Case Note & Summary
The case involves appeals by the Revenue under Section 260A of the Income-tax Act, 1961, against a common order of the Income-tax Appellate Tribunal (ITAT) dated 25 October 2023. The respondent, Shree Sai Baba Sansthan Trust – Shirdi, is a public trust initially constituted in 1953 under the Bombay Public Trusts Act, 1950, and later reconstituted under the Shri Sai Baba Sansthan Trust (Shirdi) Act, 2004. The trust is registered under Sections 12A, 80G, and 10(23C)(v) of the Income-tax Act. For the assessment years 2015-16, 2017-18, and 2018-19, the trust received substantial anonymous donations through 'Hundi' collections. The Assessing Officer (AO) sought to tax these donations under Section 115BBC(1) of the Act, which taxes anonymous donations received by charitable trusts. The trust claimed exemption under Section 115BBC(2)(b), which excludes donations received by a trust or institution established wholly for religious purposes. The AO rejected this claim, holding that the trust, being registered under Section 80G, is a charitable trust and not a religious trust. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the trust's appeal, and the ITAT upheld that decision. The Revenue appealed to the High Court. The legal issue was whether the anonymous donations are taxable under Section 115BBC(1) and whether the exception under Section 115BBC(2)(b) applies. The Revenue argued that Section 80G registration is only for charitable purposes, and the trust cannot claim to be a religious trust. The trust contended that it has mixed charitable and religious objects and that Section 80G(5B) allows religious expenditure up to 5% for mixed trusts. The High Court analyzed the provisions and held that Section 80G registration is granted only to trusts established solely for charitable purposes, and a trust with mixed objects cannot be registered under Section 80G. The court further held that the exception under Section 115BBC(2)(b) applies only to trusts established wholly for religious purposes. Since the trust is registered under Section 80G, it is a charitable trust and not eligible for the exception. The court allowed the Revenue's appeals, set aside the ITAT order, and restored the AO's assessment orders taxing the anonymous donations under Section 115BBC(1).
Headnote
A) Income Tax - Anonymous Donations - Section 115BBC(1) - Taxation of Anonymous Donations - Income-tax Act, 1961, Section 115BBC - The issue was whether anonymous donations received in 'Hundi' by a trust registered under Section 80G are taxable under Section 115BBC(1). The court held that the exception under Section 115BBC(2)(b) applies only to trusts established wholly for religious purposes, and a trust registered under Section 80G cannot claim such exception as Section 80G registration is for charitable purposes only. (Paras 2, 4, 9, 12, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34) B) Income Tax - Charitable Trust - Section 80G - Registration for Charitable Purposes - Income-tax Act, 1961, Section 80G - The court examined the scope of Section 80G and held that registration under Section 80G is granted only to trusts established solely for charitable purposes, and a trust with mixed charitable and religious objects cannot be registered under Section 80G. The court rejected the assessee's contention that Section 80G(5B) allows religious expenditure up to 5% for mixed trusts. (Paras 9, 10, 11, 12, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34) C) Income Tax - Religious Trust - Section 115BBC(2)(b) - Exception for Religious Trusts - Income-tax Act, 1961, Section 115BBC(2)(b) - The court interpreted the exception under Section 115BBC(2)(b) and held that it applies only to trusts established wholly for religious purposes, not to trusts with mixed charitable and religious objects. The court found that the assessee trust, being registered under Section 80G, is a charitable trust and thus not eligible for the exception. (Paras 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34)
Issue of Consideration
Whether anonymous donations received in 'Hundi' by a trust registered under Section 80G of the Income-tax Act, 1961, are liable to be taxed under Section 115BBC(1) of the Act, and whether the exception under Section 115BBC(2)(b) applies to such a trust.
Final Decision
The High Court allowed the Revenue's appeals, set aside the impugned order of the ITAT, and restored the assessment orders passed by the Assessing Officer taxing the anonymous donations under Section 115BBC(1) of the Income-tax Act, 1961.
Law Points
- Interpretation of Section 115BBC
- anonymous donations
- charitable trust
- religious trust
- Section 80G
- Section 10(23C)(v)
- mixed objects trust
- hundi collections
