"Anonymous donation" and judgment in case of Gurudev Siddha Peeth, Shrish Thakkar – a discussion.

[CA DEV KUMAR KOTHARI]

References and links:

2015 (7) TMI 989 - ITAT MUMBAI  Gurudev Siddha Peeth, Shrish Thakkar Versus ITO, Ward-1 (1) , Kalyan

Section 10 (23C) clauses (iiiad), (iv),(v), (vi), (via) regarding various institutions.

S. 2 (24) sub-clause (iia)

Section 115BBC  - regarding anonymous donations to be taxed in certain cases.

Section 234B,  234C and section 234D  regarding  interest

Synopsis:

Tribunal has held that offerings received in the hundis/donation boxes is not  "Anonymous donation"   and income of the assessee under Section 115BBC. Author find that the contentions raised before Tribunal were considered and allowed by Tribunal with substantial reasonings.Te author agrees with the same.

The author, in general discussion has discussed many other aspects which were not raised before the Tribunal. Such aspects can be raised in other cases and even in case of the assesse before the Tribunal because the Tribunal has allowed relief subject to taxability under any other provision. In this regard, with due respect author disagree with the Tribunal for the reasons as discussed in the articles.

Offerings and collection in drop boxes- general discussion by author:

In the case of a religious places, worship places, etc. visitors, devotees, make offerings and drop cash or things in collection box. Many send goods just for use by such institutions. Such institutions , in turn use such money and things in kind for charitable purposes including relief of poor by providing food, cloth, medical and education facilities, housing, and even by making grants for welfare of poor people.

Many people who make offerings do not want to give their name and other details. The reason is the belief that they want to make it secret – ‘gupt daan’ many times  the donors out of their esteem, respect and regard and selflessness they do not want that their name be registered as a donor before the deity for whom them make the prayer in the belief that the deity is the ultimate giver of all the worth and virtues of their life.

The ground reality may be that   majority of donor do not have taxable income, they do not claim a deduction for donation and also because they do not  maintain books of account and  make contribution out of personal expenses account.  Majority of such donors do not want  an enquiry from income-tax department about their contribution. Therefore, even if the institution want details of donor they may not be furnished by majority of donors to avoid likely enquiry and harassment by tax authorities. One related aspect of such contributions is that the donor claim a deduction and tax relief for such contributions or gupt daan / secret offerings.

Every day we observe that even people  of  ‘below poor line’ line and daily wage earners who earn hardly ₹ 150- 200 per day make offerings in temples, gives some coins to pundit ji who comes with an idol or photo of some god . Many salary earners and other person who have paid tax on income  or whose income is not taxable, make such contributions. Therefore, it cannot be said that contributions received in such circumstances and from such persons are from black money.

Cheque donations:  It is also worth to mention that donors who make substantial amount as contribution, make such contribution by cheques / DD or cash and provide details, obtain receipts  and they also claim deduction for such contributions made and get tax relief.

Therefore, offerings and donations made anonymously, has no burden on revenue by way of claims of deduction because in absence of receipt from institution, the donor will not be able to claim deduction for donation made.

As per author another important question is ,  whether such receipts can be considered as income in hands of religious institution. The obvious answer is –NO – because such receipts are not for any goods sold or services provided or assurance given for any consideration discharged or to be discharged etc. The sum is received without any consideration, therefore it cannot contain any element of income. The sums so received are also in nature of capital receipts in nature of showing respect and regards and are gift which are capital receipts as known in general concept of income vis a vis capital in commercial and accounting world and common man also.

Though our government has tendency to attach artificial meanings to various terms and such tendency is increasing even in present NAMO government. However, by making artificial extensions, a basic concept cannot be changed. For example, a capital receipt should not be deemed as income, unless tax authorities are able to show that factually such receipt is income of receiver. However, to make work of tax authorities easy, our government has adopted tools of artificial extension or restrictions’ of meanings. On proper scrutiny , and claim before courts, such artificial meanings may not hold legality  and within authority to legislate by extended meanings.

 Author has made some general observations in above paragraph. Some of concepts discussed by author were also discussed before ITAT. Some aspects as discussed by author may be useful in other cases.

Case before ITAT - Gurudev Siddha Peeth (supra.)

In the case offerings were included in income by the AO and the same was confirmed by CIT(A). On appeal , ITAT decided in favour of the assessee that such receipts in case of religious institution like assessee, such receipts cannot be considered as income Section 115BBC. In the order the Tribunal oserved and held as follows:

1.  Such type of offerings are made/put into the donation box by numerous visitors and its generally not possible for any such type of institutions to make and keep record of each of the donor with his name address etc.
2. Even sometimes the donors out of their esteem, respect and regard and selflessness they do not want that their name be registered as a donor before the deity for whom them make the prayer in the belief that the deity is the ultimate giver of all the worth and virtues of their life.
3. Now reverting to the definition of anonymous donations under sub section (3) of section 115BBC, we find that it has been mentioned that anonymous donations means voluntary contributions where the person receiving such contributions 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.
4. In the case of a religious or charitable trust as in the case of the assessee as we have observed above, it is generally not only difficult but also not possible to maintain such type of record
5. A perusal of the entire section 115BBC shows that the provisions of said section are not applicable to the institutions like that of assessee trust as the same are meant to check the inflow of unaccounted/black money into the system with a modus operandi to make out as a part of the accounts of the institutions like university, medical institutions where the problem relating to the receipt of capitation fees, etc. is generally highlighted.
6. Under such circumstances, we do not find any justification on the part of the Ld. CIT(A) in taxing the offerings received in the hundis/donation boxes as income of the assessee under section 115BBC.
7.  In view of our above observations and subject to taxability of the income under any other provision of the Act as the case may be, the appeal of the assessee is allowed.

Author’s point of view:

The honourable Tribunal has rightly held that the collections made by assessee were not income within scope of S. 115BBC and in reversing the order of CIT(A).

However, the Tribunal has allowed appeal of assessee subject to taxability of the income under any other provision of the Act as the case may be.

With respect, author feels that this rider of the Tribunal is not correct, This view of the author is for the following reasons:

The Tribunal was considering and deciding appeal of assessee. There was no appeal by way of cross objections filed by revenue. Tribunal has to pass an order on appeal of assessee. Therefore, the Tribunal was not justified in making order or even  remarks which can go against the assessee/ appellant before the Tribunal.

Readers are requested to refer to relevant provisions as may be applicable in any case from time to time because there have been numerous amendments in related provisions.