registration under Section 80G of the Act. Even otherwise, addressing the merits of this argument of the Revenue, we note that, the assessee was accorded approval by the Ld. Chief Commissioner of Income-tax, Mumbai under Section 10(23C)(v) of the Act vide order dated 17.03.2008. Undisputedly, the approval u/s 10(23C)(v) is accorded to those trusts which are wholly for public religious purposes and charitable purposes. We agree with the Ld. CIT(A) that this approval carries significant evidentiary value as it shows that the affairs of the assessee Trust had been verified by a superior authority and the assessee was found to exist for both religious and charitable purpose. On query from the Bench, the Revenue was unable to show that this approval granted u/s 10(23C)(v) of the Act has been withdrawn or rescinded by the Ld. CCIT. We further note that this approval u/s 10(23C)(v) of the Act was available on record, when the CIT(E) accorded registration u/s 80G of the Act vide order dated 25.03.2009. This supports the contention put forth by the assessee that, at that material time even the Revenue itself did not consider holding of certificate u/s 80G to be contradictory or inconsistent with certificate held u/s 10(23C)(v) of the Act. Position which emerges is that, there may be instances where a trust which is existing both for charitable and religious purpose, has incurred religious expenditure which is less than 5% of the total expenses of the Trust. In such a case, the trust may be eligible for certificate u/s 80G of the Act and at the same time would not be liable to be taxed for the anonymous donations received by virtue of Section 115BBC(2)(b) of the Act. We thus find merit in the submission of the Ld.Sr.Counsel for assessee that, the exclusion set out in Section 115BBC(2)(b) of the Act can co-exist with Section 80G of the Act. Hence, the proposition put forth by the Revenue placing reliance on 80G registration to ipso facto deny the exclusion set out in Section 115BBC(2)(b) of the Act is held to be untenable. Disallowance of accumulation of income u/s 11(2) - non-filing of Form No. 10 with Deputy Commissioner of Income Tax within stipulated time - HELD THAT - Assessee furnished the copy of the order passed u/s 119(2)(b) of the Act by the CIT(Exemptions), Mumbai dated 16.03.2023, wherein, CIT(Exemption) has since condoned the delay in filing of Form 10 by the assessee for AY 2015-16. The Ld.Sr.Counsel accordingly prayed that, since the delay in filing the Form No. 10 has now been condoned by the competent authority, the AO may be directed to allow the benefit of exemption in relation to the accumulation of income u/s 11(2) of the Act. The Ld. CIT DR appearing for the Revenue did not dispute the same. AO is directed re-compute the total income of the assessee and allow the admissible exemption u/s 11(2) of the Act as claimed by the assessee in the return of income, since the delay in filing of Form 10 has since been condoned by the Ld. CIT(Exemptions). Ground Nos. 1 2 of the assessee s appeal therefore stands allowed. Allowability of exemption u/s 11(1)(a) - whether 15% accumulation u/s 11(1)(a) of the Act has to be calculated on gross receipt or net receipt after deduction of revenue expenditure? - HELD THAT - We find that this issue is no longer res integra in light of the decision of the Special Bench of this Tribunal in the case of Bai SonabaiHirji Agency Trust 2004 (9) TMI 300 - ITAT BOMBAY-E it is difficult to accept that outgoings which are in the nature of application of income are to be excluded. The income available to the assessee before it was applied is directed to be taken - Twenty five per cent of the above income is to be allowed as a deduction. Similar view has also been taken in ParsiZorastrianAnjuman Trust vs. CIT 1986 (7) TMI 69 - MADHYA PRADESH HIGH COURT No reason whatsoever has been given by the Revenue authorities for deducting Rs. 2,17,126 in this case for purposes of s. 11(1)(a) - Thus we hold that the accumulation u/s. 11(1)(a) of the Act should be allowed in the manner as claimed by the assessee and the AO is directed to do so. Denying the benefit of exemption u/s 11(1)(d) of the Act in relation to the interest earned on corpus fund s - HELD THAT - We find merit in the findings of the lower authorities that the interest earned on corpus funds did not constitute voluntary donation received under the instructions of the donor to be earmarked for specific purpose viz., towards the corpus of the trust. Instead, the proximate source of interest was that, it had been earned from fixed deposits made by the assessee. We are therefore in agreement with the Ld.CIT(A) that it did not qualify for exemption u/s 11(1)(d) of the Act. As rightly noted by Ld. CIT(A), the assessee s reliance upon the decisions rendered in the cases of DIT vs Shri Ram Krishna SevaAashrama CIT(E) vs Mata Amrithanandamayi Math 2017 (9) TMI 1232 - KERALA HIGH COURT was misplaced wherein the donor had made a specific direction that the interest earned on corpus donation shall also be towards corpus and therefore on such unique facts the benefit of exemption u/s 11(1)(d) of the Act was allowed to that assessee. The facts involved in the present case are found to be distinguishable. Before us also, the assessee has not been able to adduce any evidence or letter or directions from the corpus donors that the interest derived from investment of the corpus funds would also be towards the corpus of the assessee.We thus hold that the Ld.CIT(A) had rightly denied the exemption claimed by the assessee u/s 11(1)(d) of the Act in relation to the interest income derived from investment of corpus funds. Assessee has claimed that the AO be directed to allow deduction for the expenses incurred out of the interest earned from such corpus funds - As assessee Trust had received corpus contributions towards various specific Funds, which in turn were invested in modes specified u/s 11(5) of the Act. It is noted from the Schedule A of the financials that, out of the corpus funds (including interest), the assessee has also spent amounts which was in excess of the interest income in question. Although this fact was discernible from the face of the accounts, we find that the lower authorities overlooked the same while seeking to tax the gross interest income from corpus funds. At the same time however, it is noted that even the assessee failed to bring the details of the amounts spent out of these funds to the attention of the lower authorities. According to us, the amount spent out of such interest income from corpus funds which are towards the objects of the Trust has to be allowed by way of application of income, while computing the assessable income of the assessee Trust. We set aside this issue back to the file of the AO with the direction to examine the details of the amount spent out of the interest from corpus funds and allow the deduction. Appeal of assessee is partly allowed and appeals of the revenue are dismissed.

Summary

Issues Involved:
1. Taxability of anonymous donations under Section 115BBC of the Income-tax Act.
2. Denial of exemption under Section 11(2) for non-filing of Form 10 within the stipulated time.
3. Calculation of 15% accumulation under Section 11(1)(a) on gross receipts or net receipts.
4. Denial of exemption under Section 11(1)(d) for interest earned on corpus funds.
5. Deduction of expenses incurred out of interest income from corpus funds.

Summary of Judgment:

1. Taxability of Anonymous Donations:
The primary issue was whether the assessee trust, existing for both charitable and religious purposes, was entitled to the exclusion under Section 115BBC(2)(b) of the Income-tax Act. The Revenue argued that the trust was solely charitable, emphasizing the certificate under Section 80G. The Tribunal upheld the CIT(A)'s decision that the trust existed for both purposes, referencing the Bombay High Court's decision in DIT(E) Vs Bombay Panjrapole Trust and the Supreme Court's decision in CIT Vs Dawoodi Bohra Jamat, which clarified that charitable and religious purposes could overlap. Therefore, the anonymous donations received by the trust were not taxable under Section 115BBC.

2. Denial of Exemption under Section 11(2):
The AO denied the benefit of exemption under Section 11(2) due to the late filing of Form 10. The CIT(A) upheld this decision. However, during the appeal, the assessee provided an order from the CIT(Exemptions) condoning the delay. Consequently, the Tribunal directed the AO to allow the exemption under Section 11(2).

3. Calculation of 15% Accumulation:
The issue was whether the 15% accumulation under Section 11(1)(a) should be on gross or net receipts. The Tribunal followed the Special Bench decision in Bai Sonabai Hirji Agency Trust Vs. ITO, holding that the accumulation should be on gross receipts. Therefore, the AO was directed to allow the accumulation as claimed by the assessee.

4. Denial of Exemption under Section 11(1)(d):
The AO denied the exemption for interest earned on corpus funds, as there was no specific direction from the donor to treat the interest as corpus. The CIT(A) upheld this decision. The Tribunal agreed, noting that the interest did not qualify as a voluntary contribution with a specific direction from the donor. Thus, the exemption under Section 11(1)(d) was rightly denied.

5. Deduction of Expenses from Interest Income:
The assessee alternatively claimed deduction for expenses incurred out of the interest income. The Tribunal found merit in this claim, noting that the expenses towards the objects of the trust should be allowed as application of income. The issue was set aside to the AO to verify the expenses and allow the deduction accordingly.

Conclusion:
The appeal of the assessee was partly allowed, and the appeals of the Revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions on several issues, provided directions for allowing exemptions and deductions, and emphasized the overlapping nature of charitable and religious purposes in the context of the Income-tax Act.